The US Dollar Rally Will End in a Crisis of Confidence

The constraint on the monetization being done by the Fed and Treasury is the value and acceptibility of the US dollar and bonds.

Export dependent countries should begin to prepare for a collapse in the US import markets. We expect this to happen earlier than 2010.

The invisible hand of the market moves slowly, but inexorably.

We expect this crisis in the US will resemble the crises in Argentina and Russia rather than Japan. The pain will be distributed heavily to those countries dependent on US dollar debt and consumer markets.

Nassim Taleb likes the protection of gold and copper. We prefer gold and silver, as it will be more difficult to increase its supply in the short term.

There will be serious discussion with regard to the annexation of Canada and Mexico into a North American government as the crisis worsens. Mexico should adopt a silver monetary standard and Canada must find its own economic independence again as it did in the Great Depression.

There is a strong likelihood that Obama will be a one term president at most unless he acts quickly to reform the growing corruption in the Democratic Party and within his own Administration.

Dollar Rally Will End, Rogers Says; May Short Stocks
By Chen Shiyin and Haslinda Amin

May 12 (Bloomberg) -- The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after nine weeks of gains.

The advance in the U.S. currency has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers said. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.”

The dollar has climbed against all of the so-called Group of 10 currencies except the yen over the past 12 months, according to data compiled by Bloomberg. The U.S. currency was at $1.3592 per euro today from $1.3582.

Rogers joins “Black Swan” author Nassim Nicholas Taleb in avoiding the U.S. currency. Taleb told a May 7 conference in Singapore he preferred gold and copper to the dollar and the euro as the global economy faces a “big deflation.”

Gains in U.S. stocks also signal a “correction,” Rogers said. He’s avoiding equities for the next two to three years because prospects haven’t changed, he added.

Disclosure: Jesse is long gold and silver.

SP Futures Hourly Chart at 3:30 PM

Don't Ask Why, Just Buy

The message on Bloomberg Television this morning is loud and clear: "Don't ask why, just buy."

The chief message carrier was a Mr. Brian Belski of Oppenheimer, who suggested that trying to analyze the markets for yourself is a waste of time. Just listen to the experts.

We have a new bull market. Who cares whether it is cyclical or secular. Let's just be happy that the worst is now behind us, and frankly, just buy.

Brian is representing the notion that any sort of gain over 20% is a new bull market.

Well Brian, here's your new bull market. Maybe it will become one. But from this perspective it is just a typical bounce within a powerful bear market. It must prove itself.

So far this looks like hot money from the public (taxes) trying to push up the shell of the Ponzi credit bubble while the insiders continue to hit the exits.

And we do not care what anyone says, the fundamentals are rotten. They are just not falling apart as quickly now after a precipitous revelation of the truth behind the facade of statistical manipulation. There are no green shoots, and there is no recovery.

There has been little or no reform. Just a fresh smear of lipstick on the same old pig, applied by the swineherds of Wall Street and Washington.




And in the meantime, let's buy some gold, silver, food, critical supplies, and party on...








Burn your credit cards, honor your family and friends friends, give to God what is His, live within your means.

Financially Farcical Friday

Institutional Risk Analytics is one of the best weekly reads around.

Institutional Risk Analytics

"Washington has indeed fixed the solvency problems of the large zombie banks -- not with additional capital or stress tests, as many of us seem to think. Rather, the banks have been stabilized by turning them into GSEs via FDIC guarantees on their debt. Those banks which can end their dependence on federal guarantees will be the visible winners in the post stress test market, and valuations and spreads will reflect this divergence between zombies and viable private banks.

Seen from this perspective, Chrysler, General Motors and the large banks are GSEs rather than private companies, parestatales as they know them in Mexico. To talk about a rally in the equity of large US financials seems truly ridiculous, at least to us, especially true when you look at how the public sector subsidies being applied to the banks have distorted their financial statements."

"We hear from the Big Media, BTW, that Tim Geithner's growing corps of handlers directs media inquiries to Roubini for "an objective view" of the Secretary's handling of the financial crisis. One Democrat asks: Could it be Larry Summers to the Fed, Roubini to the White House?

And speaking of the fall of the elites, FRBNY Chairman Steve Friedman finally resigned yesterday, ending a scandalous period when the greater community of present and past employees of Goldman Sachs, JPMorgan Chase and other dealers was arguably in control of the most important arm of the US central bank. (Ending? With Dudley still in place? - Jesse)

The fact that the Board of Governors appointed former GS ibanker Freidman as a "C" class director, who are meant to represent the public interest and not be past officers of regulated banks, was scandal enough. But then, when GS formally became a bank holding company last year, the Board failed to remove Friedman when his conflict became acute. The Board also failed too to appoint another "C" class director, making it almost seem that the Board wanted to assist in the GS operation to influence the operations of a Federal Reserve Bank."

The Banks must be restrained, and the financial system reformed, before there can be a sustainable economic recovery.