John Williams of Shadowstats provides some interesting insight on the Dollar even as the US equity markets continue their levitation.
U.S. Dollar Losing Its Safe-Haven Status? With political upheaval surfacing in the Mid-East and North Africa, global capital increasingly has been moving into traditional safe-haven investments such as precious metals, or into safe-haven currencies such as the Swiss franc. What is of particular significance here is that flight capital has been seeking shelter outside of the U.S. dollar, which for decades had been the favored safe-haven currency. Against the U.S. dollar, the Swiss franc – another traditional safe-haven currency – hit a record high in the last day or so. Other than for the British pound, the U.S. currency has been losing exchange-rate value against the other major currencies (Australian dollar, Canadian dollar, Japanese yen and even the euro) during this period of mounting political instabilities. Gold has neared its all-time high, while silver recently has set a multi-decade high.
Oil prices have spiked in response to the various crises, adding further upside pressure to U.S. consumer inflation from oil supply fears and ongoing dollar weakness. As with the dollar-debasement efforts of the Fed, these inflation pressures reflect factors other than strong economic demand.
At the same time, the fragility of the faux U.S. economic recovery is becoming more obvious to the markets, with economic data increasingly surprising consensus forecasts on the downside, as seen in this week’s home sales and GDP revision reporting. In the months ahead, an intensifying “renewed” decline in broad economic activity should gain increasing market recognition.
Irrespective of whether the political turmoil spreads or dies down, irrespective of Saudi efforts to help contain panicked oil price rises, irrespective of short-lived fluctuations in exchange rates and precious metals prices, the U.S. now stands at a point where it is particularly vulnerable to an evolving global loss of confidence in the U.S. dollar. Heavy selling of the U.S. currency and panicked dumping of dollar-denominated paper assets, which could trigger U.S. financial market upheaval and the early stages of a hyperinflation, is possible at any time with little or no warning. It could be triggered by an unhappy economic or political surprise, or otherwise. Where risks remain high of U.S. financial turmoil unfolding in the months ahead, the onset of a hyperinflation still has an outside timing estimate of 2014.
Do You Need To Buy a Vowel? M_NETIZATION
Global Economic Recovery Plan 'B' - Seek Safe Havens For the Elites, Ignite the Derivatives, and Then Wait a Couple of Decades...
