Thread: Abandoned US Dollar & Paradigm Shift

Abandoned US Dollar & Paradigm Shift

By Jim Willie CB
Jul 23 2009 3:06PM
www.GoldenJackass.com

A paradigm shift is underway, unrecognized inside the US kettle. Its water level is falling and its temperature is rising, even as fewer foreign born cooks stir its contents. The US banking and political leaders errantly pursue a path toward a return to normalcy, when all pathways have been washed out by powerful storms that to do abate and will worsen. Several key developments point to a new global order taking shape, as the Chinese actively work to plant global seeds that result in the Yuan currency serving more of a role in global trade. They will eventually de-throne the USDollar from its primal perch. The USDollar will be used less in global trade. The US$-based assets are being diversified. These developments are gaining traction, power, and publicity. The foreign creditors continue to protect their core US$-denominated reserves, while clearly undermining the US$ on the margin, as alternatives are chosen. To date, the alternative choice is hard assets, commodity supplies, and properties from the resource camp. The paradigm shift will change the face of the United States permanently, but to date few recognize the changing landscape.

CORRECT TIPOFF TO DOLLAR DUMP

Last week, a tipoff came that turned out to be true, shared in last week’s article. A contact source passed word that on Sunday night, Asia would sell the USDollar down in a big way. Four to five large parties were involved. Seemingly small moves in the FOREX cause tremendous disruption, since entire continental economies are involved with price shifts. The US$ index did fall markedly, in a moderate quantum leap down. It fell from the mid-79s to the upper 78s, big in the currency world. The principal agent pushing the buck down was the Euro, which enjoyed a major 120 basis point upleg that has held all this week. The Euro now approaches the 143 level. So the tipoff was true. We await the follow-through, like from short covering by Euro traders who were wrong on bets. If the Euro can push past 143 (it is now 142+), then clear sailing to the 155 mark will be enabled, without any notable resistance. The USDollar index would fall enough to capture global attention. Maybe they would proclaim the advent of a Currency Crisis



EURO IS THE KEY, ON EDGE OF BIG UPLEG

The Competing Currency War is to reach a fever pitch. The USDollar weakness will force other currency custodians to wreck their own in response, so as to avoid the further damage from a rise. A sequence of currency structural changes seems evident in three stages, a currency crisis in three stages, shared in the July Gold & Currency Report posted this week. It involves the Euro and what are more commonly called Commodity Currencies. Gold & silver (along with platinum) will be primary beneficiaries of the deepening crisis. It is called a Credit Crisis nowadays. A better description is a Bank Crisis. In time, it will be called a Currency Crisis as money will be doubted for quality and reliability.

The Euro currency is ready to challenge the 160 highs again. It is reluctant beneficiary to a crumbling USDollar. The custodians of the Euro want a stable currency, not a too strong currency. They will not have their wish. As the USDollar suffers the shameful global rejection, the Euro benefits. What is good for selling EuroBond debt is also bad for European export industries. A rising Euro keeps down economic costs across the continent, a vital buffer. However, the engine of Europe is Germany, whose export trade struggles and will feel greater stress as the Euro rises further. The reversal pattern dictates a target of 160, thus a challenge of 2008 highs. The base from last winter at 126 was a reaction low. The impulse high at 143 must be overcome, but all signs point to surpassing it. Hue and cry will come from Europe when the runup occurs. After 143 is overcome, a sudden scary fast move will come to 155, almost a 10% move with no resistance. In the currency realm, that is VERY DISRUPTIVE. The move will drag the US$ DX index down to 73-74 range, with blood on the FOREX floor.



IMAGE IS IMPORTANT

The USDollar is suffering from an image problem, tied to the harsh reality of lingering insolvency, growing federal indebtedness, and fraud still not prosecuted. Back in the late 19th century, cartoons made national news and forged imprints on the national psyche, in ways that editorials could not. Images were lasting, painful, and resulting in change. The Tammany Hall cartoons made history for over a century to follow. Here is a beautt!! The entire world notices the circus acts under the USGovt and Wall Street tents. Goldman Sachs sits in a position of control, steering vast funds its way. Main Street, the states, and almost all but the largest businesses are largely denied credit. The TARP episode makes the point clear, as does the more recent denial of CIT for federal rescue, despite funding loans for 950 thousand businesses. That is not systemically vital in the eyes of FDIC and Govt Sachs. Thanks to Tabtoon for a great cartoon. Methinks homeowners deserve a spot with joined arms to the taxpayers under the fat cats, supporting their corpulence. Also, underwater homes should be meshed with the market boat. This is an ugly image.

FORKED TONGUE USED TO US LEADERS

The Chinese pay lipservice to support the USDollar, or forked tongue. They tell what US officials want to hear, when they need to hear them, where it is required. Recent evidence is almost laughable. Their words go counter to all their initiatives (outlined here in Hat Trick Letter articles) in the last few months. This has become a game played in the open arenas. When in Rome, leading to the G-8 Meeting, the Deputy Foreign Minister He Yafei told reporters that China does not support the idea of creating a supra-national reserve currency and expects the USDollar to remain the main reserve currency for “many years to come.â€

Excellent article!