This is Like the Great Depression and Worse

Economics / Great Depression II Jan 29, 2010 - 12:40 PM
By: Mac_Slavo

Wellington Letter publisher Bert Dohmen discusses the economy, stock markets, gold, China’s Dubai-style bubble, and forecasts for 2010 and beyond with the McAlvany Weekly Commentary.

(Interview available below excerpts and comments)

Dohmen on the US dollar, stocks, commodities and the possibility of gold finally decoupling from equities and other commodities:

“The dollar is going to be the big story this year, in my opinion. At the end of November we got bullish on the dollar and we said that’s going to be the big surprise from now on - a rising dollar. And a rising dollar really confirms our view on the stock market. As you know, in 2008 the US stock market had a major crash and at the same time the US dollar had a major rally. So, if the same correlation still works and there are good reasons for that correlation - and the same correlations exist in my view - then a declining stock market should be accompanied by a rising dollar.

Then you have to say, what other repercussions? In the January 5th Wellington Letter we said the dollar will rally, the stock market will decline and with the dollar rally all commodities, all of the hot markets of last year will tumble. That means emerging market stocks, emerging market bonds, commodities.

The big question mark is really gold and I would say there is maybe a 30% chance that the precious metals will be able to kind of resist the plunge in the commodity prices, or the decline will be less than other commodities.â€