Equity and banks in particular are flush with cash. If the dollar rose significantly could equity benefit? It happened today. How did that happen? Massive Euro, Aussie, and Yen weakness triggered the move. I do not think Aussies will see their currencie depreciate, but Europe and Japan might. Yen weakness comes from Japan's loose policy and that could trigger a dollar increase. Coupled with Europe's expensive social state FIAT may be in for a route. It is weird that the dollar could benefit but it is the way of economics to use these paper monies. I would assume gold would do well as it has traded on a strong dollar for the better half of last year.
Dollar strength was the major theme today, for no good reason except maybe Bernanke and Shirakawa's ETF made monie shorting silver and Dollar General. Canada and England's respective Pounds traded best. Euro did Japan. Aussie and New Zealand monie was impacted by the floods. Who was weakest? Japan loses round one of the Final Showdown of FIAT monie.
If the dollar went up on other currrencie weakness, plus it was deemed best currrencie due to strong jobs numbers on non farm pay role and other economic reports, how high could it go? How long could dollar strength last? What would happen with gold?
The dollar has a range that goes up to and no higher than 89, and I see no reason for that to change. The dollar has a shelf life of 1-3 years and I am on the short side of that trade. Does a dollar recovery equal an economic recovery? Not only does it hurt exports but it is a hardship on debt payments. Inflation is the Keynesian's best friend. Inflation is necessary to keep prices up, which is one of the Fed's Chief mandates.
The governments are broke and are becoming more broke day by day. The US will break the $14 trillion barrier in a month and private debt is ten times higher still. U 6 is morbidly high, food stamps are the bread lines, and all the other depression stats that show the world has out done itself. The world was complacent and brash. America led the world to the top and it will lead the decline back down. What ever the world will look like it will be an Americanization.
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