The Phaserl


A Strong Dollar?

by Bill Holter, Miles Franklin:

The dollar has broken higher and over the 80 level by 7-8% recently versus foreign currencies. Is “King Dollar” back and what would it mean if it was? First off, I do not believe King Dollar is anything more than a “less dirty shirt” in a pile of dirty clothes meaning the U.S. economy right now is not as bad (“reportedly”) as either Europe or Japan. Notice I included the phrase “right now,” the U.S. is just as upside down and broke as either Europe or Japan and of course on a much grander scale. Please keep the term “broke is broke” in the back of your mind as this is the case for all of the West’s financial system.

So why has the dollar rallied? You must remember there is huge leverage in the system and the bulk of the debt is in dollars and must be paid back along with interest …in dollars. As the global economy has weakened, this has put stress on the ability to pay back loans. This has happened along with (maybe because) the Fed trying to stop QE. They now only pump an extra $10 billion per month into the credit markets whereas they were pumping $85 billion per month last year, the credit markets were “used to” and comfortable with all this extra cash floating into them. This (for now) is ending.

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