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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Wed Feb 28, 2007 1:19 pm Post subject: Zero Degrees of US Dollar Seperation |
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The last several months have provided a keen lesson in currency defense by a nation which has been written off in many circles as owning a dead and hopeless currency. Some key inter-related feedback loops have been on my radar, each vitally important and changing, which underscore in my viewpoint how major markets are inseparable, each inter-connected, and integrally important if the USDollar is to avoid a much deserved crash. A quip of mine at a conference one year ago centered on my claim that the USDollar was backed by the full force of the US Military.
While true in some respect, the actual defense day to day entails a green triangle not to be confused by the iron triangle which fortifies the Pentagon funding, namely the US Congress, the defense contractors, and the lobbyists when grease the funding wheels. Complementing this death grip which has contributed over decades to do irreparable harm to the USDollar, the green triangle consists of holding down gold in a straight jacket, and holding down crude oil in a giant clamp. Never stated is its purpose to reinforce the USDollar from its implied inverse leverage device as hedge funds run for cover. The greenback and gold shine in opposite directions. The greenback and crude oil flow in opposite directions. Goldman Sachs has been at the controls on most of the master machinery.
From 2001 to 2006 much attention has been given to the gold cartel, as they conduct ambushes overnight, pull the rug out from the gold bid at 10 o'clock every morning, dump bullion on the market periodically, promise further central bank gold sales, corrupt their new exchange traded funds as a new hobby, and more sinister games. The sheer size of the outstanding short positions, never with any hope or intention of covering, testifies to the absence of a free market and the institution of a corrupt mangling of the regulatory oversight function. The purpose is to prevent gold from rising in price in any sustained uncontrollable fashion. Treasury Secy Paulson is on record as stating that their objective is to keep a lid on the gold price, which stands as the publicly readable meter on all matters pertaining to inflation and its expectations. The other motive is to screw up the entire perception of inflation and its conceptual understanding, a project which fully deserves the claim “Mission Accomplished” to the masses. An entire generation of indoctrinated economists fills the ranks of colleges and universities.
When the gold price falls, the public perception concerning price inflation relaxes. Better stated, their perception of monetary inflation as an alarm is toned down, thus fostering milder price inflation expectations. With lower inflation built-in gauges at work, comes less erosion to asset prices such as bonds, which are vital to most stock and currency markets. The end result from a subdued gold price is less diversification to other competing currencys such as the euro, and at the same time more USDollar support. Market reality dictates that shortages will persist since a coerced lower price will ensure inadequate supply.
The other side of the Strong Dollar policy has been the other oil cartel, also known as the current Administration of the USGovt. While gold is, or perhaps was, more within the direct control of central bankers via bullion dumping, crude oil has been more within the domain of hedge funds and other mainstream trading houses like big banks and brokerage houses. The funds have managed to bid up the oil price whenever the USDollar sagged in weakness. The Paulson team has gone where no minister has tread or traded before. The Energy Decline Initiative witnessed and engineered last autumn, for the benefit of the ruling party (oops, did not succeed) and economic participants (oil consumers) was something to behold. By cutting by 6% their Goldman Sachs Commodity Index weight for unleaded gasoline, they forced $6 billion in gasoline contract sales, enough to trigger a months long bear in the energy complex. Now that is impressive leverage! This newfound energy trend was sufficient to support the USDollar for another few months. The last year might convince a shrewd iconoclast and suspicious person that the USGovt has been run by a syndicate of sorts for many years. That is certainly my position. The business units of the shadowy group are for the intrepid investigator to discover, not the lazy reader or viewer who relaxes for further infusions doled out by the compromised rags and networks.
When the crude oil price falls, the public perception concerning systemic cost relaxes. Better stated, their perception of the entire cost structure as an alarm is toned down, thus fostering more optimistic growth expectations. With lower cost built-in gauges at work, comes more promising prospects to corporate profits and household spending patterns. The end result from a subdued crude oil price is less speculation in other competing asset groups, and at the same time more USDollar support. The gold price managed to shake off the coordinated siege on the energy complex, primarily delivered as salvos against crude oil. Market reality dictates that shortages will persist since a coerced lower price will ensure inadequate supply.
DEFENSIVE COUNTER-ATTACKS
http://www.marketoracle.co.uk/Article415.html |
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