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TOM CLOUD PRECIOUS METALS UPDATE: U.S. Dollar Troubles Ahead & Are Banks Safe?

TOM CLOUD PRECIOUS METALS UPDATE: U.S. Dollar Troubles Ahead & Are Banks Safe?

In the newest precious metals update, Tom Cloud discusses the platinum market, U.S. Dollar troubles, and is your money safe in banks.  Tom says that more individuals and companies are moving some of their cash out of banks and into physical metals than he as ever seen before.  Americans are becoming increasingly worried about their ability for the FDIC to insure their money at banks.

Tom Cloud discusses why the U.S. Dollar is in trouble, A dollar crash is virtually inevitable, Asia expert Stephen Roach warns:

Stephen Roach, one of the world’s leading authorities on Asia, is worried a changing global landscape paired with a massive U.S. budget deficit will spark a dollar crash.

“The U.S. economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Monday. “The dollar is going to fall very, very sharply.”

His forecast calls for a 35% drop against other major currencies.

Tom told me during our phone chat that he believes the industry will suffer from even more substantial shortages of physical gold and silver bullion products when the next BIG WAVE of buying hits the market.  I totally agree.  Tom stated that during late March and in April, he saw more new clients purchasing physical gold and silver than he has seen in quite a while.

The biggest issue that concerns Tom and some of his clients is the safety of their FDIC insured money in banks.  Individuals and companies who hold a significant amount of funds in banks are becoming worried that the FDIC will not have the funds to protect customers when there is a RUN on the BANKS.  I believe this is coming in time.  Especially when the U.S. Dollar gets into trouble.

…click on the above link to read the rest of the article…

How Surging Bank Deposits May Collapse the U.S. Dollar

How Surging Bank Deposits May Collapse the U.S. Dollar

dollar collapse

In another episode of “Strange 2020”, banks have become flush with deposits. But not in the way you might expect.

According to CNBC, “A record $2 trillion surge in cash has hit the deposit accounts of U.S. banks since the coronavirus first struck the U.S. in January.”

In one month, deposits grew by $865 billion, which beat the record for an entire year.

You can see the incredible jump in deposits in the official chart below, starting as the pandemic hit earlier this year:

fred

When you see such a large deviation from the norm, you don’t have to have a degree in economics to suspect something is fishy. According to CNBC, the Fed appears to be partly responsible for this anomaly:

The Federal Reserve began a barrage of efforts to support financial markets, including an unlimited bond-buying program. And an uncertain future prompted decision-makers, from two-person households to global corporations, to hoard cash.

Fox Business notes, “About two-thirds of the [$2 trillion in deposits] flowed to the nation’s biggest banks.” So if $1.34 trillion in deposits flowed from retail, asset managers, government programs like the Paycheck Protection Program, and big company lines of credit over the last five months or so, and only to big banks… that should raise suspicion.

But that much cash flowing into big banks has another potentially big consequence…

Crash of the U.S. Dollar Could Be “Inevitable”

The U.S. dollar may be headed for trouble in the near future, and the CNBC piece finishes with one possible reason why:

A lot of banks are saying, “There’s frankly not much we can do with it right now”… They have more deposits than they know what to do with.

If banks have trillions of dollars, but there isn’t anywhere for that money to go, that has a number of potential outcomes.

…click on the above link to read the rest of the article…

The $USD is Warning Us That Something Big is Coming

The $USD is Warning Us That Something Big is Coming

Things are beginning to get out of control in currency land.

The $USD is collapsing. Astute chart readers will note that the $USD has already experienced two sharp drops in the last few months (blue rectangles in the chart below). They occurred in late February before the COVID-19 shutdown and late March after the COVID-19 market meltdown subsided.

So why is this current drop (green rectangle in the chart above) so important? 

Because this collapse is happening outside of a crisis.

The other two sharp drops were triggered by true Black Swan events (an economic shutdown and viral pandemic). This one is happening while things are actually returning to normal.

Put another way, the $USD is telling us that:

1)    Either another Black Swan event is underway already.

2)    The world is losing faith in the $USD based on the Fed’s’/ Federal Government’s money printing and stimulus.

For a better perspective on what I am talking about take a look at the next chart. The $USD is breaking its bull market trendline at a rapid clip. The only other time it did this was right before the COVID-19 black swan event.

Something BAD is brewing in the financial system. And it’s going to catch 99% of investors by surprise.

As Economies Reopen, the USD Faces this Triple Threat

As Economies Reopen, the USD Faces this Triple Threat

dollar attacked

The U.S. dollar’s status as the global reserve currency has been under attack for many years. But today, these attacks seem to be expanding and intensifying. Let’s look at three recent developments.

Big Bank Bets Against the Dollar

Now that most state economies have at least started to reopen, Goldman Sachs is betting against the dollar, according to a recent CNBC article:

In a note over the weekend, Goldman strategists said that while they had maintained that it was too early to look for “outright and sustained Dollar downside given the balance of cyclical risks,” shorts on the dollar now looked attractive in certain currency crosses.

The article continued by explaining precisely what “short selling” the dollar means:

Short selling a currency involves borrowing that currency, selling it at the current market price and then waiting for the price to fall in order to buy the currency back at a lower price and return the loan.

Specifically, Goldman is betting on the Norwegian krone to outperform the dollar, and thinks the krone is well positioned to do just that.

Recent performance of the dollar (DXY) could be revealing that Goldman Sachs is off to a good start with their bet:

U.S. Dollar Index and 50-Day Moving Average

As you can see at the far right of the chart, the dollar’s value is dropping close to levels not seen since early 2018. It’s also severely under the moving average.

Meanwhile, the krone is still above the moving average, and doesn’t appear nearly as “flat” as the dollar.

But the krone is not the only challenge to the dollar’s hegemony; changes to China’s currency represents another one.

4-Letter Potential “Nightmare” for the U.S. Dollar

Right now, the main currency in China is the yuan.

…click on the above link to read the rest of the article…

Get Ready for the Next Game-Changer: the Digital Yuan

Get Ready for the Next Game-Changer: the Digital Yuan

A new, radical paradigm shift is in progress. The U.S. economy may shrink as much as 40% in the first semester of 2020. China, already the world’s largest economy by PPP for a few years now, may soon become the world’s largest economy even in exchange rate terms.

The post-Planet Lockdown world – still a hazy mirage – may well need a post-Planet Lockdown currency. And that’s where a serious candidate steps into the fray: the fiat digital yuan.

Last month, the People’s Bank of China (PBOC) confirmed that a group of top banks started trials in electronic payment in four different Chinese regions using the new digital yuan. Yet there’s no timetable yet for the official launch of what is called the Digital Currency Electronic Payment (DCEP).

The man with the plan is PBOC governor Yi Gang. He has confirmed that apart from the trials in Suzhou, Xiong’an, Chengdu and Shenzhen, the PBOC is also testing hypothetical scenarios for the 2022 Winter Olympics.

While DCEP, according to Yi, “has made very good progress,” he insists the PBOC will be “cautious in terms of risk control, especially to study anti money-laundering and ‘know your customer’ requirements to incorporate in the design and system of DCEP.”

DCEP should be interpreted as the road map for China leading to an eventual, even more groundbreaking replacement of the U.S. dollar as the world’s reserve currency. China is already ahead in the digital currency sweepstakes: the sooner DCEP is launched the better to convince the world, especially the Global South, to tag along.

The PBOC is developing the system with four top state-owned banks as well as payment behemoths Tencent and Ant Financial.

…click on the above link to read the rest of the article…

What Happens When The Pandemic Ends?

What Happens When The Pandemic Ends?

Let’s assume that by the end of this year a combination of social distancing and some new and effective treatments convert covid-19 from existential threat to chronic nuisance and the economy starts to assume an air of normalcy. Which is to say that people go back to traveling and eating out and buying Chinese-made things they don’t need with money they don’t have.

Are we really home free? Or will some other, even bigger black swan come in for a landing?

To put this question into context, it helps to look at how the world got here. In extremely brief form: We engineered a tech stock bubble in the 1990s that burst in 2000, requiring drastically lower interest rates and truly insane speculation in housing to rescue the big banks. When that bubble burst in 2008, interest rates had to fall even further and even more debt – ranging from government to student to subprime auto (and, yes, mortgage) — had to be taken on to save Wall Street. Hence the term “everything bubble.”

Then came the pandemic, which burst the everything bubble and has convinced the world’s governments that truly astounding amounts of new debt are required to bail out all the parts of the private sector that have more-or-less ceased to exist.

Here, for instance, is the Fed’s balance sheet, which is a proxy for the amount of new currency the central bank has created out of thin air and dumped into the economy. The blue line is GDP growth and the red line is Fed currency creation. Note that more and more currency has to be created to maintain the same anemic growth trend:

Fed balance sheet pandemic

And here’s the federal government’s debt. Note the same situation as with the Fed: ever-greater borrowing is necessary to maintain a diminishing rate of growth.

US government debt pandemic

…click on the above link to read the rest of the article…

The Elites Are Already Prepared for the Coming Collapse of the Dollar Bubble

The Elites Are Already Prepared for the Coming Collapse of the Dollar Bubble

elite prepared for collapse
Photo by Wikimedia.orgCC BY | Photoshopped

Today, stock market investors are hoping desperately for Weimar-style hyperinflation to boost equities prices to dizzying heights in what some call a “crack-up boom”. In terms of money creation, we are not there yet, but such levels of fiat printing could happen within the next year. Unfortunately for investors, this “boom” in stocks may not happen again. In fact, it already happened over the course of the past several years, and now the party is over. In the past few months, the U.S. dollar has entered a massive liquidity crisis, and despite all expectations, the Fed’s attempts to compensate with stimulus measures have done little to boost markets back to their previous glory.

In Weimar Germany, stocks did get an epic rally, until it all came crashing down in 1924 and then again in 1927. The notion of the endless fiat-driven bull market is a lie perpetuated by central bankers and their cheerleaders.

As I warned in past articles, when the Fed finally decided to step in to “stall the crash”, it was after it was far too late. The Fed has no intention of stopping the crash, they WANT a crash; they created all the conditions necessary for the collapse of the Everything Bubble to happen. Their goal now is only to make it appear as though they “did everything they could” to save the economy while staging the collapse of the final bubble: the U.S. dollar and its global reserve currency status.

…click on the above link to read the rest of the article…

“Down The Rabbit Hole” – The Eurodollar Market Is The Matrix Behind It All

“Down The Rabbit Hole” – The Eurodollar Market Is The Matrix Behind It All

Summary

  • The Eurodollar system is a critical but often misunderstood driver of global financial markets: its importance cannot be understated.
  • Its origins are shrouded in mystery and intrigue; its operations are invisible to most; and yet it controls us in many ways. We will attempt to enlighten readers on what it is and what it means.
  • However, it is also a system under huge structural pressures – and as such we may be about to experience a profound paradigm shift with key implications for markets, economies, and geopolitics.
  • Recent Fed actions on swap lines and repo facilities only underline this fact rather than reducing its likelihood

What is The Matrix? 

A new world-class golf course in an Asian country financed with a USD bank loan. A Mexican property developer buying a hotel in USD. A European pension company wanting to hold USD assets and swapping borrowed EUR to do so. An African retailer importing Chinese-made toys for sale, paying its invoice in USD.

All of these are small examples of the multi-faceted global Eurodollar market. Like The Matrix, it is all around us, and connects us. Also just like The Matrix, most are unaware of its existence even as it defines the parameters we operate within. As we shall explore in this special report, it is additionally a Matrix that encompasses an implicit power struggle that only those who grasp its true nature are cognizant of.

Moreover, at present this Matrix and its Architect face a huge, perhaps existential, challenge.

Yes, it has overcome similar crises before…but it might be that the Novel (or should we say ‘Neo’?) Coronavirus is The One.

So, here is the key question to start with: What is the Eurodollar system? 

For Neo-phytes

…click on the above link to read the rest of the article…

Lacalle: Is Now The Time To Buy Gold?

Lacalle: Is Now The Time To Buy Gold?

In this interview Daniel Lacalle explains why the fundamentals for gold are stronger each day, and why silver and palladium should not be ignored in the current crisis.

Central banks keep buying more gold and will need even more as massive liquidity measures drive their balance sheets higher.

Supply challenges remain with some mines being shut down and new supply coming well below demand (as evidenced by the decoupling – once again – between spot and futs)…

Massive monetary imbalances globally will drive demand from investors looking for a hedge to currency debasement (and that systemic risk is soaring, with sovereign credit markets starting to leak information)…

*  *  *

Finally, we give the last word to Raoul Pal and his most recent thoughts (excerpted) on “A Dollar Standard Crisis” (referring to his institutional market research at Global Macro Investor)…

….

Don’t forget – the $13tn short dollar positions (foreign dollar debt held mainly by foreign corporation and investment vehicles) is the largest position ever taken in the history of global financial markets.

It can only mean a massive, uncontrolled dollar rally. 

QE will not fix this. Swap lines will not fix this. A debt jubilee would fix this or multiple trillions of dollars in write-downs and defaults.

It is the dollar strength that brings to world to its nadir (just like the 1930s). It is the dollar system that is the really big problem.

The dollar has eaten all of its competitors and now it is going to eat itself.

This eventually breaks the dollar after a super-spike as global central banks are forced to find alternatives. 

Remember, nothing lasts forever…

Despite Massive QE And Congress Bill, The US Dollar Shortage Intensifies

Despite Massive QE And Congress Bill, The US Dollar Shortage Intensifies

How can the Fed launch an “unlimited” monetary stimulus with congress approving a $2 trillion package and the dollar index remain strong? The answer lies in the rising global dollar shortage, and should be a lesson for monetary alchemists around the world.

The $2 trillion stimulus package agreed by Congress is around 10% of GDP and, if we include the Fed borrowing facilities for working capital, it means $6 trillion in liquidity for consumers and firms over the next nine months. 

The stimulus package approved by Congress is made up of the next key items: Permanent fiscal transfers to households and firms of almost $5 trillion. Individuals will receive a $1,200 cash payment ($300 billion in total). The loans for small businesses, which become grants if jobs are maintained ($367 billion). Increase in unemployment insurance payments which now cover 100% of lost wages for four months ($200 billion). $100 billion for the healthcare system, as well as $150bn for state and local governments. The remainder of the package comes from temporary liquidity support to households and firms, including tax delays and waivers. Finally, the use of the Treasury’s Exchange Stabilization Fund for $500bn of loans for non-financial firms.

To this, we must add the massive quantitative easing program announced by the Fed. 

First, we must understand that the word “unlimited” is only a communication tool. It is not unlimited. It is limited by the confidence and demand of US dollars. 

I have had the pleasure of working with several members of the Federal Reserve, and the truth is that it is not unlimited. But they know that communication matters.

FED BALANCE SHEET 2020

…click on the above link to read the rest of the article…

Something Is Breaking: Fed Fails To Ease Epic Dollar Shortage As FRA/OIS Goes Parabolic

Something Is Breaking: Fed Fails To Ease Epic Dollar Shortage As FRA/OIS Goes Parabolic

One certainly can’t blame the Fed for trying: after firing a repo “bazooka” yesterday, which could provide up to $5 trillion in monthly liquidity in exchange for eligible pledged securities, and following that up with an emergency QE operation today when the Fed announced it would buy up to $37 billion in securities across the curve from domestic and foreign banks, risk assets have staged a modest rebound after the biggest selloff since Black Monday, and the relentless selloff of Treasurys, likely prompted by risk parity fund unwinds, has moderated.

But where the Fed has catastrophically failed, is in addressing the most important task facing it this moment: easing the unprecedented dollar shortage which is getting worse by the minute.

Despite the barrage of central bank actions meant, more than anything, to ease bank fears that dollars will not be available when needed to rollover trillions in maturing debt, the dollar has seen a relentless surge higher, with today’s move shocking in its severity and consistency.

Yet while one can argue that the dollar is traditionally a flight to safety in times of stress, the fact that the dollar is surging today even as stocks are soaring and the Dow is about to be up 1,000 suggests that something else is going on.

That something else is the relentless move higher in the 1st IMM FRA/OIS, which was supposed to ease after today’s massive term repo operations, yet which spiked when it emerged that there was barely any usage early this morning, arguably due to regulatory limitations and concerns about liquidity coverage ratios.

…click on the above link to read the rest of the article…

Funding Markets Are Freezing: Global Dollar Shortage Hits Alarming Levels

Funding Markets Are Freezing: Global Dollar Shortage Hits Alarming Levels

The surging demand for repo liquidity – and massively expanded bailout facility size by the New York Fed – suggests there is a major global scramble for USD funding, and today’s price action in the archaic money markets exposes it has now reached extremely alarming levels.

Surging cross-currency basis swaps (measuring how much investors are willing to pay to swap their currencies for dollars for 3m) signal something has snapped…

And it appears to be centered on Japan (though EUR and UK are also seeing huge demand for USDs)

Additionally, the FRA/OIS spread is screaming liquidity crisis…

Which helps explain why The Fed just upped its daily repo limit to $175 billion (yes billion)…

But as evidenced in today’s worsening situation in liquidity markets, it is not helping.

This is all exacerbating the massive tightening in US financial conditions…

Which has sparked demand from the market for almost a 100bps rate-cut next week (or before) when The Fed meets…

Summing up, Bloomberg’s Cameron Crise notes that in fixed-income relative value – historically a very profitable, highly leveraged strategy – relationships have frayed to the point of incredulity, indicating high levels of distress.

One consequence of this basis swap repricing is that USD-denominated treasuries are suddenly more expensive to hedged foreign buyers to the tune of roughly one rate hike. Which, all else equal, would mean that there is now that much less demand by international buyers for TSY paper on the long end. Could this shift in supply-demand mechanics impact the yield on long-dated paper? Which is what we have seen in recent days as bonds have not rallied as much as one would expect given the carnage in stocks.

“We Have Never Seen This Before”: The Last Time The Market Did This, FDR Confiscated All The Gold

“We Have Never Seen This Before”: The Last Time The Market Did This, FDR Confiscated All The Gold

To say that moves in the US stock market have been erratic in the past two weeks would be a prodigious understatement: with the Dow Jones swinging by over 1,000 points on nearly 5 occasions in the past two weeks (today’s 970 point move would have been the fifth)…

… traders – holding on for dear life in a market rollercoaster the likes of which have not been seen in years – have given up trying to make sense, and are just praying they don’t lose all their money. “When you have a 4.5% up day in the market and a 2% down day – what does that mean?” Kathryn Kaminski of AlphaSimplex Group told Bloomberg. “It just means we don’t know what’s going on.”

And while futures continue to slide amid a surge in US coronavirus cases late on Thursday with over 2,000 New Yorkers now having self-quarantined, and emboldening what little is left of the bears – recall that heading into this week, single stock/ETF short interest was at all time lows…

… the bulls, who are rapidly losing faith that even the Fed can prop up this market, are pointing to the recent dramatic rebounds in the stocks most recently on Wednesday when the S&P500 surged back above 3,124 (it is now trading well below 2,990), yet which nobody can fully explain because even though there are several catalysts for the rebound that one could point to, historically speaking none of them are entirely satisfying as explanations, and as Nomura’s Masanari Takada writes in his daily Nomura quant note, “we suspect that more than a few investors (whether bearish or bullish) are feeling paralyzed in the face of such unusual swings in the market.”

…click on the above link to read the rest of the article…

Why a bear market will lead to a dollar collapse

Why a bear market will lead to a dollar collapse 

Falling equity markets this week are likely to signal the onset of a bear market, responding to a combination of the coronavirus spreading beyond China and persistent indications of a developing recession.

This has provoked a flight into US Treasuries, with the ten-year yield falling to an all-time low of 1.31%. This will prove to be a mistake, given US price inflation which on independent estimates is running close to ten per cent, exposing US Treasuries as badly overpriced.

After this short-term response, much higher US Treasury yields are inevitable. Foreigners, who possess more dollars and dollar investments than the entire US GDP will almost certainly sell, driving bond yields up and the dollar down, leaving the Fed the only real buyer of US Treasuries.

This article goes through the sequence of events likely to destroy value in US financial assets and the dollar as well. And what goes for the US goes for all other fiat-currencies and their financial markets.

Introduction

In my last article I pointed out that the cumulative effect of central bank intervention has led to bond prices that have come badly adrift from reality. Taking a more realistic estimate of the dollar’s purchasing power than that implied in goal-sought CPI numbers, plus an estimated amount for the time preference involved, ten-year US Treasuries should yield closer to 10% to maturity, not the 1.31% implied today. If a ten-year bond has a coupon such that it is currently priced at par, the price should halve.

Those who put our monetary misfortunes down to the coronavirus have missed the point. Yes, it will be fatal, both economically and unfortunately for some of us as individuals as well. It is early days in what is definitely becoming a pandemic, that is to say an epidemic that is not restricted to national boundaries.

…click on the above link to read the rest of the article…

Don’t Mess With the U.S. (Financially)

Don’t Mess With the U.S. (Financially)

Don’t Mess With the U.S. (Financially)

I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.

Because as you’ll see below, it can directly impact your wealth.

Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.

These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.

The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.

Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?

We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.

It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.

From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.

This is warfare. It’s just a different form of warfare.

It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.

North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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