Financial Sense Blog

While the long-term fundamentals related to the U.S. dollar remain bearish, Friday’s significant rally in the greenback leaves the door open for a possible countertrend rally.

There is hardly a person who does not want to know what the future holds. In the financial markets, predictions are not hard to find because everyone has an opinion. In summary form, this is what constitutes total market supply and demand.

The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered. Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.

I know that many people focused on the elections this past week, as well as on the Fed decision for "quantitative easing." But I would like to focus on another big event, namely, the price move in silver above 25 dollars. This is a move which I believe is a significant vote for honest money, and should not be feared by investors.

Due to high growth and easy money, Hong Kong is ripe for some serious economic turbulence, namely, inflation. Calls will intensify for the HK dollar to be decoupled from the U.S. dollar.

The Fed has cranked up the bubble-machine again, pumping up opportunities as well as risk!

Savers and merchants worldwide are being forced to price scarce resources in ever-depreciating money..

This week, desperation became palpable at the Fed. In both the formulaic statement that accompanied its FOMC policy decision and Chairman Ben Bernanke's unusual (and clumsy) Washington Post op-ed follow up, the guardians of our currency expressed grave disappointment at the slow pace of US economic recovery and emphasized the continued threat of deflation. The Fed is now pledging to defeat this recession using any monetary means necessary. Unfortunately, their embrace threatens to smother our economy.

"QE2" is radically different – and radically more dangerous – than the risky games that were played with earlier "quantitative easings".

Many years from now when we look back at history I think yesterday will be seen as one of the greatest blunders ever made by a central banker. The dollar was already headed down into a major 3 year cycle low.