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USD -
A Big Picture View
by Gary
Tanashian
biiwii.com
January 17, 2007
The
US Dollar is hated by nearly everyone, even its own government
apparently (out of control wildcat spending) and of course the voracious
American consumer who just can't wait to get his hands on ever more
credits to feed his consumption habits and push the nation's current
account further and further out of balance. The Fed does not hate the
dollar however. The dollar is the Fed's note, its product, its means of
creating limitless fiat fun - and debt. The gold bugs of course know
that this entire mess is one huge Ponzi scheme, which is why they expect
a dollar collapse imminently and have been since Nixon closed the gold
window for good. So we are going on 4 decades of "imminently".
Talk about frustration.
Sometimes I get crazy thoughts of a return to American pre-eminence,
where the dollar remains king, what the US says goes and the rest of the
world remains in line behind the greatest culture and most flexible
economy on the planet. Seeing Huey & Dooey huddled together in
Venezuela yesterday while the mighty house of Saud plays ball on crude
supports such fantasies. Never mind that in reality I am embarrassed at
the direction the culture is going and that fundamental analysis shows
that the great elastic economy is nothing more than a result of decades
of financial engineering, the matter at hand is shelf-life. How long can
appearances be kept up? Answer: Nearly 4 decades and counting by my eye.
This entry will abort without coming to a conclusion other than to point
out that things don't usually happen on time tables expected and that
near term outcomes are often surprising. I would not be surprised to see
a new blip on the radar where a great American age falls into place,
even if that age only lasts months as opposed to years or decades. Long
enough to get the majority of casual market watchers believing
the story.
The US and many would argue the modern world appear to be at an
"all or nothing" juncture. The dollar chart can be interpreted
as bullish, with major support at 80 not being threatened and in fact
the index readying itself to turn up from consolidation and potential
bullish falling wedge. On the bearish side, with all the stimulus thus
far, 85 is the best it can do? With the current levels of debt and derived
leverage woven into the global economy, how much tight monetary policy
can the system withstand? The chart says be patient, a strong dollar is
coming imminently. But a chart is just a chart. Fundamentals say the Fed
is in a box and traditional laws of economics (like say, Austrian?) will
hold sway. I say this mess is and has been all about price as opposed to
any kind of enduring value and as you trade and speculate, keep that in
mind. A Ponzi scheme is only as good as its duration. 4 decades and
counting... Chart bullish, sentiment bearish. What does that mean to
you?
© 2007 Gary Tanashian
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