Dollar to Yo-Yo Back Up on Faux Euro Troubles

Eric Blair
Activist Post


Here we go again.  With the debt ceiling approaching, the dollar hitting a record low against the Swiss Franc, dollar-based commodities soaring to new highs; everyone has been predicting the death of the dollar, again.  Yet, as if by miracle, Euro-zone troubles emerge just in time to save the dollar from complete collapse.


Spiegel Online reported Saturday that Greece is considering leaving the Euro and printing its own currency, prompting a secret crisis meeting in Luxembourg.  Finance ministers and European Commission representatives scrambled to figure out how to threaten Greece back into the fold.

Europe Whispers “Crisis” While the Market Continues Screaming

Jason Kaspar, Contributing Writer
Activist Post

Last year the Europe Union (and the euro) teetered on the verge of collapse when the Greek financial crisis strained the viability of the EU construct. This year, as other EU countries domino in similar fashion, no one seems to care – certainly not the markets. Portugal’s government collapsed last Friday, and Standard and Poor has downgraded Portugal twice in the last week from A- to BBB-.  S&P then proceeded to cut Greece’s rating further from BB+ to BB-. Yet, defying all reason, the markets have gone up.

So, why is the market reacting positively to this news?

Well, in the perverse logic of a shortsighted market, debt spending is good.  Going into the European crises last year, there was no backstop for a European country in trouble.  The provisions for sovereign collapse were unclear and hotly debated.  Would Greece be kicked out of the Eurozone?  What would happen to the Euro?  Would bondholders suffer losses? How would this impact banks?

Dollar Quietly Losing Status as Safe Haven During Crisis

Eric Blair
Activist Post

It used to be that during times of perceived global crisis institutional investors rushed into the dollar as a safe haven. U.S. Treasury bonds were once considered as good as gold when uncertainty gripped the world. However, it now seems that the weight of fundamentals have finally surpassed prevailing perceptions where the dollar is no longer king of crisis investing.

In October, 2010, the dollar reached a 5-month low against the Euro during the fierce debate leading up to the $600 billion quantitative easing by the Fed.  Following the final passage of QE2 in early November, the mainstream media hyped it as victory and promptly pivoted to begin pounding out headlines about the Eurozone debt crisis.  Almost immediately the dollar turned the corner against the Euro.

2-month Dollar/Euro Chart 2010

It was easy to predict such a turnaround because perception at the time was clearly driving the currencies, while fundamentals were largely ignored.  As I pointed out in October:

The fundamentals suggest that it (the dollar) should be finished, but just as the world is about to declare it dead, miraculously a global storyline seems to emerge just when needed and foreign investors rush back in for 'safety.'

And, indeed, investors flocked back into the dollar on the hyping of the Eurozone debt crisis 2.0.  However, this cycle only lasted until the first week of January, 2011 where talk of the Euro crisis was noticeably absent from the headlines, and America's financial woes once again took center stage.

Now, as the world is gripped by authentic crises with mass civil unrest in the Arab world, and the devastating earthquake/tsunami in Japan, large institutional investors are continuing to abandon the traditional safe-haven dollar.

Bloomberg reported last week that "Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits."

Despite the global turmoil, the dollar hovers near its 52-week low on the Dollar Index.  Perhaps the timing of these crises coinciding with American lawmakers threatening a government shutdown over its escalating debt has deterred investors from their normal behavior.  Instead we are seeing far more money moving into commodities, as currencies and government debt are being increasingly exposed as unreliable.

The world seems to be finally realizing that commodities such as food staples and oil are the genuine currency of our society, and the only true safe haven during global uncertainty.  In fact, it appears that the fiat U.S. dollar is actually measured by oil (and other vital commodities), not the other way around.  As tangible and necessary resources, oil and food are now kings of the crisis.

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U.S. fiscal health worse than Europe's: China adviser

AFP image

Reuters

The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone's troubles but America's fiscal health is worse than Europe's, an adviser to the Chinese central bank said on Wednesday.

Li Daokui, an academic member of the central bank's monetary policy committee, said that U.S. bond prices and the dollar would fall when the European economic situation stabilized.

"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about U.S. President Barack Obama's plan to extend tax cuts for all Americans.

"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."

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Citizens of Europe Rage Against the Machine

Austerity measures drive 100,000 protesters to the streets of Ireland, another 100,000 in Italy as Europeans continue to rage against the international banking machine.

Eric Blair
Activist Post

The international bankster machine seeking to colonize Western nations through debt is now meeting resistance from Greece, to France, to Ireland, to Italy, to Spain, to Portugal, and to the U.K. 

These new protests in Ireland and Italy follow a crippling 2-week strike in France where citizens took over fuel refineries and other vital infrastructure, more strikes in Greece which took over the Acropolis, and a massive student protest in the UK that caused physical damage to government buildings. All of these protests were sparked by governments reducing benefits or increasing fees and taxes on a population that had little to do with the private gambling of banks.

These European protests are intensifying as the international bankers move to collect their "pound of flesh" through austerity and sale of public assets.  As Europeans are becoming acutely aware of the dubious plan to loot them and the anger at their corrupt elected officials for bowing to banks has reached a boiling point.  In all cases the governments are enforcing austerity measures on the people after the private banks over-leveraged themselves to the breaking point, threatening to bring down entire nations. 


For years the bankers churned out easy credit to these nations while they invested public and private funds into worthless credit default swaps and derivatives. As if orchestrated to perfection, they pulled the plug on those toxic assets, essentially bankrupting the more fragile developed countries, followed by calling their debts due.  Now they're demanding that European governments be forced into IMF bailouts that impose drastic austerity measures on the populace.

By forcing tax increases and reducing benefits for the citizens of sovereign nations, the IMF is essentially rewriting their laws.  Well, it appears that the citizens of Europe have had enough.  The massive protests, strikes, and riots that have swept through the streets of many European countries have resulted in growing calls to reject the bailout money used to prop up failed banks and corrupt governments.  The Irish people prefer to default on the debt which drove the EU 'completely mad'.

The protesters are getting support from someone who is experiencing the outcome of resisting public bailouts of private banking debts.  The President of Iceland recently remarked that they're in much better shape than Ireland because they let the private banks fail and their currency naturally devalued, allowing them to regain some competitiveness relative to their neighbors:

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

UK's Libertarian politician, Nigel Farage, once viewed as a fringe player, is now getting international recognition for forewarning his European comrades about the troubles in the system.  He's quickly becoming a hero to the banker resistance as his credibility reaches new heights for being proved right -- much like his U.S. counterpart Congressman Ron Paul. His rants in the European Parliament are going viral on YouTube as the people are waking up to their servitude to banks and a lack of true democracy and sovereignty.

Nigel Farage speaks with such confidence against the EU, as he should, given that a recent mainstream media poll showed 99% of UK citizens want out of the Euro.  The battle against the banking cartel is clearly happening with Europe as the spearhead.  As Europeans continue to fight back against corrupt international banksters, lazy Americans continue to live with a much lower standard of living and do nothing to challenge the system.

The rage in Europe and quiet streets in America is causing the euro to fall against the dollar.  The dollar was all but declared dead in the lead-up to the Fed's QE2, but now the eurozone debt crisis has taken center stage.  The European Council is set to meet again this December to amend the Lisbon Treaty to essentially legalize more bailouts.  Some insiders are calling it an impossible mission to get all European countries to agree on fair amendments.  The outcome of these December meetings will assuredly be pivotal in determining whether the euro "experiment" will survive.

If it crumbles, so then does the structure for a global currency.  Indeed, the front lines in the battle to conquer plans for a global currency and the end of sovereign nation states is being waged by the angry citizens of Europe.  Bravo comrades, keep up the fight!


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Debt turmoil, contagion fears sweep Europe

Illustration: Market Oracle

Barry Hatton
Associated Press

LISBON, Portugal – Europe struggled mightily Friday to keep the debt crisis from engulfing country after country. Portugal passed austerity measures to fend off the speculative trades pushing it toward a bailout and Ireland rushed to negotiate its own imminent rescue.

As Portugal and Spain insisted they will not seek outside help, creating an eery sense of deja-vu for investors, Europe braced for what seems inevitable — more expensive bailouts.

The Portuguese Parliament approved an unpopular debt-reducing package, including tax hikes and cuts in pay and welfare benefits. But while that helped to avoid a sharper deterioration in bond markets, the sense among analysts was that the move had only bought a little time.


Adding to the pressure, Ireland's major banks were hit with credit downgrades — one to junk bond status — as speculation mounted that the EU-IMF bailout of Ireland, to be revealed within days, would require investors to take losses, a possibility earlier denied by officials.

"This confusing `pea-soup' of indecision, vacillation and disunity by the EU is beginning to create unnecessarily seismic waves of fear in international bond and money markets," said David Buik, markets analyst at BGC Partners.

Yields in fiscally weak eurozone countries remained near record highs Friday, stocks slumped across the board and the 16-nation euro lost another 0.8 percent on the day to trade at $1.3241, just off two-month lows.

Portugal's high debt and low growth have alarmed investors, but the government insists it doesn't require an international rescue — a line ominously reminiscent of claims by Greece and Ireland before their massive rescues.

Analysts say markets need more reassurance from EU leaders that the rot can be stopped in Portugal before spreading to Spain, the continent's fourth-largest economy — a scenario that would threaten the 16-nation euro currency itself.

The financial crisis took a step in that direction this week, as it increasingly becomes apparent that bond investors will not be pacified by austerity measures but want weak countries' public finances to be plugged once and for all. Greece, which accepted a bailout six months ago, and Ireland are still far from being able to return to international debt markets.

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Euro slides as Portugal bailout pressure builds

Portugal is under pressure to accept an EU bailout in order to stop the eurozone debt contagion spreading to Spain, according to German press reports that pushed the euro to a two-month low.

Portugal General Strike - AFP image

Bruno Waterfield
Telegraph

The European Central Bank is pushing Portugal to become the third eurozone country to accept an EU-IMF “rescue” because of concerns that a Portuguese debt crisis will sink its Iberian neighbour Spain.

The EU and eurozone fears that Spain, Europe’s fifth largest economy, is too big to bailout and that a Spanish crisis would tear down the European single currency.

Major European stock markets fell sharply, unsettled by the news and talk of the EU bailout fund being doubled. Spain's Ibex led the way losing 2.3pc, while bourses in London, Paris and Frankfurt were down between 1.3pc and 1.7pc. The euro hit $1.3204, its lowest since late September.


Borrowings cost in Portugal and Spain climbed, with yields on the countries' 10-year bonds near record highs.

“If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal,” unnamed sources told the Financial Times Deutschland.

The rumours mirror similar leaks and briefings three weeks that Ireland was seeking an EU bailout and despite denials from all parties the reports were later confirmed.

Portugal, like Ireland before it, has denied it is being pressured by euro zone countries and the ECB. “This news article is completely false, it has no foundation,” said a government spokesman.

But Fernando Teixeira dos Santos, Portugal’s finance minister, has hinted euro zone are pushing Portugal to accept a bailout and the loss of sovereignty that allows the EU and IMF to take over a country’s fiscal policy.

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Eurozone Debt Crisis 2.0: Dollar Sucks Less than Euro, Again

Eric Blair
Activist Post

The grand symphony of currency manipulation seems more finely orchestrated than ever before. However, it's not necessarily the fundamentals that are moving currencies so much as global perception.  In the battle between the Fed's quantitative weakening of the dollar versus the eurozone debt crisis, the dollar is winning this round of who sucks less.

On October 1st, I posed the question, will the dollar rebound before being dissolved into a global currency? At that time, no one was predicting the dollar to gain strength with the Federal Reserve planning more quantitative easing.  The windbag media promoted QE2 as a stock market stabilizer and a boost to U.S. exports, yet most experts openly called it a backdoor bailout, or monetizing debt, or plain old money printing.  Nearly everyone agreed it would ultimately erode the value of the dollar even further and cause measurable inflation.


Indeed, it was a well-justified gloom-and-doom 6 months for the dollar by Fed critics.  After all the media build-up, the Fed's announcement of the $600B easing plancame strategically on the day after mid-term elections, when most of the media was focused on feeding the false left-right frenzy by digesting the election results.  In other words, QE2 got some mention, but the timing was clearly a tactic to keep a lid on the talking-head backlash.  Then, Obama rushed out of the country for the G20 economic summit taking the remaining media distraction with him.  Between stories of Michelle's shopping trips, it was revealed that China and other foreign economic players were not very happy about the Fed's move. Yet, the dollar started to rally.

Recent commentary by Chuck Butler in the Daily Reckoning questions the commodity sell-off and dollar rally:

But does it all make sense, given what I mentioned above that the FOMC is looking for inflation to inject into our economy? No… But since when, going back to the financial meltdown, does anything the markets do make sense?

Nothing makes sense if we still believe fundamentals actually matter.  Sure the dollar is nearly dead, fundamentally, but it seems that perception now trumps concrete analysis.  As I reported in October:

The fundamentals suggest that it (the dollar) should be finished, but just as the world is about to declare it dead, miraculously a global storyline seems to emerge just when needed and foreign investors rush back in for "safety."  A clear example was the steady drumbeat of a sovereign-foreign-debt war that resulted in reports of whether the Euro would even survive, while the dollar enjoyed a triumphant ride up victory mountain.

Now, here we go again.  As soon as the Fed announcement was made, the media shifted its focus once again to the eurozone debt "crisis."  Story after story, day after day, about the developing crisis in Ireland -- and now Portugal.  News agencies often salivate to repost these headlines, because crisis sells.  And it sells because doom and gloomers, otherwise known as fundamental analysts, are waiting for reality to catch up to the numbers -- not just in the eurozone, but globally. The debt-infected PIIGS is a legitimate story, but it is clearly being heavily pushed to make the dollar look less pitiful.

Dollar on the Rise: 2-month Dollar/Euro Chart (source advfn)

Today's major headlines from leading UK papers show how "critical" the eurozone debt crisis has become.  The first story appeared in the London Guardian titled Ireland crisis could cause EU collapse, warns president, where EU President Van Rompuy warned in a speech in Brussels, that "We're in a survival crisis . . . we all have to work together in order to survive with the eurozone, because if we don't survive with the eurozone we will not survive with the European Union." The article went on to define the pressure cooker facing the PIIGS:

Van Rompuy's speech added to the pressure on the Irish government, which was continuing to resist international pressure to accept a bailout this morning.

Shares fell across Europe as pressure mounted on Ireland to accept an EU or International Monetary Fund bailout to stem contagion to other high-deficit eurozone countries. Portugal, which has seen its borrowing costs rocket along with Ireland's, warned last night that it too might need a rescue package.

But despite fears that the crisis could bring down the euro, Ireland's minister for European Affairs Dick Roche denied this morning that Ireland needed emergency financing.

The next article that encapsulates the heightened fear surrounding the debt crisis was written by the brilliant financial reporter Ambrose Evans-Pritchard of the Telegraph titled The horrible truth starts to dawn on Europe's leaders where he states: "The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict."  Granted, he was basing his analysis on the same Van Rompuy speech, which seems eerily reminiscent ofHank Paulson's dire warning of complete collapse and martial law in the U.S. if the Congress did not pass the TARP bailout.

The situation for the PIIGS hasn't changed in the last six months.  It isn't incredibly more severe than it was then.  And despite mildly encouraging retail numbers this quarter, the U.S. is not much better off than it was when the dollar was sinking like a stone. So, it is vividly transparent that the global banksters use the media to move the FOREX at times of their choosing and in contrast to fundamentals.  In turn, we all buy in and post and repost the crisis headlines feeding the manipulation machine.

The video below shows the absurd shell game that is the eurozone debt mess.  It's comically and obviously robbing Peter to pay Paul to prop up the Ponzi scheme:

The media machine seems unbeatable, but luckily it's somewhat predictable.  I reiterate what I said when I predicted the dollar to rebound in October:

The severely debased dollar is unlikely to rebound to previous highs given the international awareness of America's financial problems.  Understanding that the goal of the global elite is to move toward a global currency, ultimately they must kill the dollar and other major currencies.

Although the end may be very near for the dollar we will likely see the establishment play them off each other for as long as possible.  These cycles have seemed to run for about six months, but I don't think we'll see the dollar rise again for that amount of time.  Nor do I think it will reach its twelve-month highs against the euro again, but I would wager that we'll see very strong gains to the dollar by year end.  The European Union heads are to meet again in December to determine amendments to the Lisbon Treaty, which some leading diplomats are calling "mission impossible."  The lead-up to this meeting, coupled with the eurozone debt issues, will drive this quarter's news cycle and the FOREX.

Another development to watch in regards to the strength of the dollar is food, oil, and gold commodities.  Since they trade in dollars, it would make sense that they would sink if the dollar starts beating up on the euro.  And we already have witnessed some slight movements downward. However, I predict that they will remain relatively stable and fall far less than the euro will against the dollar.  And by the first quarter of next year, commodities will be off to the races again where we will likely see $100 oil and $2000 gold by mid-year.  That may be the real start of the end of the dollar, and the euro.

As a final note: They can't allow the euro to fail before the dollar because the European Union is the banking model they desire for the world currency; separate nation states with local currency but where consolidated economic governance is dictated by a grand central bank.  Incidentally, theeurozone debt crisis 2.0 is a dog and pony show.

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Euro under siege as now Portugal hits panic button

Bruno Waterfield and Robert Winnett
The Gazette

The euro is facing an unprecedented crisis after another country indicated on Monday night that it was at a "high risk" of requiring an international bail-out.

Portugal became the latest European nation to admit it was on the brink of seeking help from Brussels after Ireland confirmed it had begun preliminary talks over its debt problems.

Greece also disclosed that its economic problems are even worse than previously thought.

Angela Merkel, the German Chancellor, raised the spectre of the euro collapsing as she warned: "If the euro fails, then Europe fails."

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