Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Highly Flexible and Secure Trading Accounts - 24th Jan 18
Smiggle Python Puzzle Review - 24th Jan 18
Government Shutdown Ends – Markets Ignore Looming Debt and Bond Market Threat - 23rd Jan 18
Stock Risks to Watch: Choose Your Bear Market Dashboard - 23rd Jan 18
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

US Dollar, Gold , Interest Rates and Crude Oil - Four Sheets

Currencies / US Dollar Jun 07, 2007 - 12:58 PM GMT

By: Jim_Willie_CB

Currencies An old expression is often used. Most people remain unaware of its origin. “Joe is three sheets to the wind!” means Joe is stinking drunk, smashed, plastered, intoxicated, inebriated, and who know? he might soon go meet Ralph out back (i.e. vomit). Several years ago, a learned man of letters explained to me the meaning of the phrase, which came from the world of sailing. If a sailor loses control of his sailboat, which could be from heavy imbibing of alcohol (or fishing or reading or man's favorite dance sport), the three main sails are let loose to the wind, flailing thrashing and whirling around, not pulling the boat.


The three sails (called sheets) are exposed to the whim of the wind. Well, the USDollar and gold have four sheets which are now heavily torn by the wind. Before identifying the sheets, a preliminary glance at some critical events to bear heavily on world finance. These topics are more fully developed in the upcoming June Hat Trick Letter due out in mid-month.

The extremely secretive Illuminati Group from Old Europe had their meeting in the last week of May at the upscale Ritz Carlton Hotel in Istanbul Turkey . Riot police and rooftop snipers kept plebeians from interfering with the collectivist supranational bankers and globalist imperial advocates in attendance who are making decisions on world organization and rule, all without a vote by the rest of the eight billion inhabitants or their representatives. The meeting details were provided indirectly by Jim Tucker, who has inside moles supplying information. The meeting instituted some new agreements which affect anyone who either chooses or is permitted to continue breathing. Worldwide implementation of a 10% gasoline tax will be imposed, used to fund their efforts. A preemptive claim has been made to give the United Nations control over the world oceans. An ongoing gnarly issue for this cabal is the USGovt leadership of the World Bank, a sore point by Europeans. At dispute is control over pharmaceutical drug distribution to over 73 Third World nations, the motives being unclear.

Joseph Goebbels has nothing on US Treasury Secy Hank Paulson, the Herman Munster lookalike all dressed up who expertly state the Wall Street case. Goebbels was the Minister of Information for the Nazis under Hitler. If these words do not put a chill down your spine, in an Orwellian tone, then you are missing something big. The vital topic cited is TRUST. We have come to see almost every single major economic statistic as falsified, most financial markets interfered, cozy insider agendas exploited, and regulatory bodies sitting on their hands. Paulson actually has spoken about the key test of accurate financial reporting as being trust, and defends it without blinking.

Accurate and transparent financial reporting is vital to the integrity of our capital markets and the strength of the US economy. In an address last November, I spoke about the importance of strong capital markets, pointing out that capital markets rely on trust. That trust is based on financial information presumed to be accurate and to reflect economic reality. Our capital markets are the best in the world and so is our financial reporting system. We must work to keep them that way. Today, the Treasury department is announcing several important steps to ensure we preserve an efficient financial reporting system that provides reliable information, is supported by a sustainable auditing industry, and has enhanced compatibility with foreign reporting standards.

-- Henry Paulson, 17 May 2007

The entire Strategic Economic Dialogue (SED) between China and the United States is incredibly flawed from the start. They could buy some time. To highlight the misplaced blame, take note that 60% of all Chinese bilateral trade surplus with the United States is derived from sales to US customers from US-owned firms operating in China . Hypocrisy is ripe, and insider agendas are clearly at work. My personal suggestion is that work be done, new paths forged, toward a Asian-Western pact on contract law and rigorous enforcement. The US continues to miss out on $60 billion per year in IP royalties with China . Russian energy projects also have contract law frustrations. The yuan is NOT the device to resolve the trade gap. Paulson knows better. US Congressional leaders continue to call the yuan currency regime an export subsidy. In reality the labor cost advantage is the actual export enabler, subsidized by enormous population replenished each year. Chinese Govt officials suspect that rapid reform as suggested by the USGovt would result in a series of sudden shocks such as what happened with Thailand and East Asia in 1997, known as the Asian Meltdown. The USGovt might be attempting to cause shock waves and dislocations in China , in order to weaken China . The immediate backfire of a quantum jump in the yuan valuation might be a sudden decline in USTreasury Bond purchases by China , which by the way is probably the only buyer in Asia these past few months. Do any American leaders or people comprehend the impact of a swift yuan rise on Chinese agriculture? No.

SHEET #1: EURO CENTRAL BANK HIKES RATE

The Euro Central Bank hiked interest rates by 25 basis points, as expected, to 4.0% this week. If the central banks were to collude in order to provide the USDollar a grand assist with a delayed hike, this was an opportunity. The ECB gave no help to the teetering buck. The futures market in Europe reflect another one or two rate hikes by year end. They show an anticipated official rate of 4.51% in December. The pressure is acute for further euro currency appreciation, and further US$ decline. The DX dollar index is likely to test the 80 level this year. The euro-based carry trade continues. Borrow cheaper euros and take advantage of the 1.25% differential versus the official Fed Funds rate. The long end has a 1% differential as well.

Some wonder why the USTNote 10-year yield has risen above 5% recently when economic growth has slowed, when consumer prices are tame, when housing slumps. It might be best explained as keeping a constant differential with the 10-year German Bund yield. Check the carry trade inner workings. As usual, the US investment community ignores the rest of the world, out of ignorance, out of isolation disinterest, or out of desire to misrepresent. My forecast of a 4.0% USTNote yield seems incorrect. The miserable 0.6% GDP for 1Q2007 has been ignored. Price inflation has worked into far too many pipelines. Carry trades from bond speculation must be kept in order, since bonds rule, not economic fundamentals. One should never lose sight of the fact that a combination of rising US long-term bond yields and a slipping USDollar is the worst possible scenario for foreign central banks holding a mountain of FOREX reserves mostly in US$ denomination. On the domestic front, rising long-term rates result in rising fixed mortgage rates, exactly what the housing market does not need.

SHEET #2: MEMBER ECB BANKS DUMP GOLD

The Euro Central Bank has seen combined gargantuan sales of gold bullion. Without those sales, the ailing weakening wobbly USDollar story would have surely lifted gold over the $700 mark. The dump of 170 metric tonnes of gold bullion over the past three months tends to slow the bull, a heavy load for any four-legged animal to tote down the road. That figure includes umbrella ECB organizations. The April and May gold price was frustrated at that critical $700 mark, turned down, but has found its mojo again. Perhaps the big negative has turned into a big positive, as the ECB public statement claims ‘no interest' in future gold sales. While these guys in no way lie as much as their American counterparts, or obfuscate with mumbo jumbo FedSpeak gobblygook language, one is hard pressed to take any ECB public statement at its word. Nevertheless, the gold price jumped back toward the 670 handle.

The quiet riot occurs in Spain . Last month in the Special Report on foreign lands update, Spain was featured as hosting a crippling housing decline, a mortgage crisis, a cascade of adjustable mortgage resets, a banking liquidity problem, massive federal deficits, and a central bank meltdown. The Banco de España, has in this calendar year liquidated (dumped) a total of 80 tonnes of gold bullion. They are in a panic, selling off all available assets of any and all liquid variety. No federal European Union government organization exists to come to Spain 's aid. The ECB has no system to grant a bailout relief loan. An acute housing millstone drags down the Spanish economy, and Spain is the grandest abusive agent on official desperate gold sales. Let's be clear. NOT ONE PEEP ON MAJOR FINANCIAL NEWS NETWORKS HAS BEEN GIVEN TO HUGE CENTRAL BANK GOLD SALES. A vested interest is engrained not to properly inform the public about gold or how its price fluctuates.

SHEET #3: SOVEREIGN WEALTH FUNDS

Recent events emphasize the power and impact of what are lately called ‘sovereign wealth funds' by the finance sector, since managed by government ancillaries on FOREX reserve accounts. The principle wellspring of these funds is Asian trade surpluses and Persian Gulf petro surpluses. China has set aside $300 billion. The Chinese trade surplus grows at $1 billion per day, most of which will be diverted to their investment fund, as announced. The two largest such state-run funds are managed by the UAE at $875 billion and Singapore at $330B. The Saudis, Norway , and China each lord over a $300B fund. Several other nations command a sizeable fund. These funds have several alternatives, with private equity funds (see suspicious Blackstone deal) being clearly the worst choice from an open market perspective. Pursuit and broad bids on energy, mineral, and commodity properties is what we should prefer to see in order to provide a continued wind to the commodity bull market.

State account managers feel a fiduciary responsibility to pursue greater returns with less US$ currency risk. This surely means lower yielding and less liquid assets, as a trade-off to sidestepping grandiose US$ risk. My contention has been for the last several months that China would lead a global movement to invest in commodities, via crude oil stockpiles, futures contracts in forward years, raw ore stockpiles, foreign properties, and foreign companies owning leases. The movement is catching on exactly as forecasted. Numerous complications are involved, however. Obscure motives, political objectives, strategic initiatives to secure resources, and secret agendas can be put to work. Insider corruption, cozy crony deals, and secret quid pro quo agreements are possible to occur.

(and lastly, the most important)

SHEET #4: PETRO-DOLLAR TORPEDOED IN PERSIAN GULF

The first pillar of USDollar support was removed last year when Asia (ex-China) essentially halted USTBond purchases with trade surpluses. The second pillar of USDollar support is in the process of being removed, as the Persian Gulf nations are splintering that pillar. The Gulf Coop Council (GCC) has an initiative which seems dead long before arrival, that to form a single currency for oil exporters in the Gulf. In May, two nations broke from support of the USDollar, Syria and Kuwait , both ending their peg to the US $. The GCC is comprised of Saudi Arabia , Qatar , the United Arab Emirates , Bahrain , Kuwait , and Oman . Their plan for a unified currency is in deep trouble, if not doomed, unless departure from a tight USDollar link is part of the process. Individual nations are responding in their best interests. WE ARE WITNESSING THE BEGINNING OF THE END OF THE PETRO-DOLLAR DEFACTO STANDARD.

The Bretton Woods II economic myth has been shattered, reliant heavily upon Asian trade surpluses and Persian Gulf petro surpluses. The USDollar and its alter ego USTBond will take the heat and feel the pressure from lack of pillar support on the financial sector front. The so-called nonsensical Asset Based Economy promoted by quack Greenspan has turned sour, as expected here. The USDollar and its alter ego USTBond will endure mixed pressures from a profound weakening of the USEconomy, like a slow descent into quicksand on the tangible economic front.

Most Persian Gulf nations are heavy importers to their economy. Thus they have an embedded deep risk when they link their currency to the USDollar, of rising prices for all things imported. The Kuwait price inflation runs over 5% for 1Q2007. The UAE posted over 10% CPI. Steady staid Saudi Arabia suddenly is running at 3% in CPI. Their collective loyal linkage to the US $-based system has ensured substantial price inflation both from import price rises and heavy bank lending of surplus funds among banks. Broad money supply growth in the GCC region is ramping at a 20% rate, twice that of the United States . In effect, the United States has exported massive monetary inflation to a principal supporter, the OPEC Arab nations. Their responsible reaction to fast rising price inflation might fracture the Petro-Dollar standard itself. A solution of sorts requires GCC member currencies to engineer a rise in their US $ exchange rates. The Gulf Coop Council has forced the issue! After time passes, when dust clears, close alliance between a nation's currency to the toxic USDollar might reveal its underlying true value.

Syria chose to tie its currency in a clever fashion according to the Intl Monetary Fund special drawing rights. These are certificates governed by a defined basket of currencies including the USDollar, the euro, Japanese yen, and British pound sterling. The signals are pointing to more defections but at the same time the makeup of the GCC currency to be a basket. The Chinese moved to a basket makeup for their currency. Watch the OPEC Arab nations do the same and potentially embrace a basket as an alternative to rigid US$ linkage. Forward currency markets in the MidEast offer some adequate clear signals on which nation will break next. The UAE is probably next to defect with its dirham, rather than Qatar with riyal.

USDOLLAR FEEBLE BOUNCE

The USDollar is at a critical crucial important point. The feeble bounce did not even reach the 20-week moving average on this brief cycle. Much depends on whether the Euro Central Bank continues to raise interest rates again this summer. Europe contains curve balls. If Spain melts down, a flight into the USDollar could ensue, at least temporarily. Without much doubt in the near-term, a challenge of the multi-decade critical support in the 80-81 baseline is coming. If the Petro-Dollar conventional is broken, if the Arab oil producers distance themselves from the USDollar, if Persian Gulf nations take steps to protect themselves from inflation (imported from the Untied States), if the Europeans indeed hold off on additional gold bullion sales, the USDollar will repeatedly scrape against the 80-81 critical support level. Until support breaks. THAT DOES NOT ADDRESS THE US HOUSING CRISIS AND MORTGAGE DEBACLE, neither of which has ended despite silly indefensible hope-filled fantasies to the contrary.

USDOLLAR FEEBLE BOUNCE

Two key items deserve mention on the currency front as seen through the crude oil lens. The Brent crude oil price penetrated the $70 mark. A rising crude oil price pushes the USDollar down. Without the illicit JPMorgan suppression of future crude oil prices out of its Bank of Baghdad renegade office, West Texas & Saudi crude oil would be selling for a similar price. The purpose of the JPM/Baghdad office seems clearly to abuse petro funds and to escape the purview of the Commodity Futures Trading Commission. Also, the Canadian Dollar has been buffeted by the strong crude oil price. More than that, the loonie is lifted by a new ‘hands off' policy by Dodge at the Bank of Canada. The loonie is up 10% since March, almost 5% in the past month. A rate hike in Canada would actually lift the loonie even further, thus talk of no overheating in their economy. A rate cut by Canada would unwisely offer their housing bubble new life, always a reckless decision. The neighbors north of BubbleLand are just as stuck without monetary policy alternatives as the US Federal Reserve. The Canadian Dollar will reach parity, exactly according to my longstanding forecast here since 2003. All Canadian stock investments receive a hidden dividend, worth 50% since 2002. Look for export subsidies to Ontario manufacturers in the future, financed by energy and mineral and resource sales, for an interesting compromise designed to save jobs.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

“I am staggered by the depth and breadth of the information I now have access to in your newsletter. Just one problem, I cannot put my computer down. Reading your current reports and catching up on earlier editions you make available in your ‘library' is dominating my mornings, afternoons and evenings!” (DavidR in England )

“The monthly Hat Trick Letter is like a breath of fresh air about the geopolitical financial and commodity markets. You possess the uncanny ability to cut through the many streams of faulty information like a knife through butter. Please keep the fantastic work coming!” (Matt J in Virginia )

“Your articles, newsletters, special reports are outstanding. I read many, many publications and nothing compares to what you offer. Many are good, but the coverage you give is exceptional!!!” (Elaine W in California )

“I believe your wit and disgust at the state of affairs stand untouched.” (Charlie P in Virginia )

“I am currently subscribed to over 60 paid newsletters. Your analysis is by far the most accurate every time. The most impressive characteristic of your thought processes is your ability to think in multi-factorial terms. You are one of the few remaining intellectuals with such capacity intact.” (Gabriel R in Mexico )

By Jim Willie CB
Editor of the “HAT TRICK LETTER”
www.GoldenJackass.com
www.GoldenJackass.com/subscribe.html

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules