Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Gold $1000 Sees Right Through Fed's 'Strong US Dollar Policy'

Currencies / US Dollar Mar 13, 2008 - 12:52 PM GMT

By: Chris_Galakoutis

Currencies Imagine that, an entire economy built around the ability of the American consumer to borrow and spend money he can never conceivably pay back. A consumer so gorged in debt that he eventually stops making payments on his mortgage, credit cards and others debts, putting an end to the gravy train ride of the financial institutions that facilitated the funneling of credit to the now beleaguered spender.

Helicopter drops, bailouts, tax rebate checks and other ideas are bandied about in the belief, or shall we say hope, that the consumer can be revived.

Since on the subject of gluttony, let's also imagine an economy built around a heavy eater. As this person keeps putting on the pounds, more and more fast food eateries open up around his home. As time goes by and the orders increase, the restaurants can't believe their good fortune -- at this pace, they all agree, we will all be rich in no time.

The eater eventually gets so huge he is confined to his room, unable to squeeze through the bedroom door. Steel reinforcements continue to be added to his bed and chair, creating demand for businesses that provide that service. An entire economy, now booming, has come to be completely dependent on this eater.

But eventually bad health requires his hospitalization, a stomach stapling and a new life elsewhere.

The result is that an entire economy comes crashing down with the eater's removal from that home. Every business around the home goes under, bringing on massive unemployment and a recession. The capital allocated to those businesses goes up in smoke as the businesses fail. Years will be needed to rebuild a viable economy, and to replenish the capital that was misallocated and lost.

All the while, local government officials spew out lines about a ‘strong fast food sales' policy. It is agreed that a few Big Mac's and pizzas should be delivered to the eater's hospital bed, for free.

Sound familiar? Does it make any sense?

What is this strong dollar policy all about anyway? Treasury secretary Henry Paulson continued to make the same statement this morning during questioning at a news conference, where he issued a call for U.S. financial institutions to raise capital quickly in order to continue to lend, and pledged tougher rules for the mortgage industry.

It was interesting to watch the various markets we like to cover -- precious metals and energy -- move higher as he repeated the now famous ‘strong dollar policy' words.

What do those words mean, anyway, with the dollar tanking by the hour.

Is it merely just something you say, perhaps a little white lie, the way an interviewee might speak about his abilities in an effort to dupe and sucker in a prospective employer?

Or is it code to foreign countries, as in: Yes we do have a strong dollar policy, and it's up to you to ensure it!

Could it be that the strong dollar policy is simply any level above zero? “Strong” is such a subjective term for a lot of people. Does anyone really know? Does Paulson?

The dollar fell below 72 this morning on the dollar index, a huge drop from the pop of just two days ago, when the most recent Federal Reserve operation was announced – more short covering than anything it turns out.

Gold hit 1000$ per ounce this morning as well. This is still well below inflation adjusted highs already hit by oil, so it seems to me the stars may be aligning just right for a significant catch-up trade here for the precious metal. If that were to happen, our favorite gold stocks, and especially our juniors, will have a banner year.

The website by Christopher G Galakoutis is a running macroeconomic commentary on the state of the financial markets with emphasis on gold, silver, the currency markets and energy. Visitors to our new site are always welcome.

By Christopher G. Galakoutis

CMI Ventures LLC
Westport, CT,
USA Website:

© 2005-2008 Christopher G. Galakoutis

Christopher G Galakoutis is an independent investor and commentator. A student of finance and economics, he has in the last few years directed his attention to studying the macroeconomic issues that he believes will impact the United States, and the world, for many years to come. While working diligently to cater investments for his own portfolio to the changing economic landscape, he also decided to start writing about these issues in an effort to reach as many people as possible. In that respect Chris also highly recommends tuning in weekly to the Financial Sense Newshour with Jim Puplava, and Peter Schiff's book “Crash Proof: How to Profit From the Coming Economic Collapse.”

Christopher Galakoutis  Archive

© 2005-2019 - 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