"Shock Therapy" and The Freefalling Dollar

[RPankn]

I don't know if it's necessarily the CFR behind this -- some of its members may be involved, but I think it's more groups than just them. I think this has been the plan all along, though: a small group of ultra-wealthy individuals and families who run multinational corporations, which financially back the world's "supreme leader," while an enormous pool of worldwide labor competes with each other, and thus drives labor costs even lower. It's really the realization of the plans the Nazis had for the world.

The chart above is the U.S. Dollar Index for the past two years. I used to follow this stuff, and a technical analysis of this chart says the index is completing a "head-and-shoulders" pattern, which suggests the index topped out last November at just above 92, and is headed down to 76 -- about a 17% fall. The downward turn of the index is confirmed by the index falling below its 200-day moving average (the red line) in early April, and then the MA turning into a resistance line when the Index attempted to breach it about a week or two later. If I were a trader, I'd would short the Dollar, play put options on the index, or both.


May 14, 2006

by Mike Whitney

www.opednews.com

The dollar is getting hammered almost daily now. It’s like watching the blood ooze from an open wound. In just one month the dollar has tumbled from $1.20 to $1.29 vs. the euro; an astonishing 7% retreat.

Can’t the American people see what is happening to their future? In just 6 years Bush has taken the world’s strongest currency and chopped it into finally ground hash. By the time people rouse from their stupor, the greenback will be eye to eye with the peso.

Bush has piled up more debt than all the other presidents combined. His tax cuts have fattened the bankrolls of his constituents but they’ve put the dollar on a downward slide. Since he took office the once-mighty greenback has plummeted a whopping 35%.

Meanwhile, at the Federal Reserve, new Fed-master Bernacke has the printing presses running at warp-speed. The soaring price of oil has soaked up more than a trillion dollars of freshly-minted fiat currency, but it’s the only thing that's kept the greenback from slipping beneath the waves. Unfortunately, that trick won’t last forever.

Now that Bernacke is hinting that interest hikes may slow down or stop entirely, central banks across the world are stealthily off-loading their dollar-stockpiles. The twin-deficits ($400 billion account deficit and $800 billion trade deficit) have finally come home to roost and are pushing the dollar to new lows.

Dick Cheney’s foolish axiom, “Deficits don’t matter” has turned into a funereal-dirge for the greenback. Deficits Do matter, and bankers around the world are proving that by hastily moving away from Uncle Sam’s washed-out script.

On Thursday the congress added another $70 billion to Washington’s mountain of debt, completely ignoring the fact that the dollar lost a full 2% against the euro in the same 24 hour period. Is it possible to be that obtuse?

Is anyone minding the store? The blinkered congress keeps writing bad checks on an overdrawn account and then patting themselves on the back for a hard day’s work. It’s incredible. What foreign country wants to be yoked to a currency that is underwritten by $8.4 trillion in debt and freefalling by the day?

The currency markets are as jittery as anyone can ever remember. The European Central Bank (ECB) and Japan are not prepared to take over as the world’s reserve currency, but they are equally reticent to keep shoring up the flaccid dollar. What they’d like to see is the Bush administration demonstrate that they can still be a responsible steward of the global economic system, a role the US has managed since World War 2.

Don’t expect maturity from this crowd.

Bush is simply carrying out a crackpot plan from his globalist friends at the Council on Foreign Relations (CFR) It is a strategy that Washington has executed many times via its surrogates in the World Bank and IMF. Corrupt politicians (Bush and co) plunge the nation into unsustainable debt, interest rates rise, the economy implodes, and the banks and corporations pick the carcass clean; privatizing what they can while destroying what's left of the social safety net. (John Perkins “Diary of an Economic Hit Man” provides a first rate account of how this method has been used repeatedly throughout Latin America) In fact, it is simply the corporate version of traditional colonialism.

The American public is too blind to see that the trap has now been set for them and that soon they'll be tottering off to the grocery store with wheelbarrows of cash for a loaf of bread and a head of lettuce.

The dollar-slaughter is the biggest part of this whacko scheme. It is the quickest way to crush the middle class by robbing them of their life-savings through hyper-inflation.

We often refer to Tom Friedman in this column as the unofficial spokesman for the Council on Foreign Relations. The CFR is an amalgam of American elites from all professions who are committed to the creation of a “global government”. When Friedman preaches his “Flat-earth” theory of economics from his perch at the New York Times, he’s really offering his vision of what America will look like after labor laws and trade protections have been removed and workers are forced to compete head-on with the poorest paid workers in China or Guatemala. The falling dollar will trigger this scenario sooner than we think.

This view of unfettered capitalism is the Holy Grail of “free market” globalists. In fact, they invariably refer to it as “democracy”. It portends a world where industry overlords dictate policy to their political underlings and where society is entirely shaped to enhance corporate profits.

For the avatars of predatory capitalism, Friedman’s Flat-world is a “dreamscape”; the capitalist Valhalla. For the struggling middle class, it is a return to the law of the jungle; the fast-track to widespread destitution.

By collapsing the dollar, Bush can shift the wealth of the American middle class to corporate mandarins in the blink of an eye. Industry profits will soar while working class people drown in an ocean of red ink.

The wheezing housing bubble and the steadily rising interest rates are a warning sign that time is running out on the dollar. America is being readied for economic “shock therapy” and “structural readjustment”, the vile remedies for ailing economies. When the bottom drops out, the snoozing American middle class will finally stir from their slumber and get their first look at the new world order.

Mike is a freelance writer living in Washington state.


www.opednews.com/articles/opedne_mike_whi_060514__22shock_therapy_22_and_.htm

[RPankn]

This is scary. And considering the IMF is involved, I can't help but wonder if there's a hidden agenda here.

IMF acts to avoid markets meltdown

Heather Stewart, economics correspondent
Sunday May 14, 2006
The Observer

The International Monetary Fund is in behind-the-scenes talks with the US, China and other major powers to arrange a series of top-level meetings about tackling imbalances in the global economy, as the dollar sell-off reverberates through financial markets.

Amid tumultuous trading, which sent the dollar to its lowest level in a year against the euro in late trading on Friday and gave the FTSE its worst day for three years, the IMF was working privately to exercise its new powers to bring decision-makers together.

At the IMF's Spring Meetings last month, its managing director, Rodrigo de Rato, was handed new responsibilities to carry out 'multilateral surveillance', assembling groups of relevant countries to discuss critical issues in the global economy. With the long-predicted dollar bear market sending ripples throughout the world, the IMF is keen to use its powers as soon as possible.

Analysts believe the weakening of the dollar is the beginning of a long-awaited readjustment in the global economy. After the Federal Reserve appeared to hint last week that it could pause in its series of interest rate rises, attention in the markets switched to the weaknesses of the US economy.

David Bloom, currency strategist at HSBC, described the switch of focus as a 'regime change'. 'I'm saying don't use the philosophical methodology you used last year: chuck it away. The market has wholesale changed the way it looks at the world,' he said, predicting that the euro could rise to $1.40 over the next 12 months, from its current level close to $1.29.

Few analysts expect IMF discussions to result in a concerted deal on stemming the dollar sell-off; but governments and central banks will want to avoid a crisis.

'We are in meltdown mode,' said David Brown, chief European economist at Bear Stearns. 'It's all being whipped up into a bit of a selling frenzy. The dollar has a massive portfolio of negatives against it: it's the long-term problems of the trade deficit, and the government's budget deficit.'

Bloom warned that 'phase two' of a sell-off would cause turmoil in the equity markets, as on Friday, when both the Dow Jones and FTSE saw sharp losses. 'I'm expecting an increase in volatility and uncertainty across the board,' he said.

Brown added that the dollar's woes were likely to be exacerbated by central banks shifting their reserves towards other currencies, including the euro. 'Asian central banks have been buying fistfuls of dollars as the flipside of their massive current account surpluses. They're long dollars.'

He added that with the US current account deficit with the rest of the world worth 7 per cent of its GDP in 2005, the White House and the Federal Reserve would probably be happy to watch the dollar decline. 'I don't think Washington's going to be concerned,' he said.


observer.guardian.co.uk/business/story/0,,1774162,00.html

[camaxtle]

He added that with the US current account deficit with the rest of the world worth 7 per cent of its GDP in 2005, the White House and the Federal Reserve would probably be happy to watch the dollar decline. 'I don't think Washington's going to be concerned,' he said.


So does this mean that Bush and his pals are basically flushing the toilet on the U.S. economy? How soon is this going to hit. How soon will this NOTABLY affect the normal American? Any guesses. Is it by end of summer 2006 or end of year 2006. Will it happen in time for the midterm elections?

[RPankn]

I think it means that a weak dollar will make US exports cheaper, as well as the inverse of that: imports will be more expensive. But what exactly does the US manufacture and export anymore and how much do we depend on imports?

A weak dollar also deflates the return on U.S. Treasury instruments, when converted into local currencies. The administration must know that foreign central banks are left holding the bag because if they decided to cut their losses and start dumping their treasury securities, who's going to buy them if administration policy is continue to allow the dollar to fall? In order to make Treasuries more attractive again, the Fed will have raise rates to kick the dollar back up a little. Higher rates, of course, ends up being bad for the have nots, who are the only ones really getting screwed in this whole deal.