09/23/09 St. Louis, Missouri Well, the Fed Heads will make an announcement this afternoon… Yawn… Norway’s Norges Bank will also make an announcement today, but theirs will come this morning. I still contend that the Norges Bank will keep rates unchanged and give a hint as to when their rate hike cycle will begin. If that were to happen as I think, then it would be very bullish for the krone (NOK).
The non-dollar currencies pretty much held the ground they gained yesterday, giving back oh-so-little to the profit taking. The euro (EUR) didn’t hold 1.48, but it’s so close it could spit in 1.48’s backyard! The negativity toward the dollar and all that goes with it – like huge deficit spending, low yields, economic depression, inflation fears, and more – just keeps mounting… All these pundits who have “discovered” that the dollar has bad fundamentals just make me laugh. Welcome to my world! In this world, we don’t wear rose-colored glasses… We call dolts for what they are… And we fully understand the bad effects of building deficits.
One of the first books I ever read about the dollar was written in 1972 by a guy named Gerald Krefetz called The Dying Dollar… But the one that really pushed things to the forefront was Richard Duncan’s The Dollar Crisis, which came out in 2003. For the longest time, when someone would ask me what book they should read to get started, I would give them Richard Duncan’s The Dollar Crisis…
The Dollar Crisis was followed by two books by Addison Wiggin and Bill Bonner – Financial Reckoning Day and Empire of Debt – both of which have been recently updated… Then Craig Karmin wrote The Biography of the Dollar, in which he writes one chapter around my story… All of these have done a wonderful job of explaining things to people who might not normally understand what’s going on financially…
The reason I bring this up is that Richard Duncan was in the news yesterday, as he gave an interview in Hong Kong… Let’s listen in…
“The bad news is [that] at the end of a 10-year period we’re still not going to have fixed the problem. Eventually it will lead to high rates of inflation well down the line and really destabilize things to the point where there may be irreparable damage. A kind of ‘Fall of Rome’ scenario.”
Mr. Duncan was talking about the US budget deficits, which he feels will continue to pile up in the next decade, eventually reaching an unsustainable level that may result in an economic collapse…
I think it would behoove us to listen to the advice he gives in The Dollar Crisis. In it he said that persistent current account deficits by the US were creating an unsustainable boom in global credit that was destined to break down, resulting in a worldwide recession… Hmmm… Does he have everyone’s attention now? Good!
OK… Enough of the “book tours”! I was listening to the evening news while icing my knee last night, and something struck me as strange… He said… “The poll of more than 1,000 adults, taken within the past week shows growing optimism that the economy has begun to turn around.” Hmmm… I guess they didn’t ask one of the 7.4 million people that have lost their jobs!
I’ve got two things to talk about here with this… One is that people would be listening to Big Ben Bernanke, which is where I believe this “optimism on the economy” is coming from… And the second things is the question that I have regarding those people surveyed… How could they have optimism when 7.4 million Americans have lost their jobs during this depression (what they call a recession)… That wouldn’t be bad if these 7.4 million Americans turned around and found jobs right away, eh? Well, unfortunately, the average duration of unemployment is 25 weeks – now the longest since the Department of Labor started tracking the data in 1948. By the end of August, nearly five million people had been unemployed for longer than six months.
Whew! Now that was a depressing piece… Hmmm… What can I talk about that brings the smiles back on everyone’s faces? I’ve got it… Gold!
I was telling Jen yesterday that the commercials for gold on TV are really starting to add up… You’ve got Gordon Liddy, Jay Johnson, and others telling you how gold is a store of wealth, an inflation fighter, and more dependable than fiat currencies… And of course you should buy gold where “they buy their gold”! I really think we should have our own gold commercial saying, “Yes, you can buy it from those other guys, but why pay more for your gold?”! HA! Now that would get ’em!
OK, let’s head to the South Pacific! New Zealand pushed out of their recession in the second quarter after seeing its economy contract for five consecutive quarters… Now don’t get too lathered up over this initial news… The New Zealand GDP only increased slightly less than 0.1%. But! That technically ends the nation’s worst economic downturn in three decades.
This was very bullish for kiwi (NZD), as now the markets are beginning to talk about a rate hike in New Zealand… I would say that’s a little premature, wouldn’t you? I mean, they have barely climbed out of the red, and the talk turns to a rate hike? Yes, definitely… That’s premature… But! The talk has kiwi on the rise… Let’s hope that traders don’t get disappointed too quickly!
And then back in the Eurozone… Germany’s Manufacturing PMI came in less than forecast… But! It did hit a 13-month high of 49.6! Still not above 50, but the trend is Germany’s friend right now in the manufacturing sector! Tomorrow, we’ll see the think tank IFO’s Business Climate, and I truly believe this will be strong, and these two together, strongly suggest that the euro is trading at a proper level!
I’m still waiting for news from the Norges Bank…
I read some real disheartening news last night regarding foreclosures in the US. It seems that they are really backlogged… As of July, mortgage companies had not begun the foreclosure process on 1.2 million loans, according to LPS Applied Analytics. Also, 1.5 million seriously delinquent loans were still caught up in the foreclosure process… Hmmm… You don’t think the processing of these foreclosures is being held back by someone, do you? I mean, what better way to get people “feeling good again” than to not have them hear “bad news”…
OK, that’s just the conspiracy blood in me… Sorry…
Things have been quiet in Japan since the election… And the Japanese yen (JPY) has range-traded, waiting for a direction from the new government… What will they do? Will they promote growth? Will they continue to authorize intervention to keep the yen weak? Lots of questions here in Japan…
I had a reader send a note that made me chuckle… He asked if the Chinese were going to sell Treasuries to buy the IMF’s gold… He called it “Junk for Gold”… HAHAHAHA!
Speaking of China… Have you noticed that the renminbi (CNY) has gotten ever-so-slightly stronger versus the dollar? These are micro-moves… But “moves” nonetheless! And not weaker!
And did you see where China was arguing their position in the World Trade Organization (WTO) regarding not allowing Hollywood movies and other Western media into their country? The Chinese invoked a defense of “public morals”… We’ll have to keep an eye on that to see how that turns out!
Yesterday, I told you that Canadian retail sales were the only “real” data to print… Well, it turns out they backed off the consecutive gains of 1.1% in May and June, and posted a -0.6% in July… This won’t do anything to get the Bank of Canada off their duffs… However, one would have thought that data like this would hurt the currency – in this case the loonie (CAD)… And it did… But only for a short time… The loonie is back on the rally tracks this morning!
OK… So… The FOMC ends today, we’re still waiting for the Norges Bank’s announcement, and the dollar is holding on for dear life! The negativity toward the dollar has returned, and Richard Duncan gives us his latest forecast…
Chuck Butler
Chuck Butler is President of EverBank® World Markets and the author of the popular Daily Pfennig newsletter, which is reposted here at The Daily Reckoning. With a career in investment services and currencies extending over 35 years, Mr. Butler oversees all aspects of customer service and the trading desk for EverBank World Markets. A respected analyst of the currency market, Mr. Butler has frequently made appearances or been quoted by the national media. These include the Wall Street Journal, US News and World Report, MarketWatch, USAToday, CNNfn, Bloomberg TV, CNBC, and the Chicago Tribune. Mr. Butler was previously the Chief International Bond Trader and Director of Risk Management for Mark Twain Bank, and has held significant positions in the investment industry since 1973.
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RE: foreclosures….
For a fact a friend has not paid (their) mortgage since the beginning of ’09 (out of work for more than a year), several “letters” and conversations with mortgage company but no “foreclosure” as yet?????
Either so backed up that “pipeline” is clogged with “non-payments” or there is some weight to keeping more foreclosures from the public eye…
And yet, the local papers are filled in back pages of “foreclosure” notices.
Go figure….