Wednesday, March 11, 2015

King Dollar

Europe and Japan are depreciating their respective currencies. In the case of Europe it is to stimulate the Eurozone and increase employment, particularly in the peripheral countries, some of which are on the verge of bankruptcy. Japan has mountains of debt, needs to continue it's export machine, and has been fighting deflation for 20 years as their population ages and saves. Isn't that the story of the developed world, aging populations trying to save for retirement and infirmity?

A strong US Dollar makes imports less expensive in real terms. A strong dollar is a disincentive to manufacture for export as well as a disincentive to manufacture for domestic consumption. A strong dollar does nothing for meaningful employment in the U.S. in a world of mercantilist nations.
As the US dollar appreciates in value, the currencies of many smaller nations depreciate. As we import deflation we export inflation. A weak currency in any country makes it harder for people to buy the food that they produce, which will tend to get exported to the market that pays in the most valuable currency.  In the past we have seen rice riots around the world. Now we have war in the middle east with insurgencies rampant. They do not make war because they hate us. They make war because they have a hard time making ends meet when the rich nations use up the resources. And this is a function of the financial sphere moving money around to where the profits are. Money doesn't even look at a beggar in the street, not to mention the world. If you ain't got money you ain't got nothing.

The US Federal reserve is expected to start the process of raising interest rates this summer. This is the reason for the latest round of stock market selling. (which isn't that impressive so far)

Money follows the rate of return. If interest rates rise the currency usually rises. The U.S. Dollar is the reserve currency of the world, and is used the world over for transactions. Things will get cheaper for US, and cost more for them. This is only good for a short period of time. Perhaps those decades are past. Then the peasants riot, and take back what they can salvage. (Read P. Buck's "The Good Earth" for a lesson in macro-economics)

As far as the U.S. stock market lately there are few sustained trends.  The averages still go up, but the individuals are difficult to trade. The bloom is off the rose, so to speak, and has been for some time. Now it is just a matter of time.

I've been doing other things lately. It is spring, you know. Well it feels like it out where I live.

I am still holding for a bottom in the basic materials. FCX and CHK, AU, CDE, etc.
If you get a chance help out with NIOBF. It is keeping me afloat these days.

Take no prisoners,


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