“YOU AIN’T SEEN NOTHING, YET”
“THE EFFECTS OF DOLLAR INFLATION”
PART 1: IT’S SIMPLE MATH
Since 2005 we have shared our thoughts regarding our expectations of how the markets might move in this current large cycle. In doing so, we have shown charts and discussed how we thought this large cycle would play out in this environment of Dollar Inflation which the Fed is applying to combat the massive deflationary backdrop of K-Winter. So far, the fractal relationships in the long-term $Gold chart have been practically perfect in the comparisons of the current moves of $Gold compared to the late 70’s. The fractal nature of the Dollar price chart also closely mimics the late 70’s Dollar moves, another environment of Dollar Inflation. The Dow chart is playing out much like we anticipated in the same form as the 70s. The driver of the markets is clearly the program of Dollar Inflation that the Fed has served up. In 2007 we cited our expectations of the Dow falling precipitously into a “Deflation Scare” bottom into the 4th quarter of 2008 at the same time as the anticipated bottom in Gold in the LT fractal chart. As an alternative we allowed for the Dow to see a momentum bottom into the 4th quarter of 2008, with a final bottom coming in 2009. We chose the term “deflation scare”, not in terms of the asset deflation, but in terms of the panic we expected to ensue falling in the period between the two legs of Dollar Inflation “cure” that the Fed is creating. Still like the 70’s market, our expectation of the Dow “price” falling to a lower low for the decade has evolved, in fact, the move might be close to ending for the cycle. With the Fed’s recent move to the second leg of Dollar inflation by monetizing the bail-outs and by announcing they will monetize our Treasury debt- it is our opinion that the rest of our expectations for the cycle will likely be set in stone. There are only 2 events that could change things in our eyes. One would be if the Fed quit inflating the Dollar. The other would be if the Dollar was to suffer a sudden, sharp, and deep devaluation. In our opinion these two low probability events become less likely as time passes in the cycle since Global Competitive Currency Devaluations should be increasing from here on out. The GCCD will provide a certain amount of cover for the falling value of the Dollar since investors are used to looking at the Dollar only in terms of the smoke and mirrors pricing scheme, called the Dollar Index; whereby the Dollar is priced not in terms of it’s “value” as determined by supply and demand, but in terms of the constantly changing values of other currencies. Below, we hope to clear some of the smoke of the markets caused by fiat currencies to see what is really going on behind the fog.
Continue w/ Part 1 & Keep Going
Trust me, you’ll be glad you did!
Tags: Add new tag, Bailouts, Banks, Credit Bubble, deflation, Dollar Inflation, mortgage fraud, Mortgage Modifidcations
