Thursday, November 3, 2011

EU Blowup, Dollar Down?! QE Done Deal - Beacon Equity Research

Greek Prime Minister George Papandreou is resigning; now, he's not—just a rumor. Referendum scheduled for the Greek people; now, it's not.

Berlusconi cannot leave his underage tarts for a day to prepare for a G-20 meeting. Italian bonds are on life support from the ECB from a near blowout Tuesday of more than 450 basis points to the German 10-year bund.


Dexia collapses. Who knows what counter-party risk is stuffed?


The new ECB chief Mario Draghi surprises the market with a 25 basis points cut at its 'marginal lending facility'. Portugal, Spain and Ireland salivate over getting a similar deal given to Greece, teetering banks in France and German. Now French banks are under severe pressure in a circle-jerk default scenario throughout the EU.


Japan, Switzerland, UK, and China are trashing their currencies to bits along with the euro—and the result of all of this Argentina-style mayhem? The USDX drops!


In fact, the rally from the 73.42 low of Jul. 28 to 76.92, as of Thursday, is a whopping 4.8 percent. That's the extent of the rally into the 'safety' trade. CNBC calls US Treasuries the 'safety trade', yet calls gold a bubble trade after the yellow metal corrected back to the planet Uranus following its trip to Pluto.


Famed commodities trader, Jim Rogers of Rogers Holding told MarketWatch.com in mid-October that the dollar is—how is it said, gracefully?—fading as a trusted reserve currency.


“The U.S. dollar has started fading as the world's reserve currency,” Rogers said, as the 68-year-old American citizen, now Singapore resident, complained of dollar debasement policies by the Fed, according to MarketWatch's John Prestbo.


Rogers used the words, “starting to fade.” Starting? It's a done deal, Rogers. Financial journalist should no longer use the term 'reserve currency' within the same sentence with the word 'dollar'. And to make matters worse, the villainous half of the former Rogers-Soros partnership at the Quantum Fund, George Soros, beat Rogers to the punch.


“The big question is whether the U.S. dollar should be the reserve currency; it no longer is, it shares that role with the euro, other currencies, and commodities,” Soros stated at the Bretton Woods II conference in April. “But it’s not just gold being used as a substitute, but oil too, which is putting upward pressure on the market.”


Students of the Weimar Republic days in Germany chuckle at those silly Germans who thought sterling, dollar, Swiss and French francs were strong against the reichsmark in the early 1920s, when in fact, the reichsmark was collapsing. Aren't financial journalist and TV commentators making the same mistake when discussing the US dollar? (see When Money Dies author Adam Fergusson discussion with Goldmoney's James Turk on YouTube.com)


What started in earnest in January of 2010 with the blow-out of Greek bond yields has come down to a pathetic display of, not only the cartoonish leadership of the EU, but the fatal flaws of a framework for the euro currency at the outset.


No one doesn't know how bad the situation is on the other side of the Atlantic. But the obvious weakness in the dollar throughout this sordid affair is glaring—to say the least. As US investors chuckle at the EU, they do so while neglecting to notice the US dollar train wreck about to smack them in the face.


Is there any question that front-running of an announcement by the Fed of more QE is underway? How dare those silly Europeans debase their currency faster than the US dollar. Thank goodness the Bernanke is prepping to show who's still no.1 in the world!


source

Jim Rogers

Warren Buffett

Nouriel Roubini