Tuesday, June 21, 2011
Shortage of Commodities? er...ummmm....shortage of U.S. Dollars? MAJOR U.S. Dollar Bull Market setting up
1. An increase in demand for Dollars to satisfy debt payments
2. A MASSIVE reduction in the supply of available Dollars due to debt contraction that can collapse much faster than the Fed can counter it.
This money dynamic is extremely Bullish for the U.S. Dollar going forward. As the world's debt money system collapses, deflation will take hold and send the value of the U.S. Dollar skyrocketing, and the value of U.S. Dollar denominated assets to virtually ZERO. This does sounds extreme, but what has already occurred since the inception of the Federal Reserve since 1913 is the real extreme that most people don't even take notice to. It is the Massive inflation of our money supply through Credit Inflation. the crash will correct this extreme. In addition, Since most all of our money is debt (with the exception of coins, which make up about 5% of the money supply), for the Federal Government to "Pay off the debt" would be to contract the money supply and cause a depression. Since an ultimate default by the U.S. Government is virtually inevitable (unless they decide to print their way out of it, which they are not likely to do until after the collapse happens, using 1929-1932 as an historical precedent), a massive contraction in our money supply is also inevitable. This has already begun in 2008, and is the first contraction in the money supply since the 1930's. The difference this time is, the bubble leading up to the 2007 top is much bigger than the one leading up to the 1929-1932 crash. This means we should expect a decline greater than 1929-1932. DOW 570 would equate to a 96% decline, greater than the 89% decline of 1929-1932. While all this happens, the U.S. Dollar will be in a Super Bull Market as credit contracts and the few dollars that are left in the system will be scrambled for by debtors. The U.S. Dollar does not appear to be finished with its bear market, however, contrary to what I previously thought. While it could just take off from here, it is likely to get down to the mid-to upper 60's on the U.S. Dollar index, fool everyone into this Dollar Collapse Scam, and then take off in a Super Bull Market. This should last until the debt collapse is over, most likely 2020-2023, although the chances are high for a final low in the stock market in 2016 or 2017.
As it turns out, the stock market did move on to new highs, but only in three waves, not five. That could have marked a weak end to the bear market rally, or the other option is that the market has been corrective mode for most of 2011. It is possible that the market is in an expanded flat correction from the 1344 high in Feburary 2011. Under this scenario, the market should ideally retest the SPX 1249 low, although it is not required in this type of correction. If this is the case, then the bear market rally will continue after this correction is over, and likely top in early to mid 2012.