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The Euro & Dollar – the Essence of Chaos

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Nothing has changed with the Euro v the dollar. We are waiting for the turn in 2014 and that remains in place. In order to set the stage for the worst of the worst, we need to move to extremes in both directions. Economically, Europe is a disaster. You typically have the currency rise in the last deflationary way. The Euro has NOT however, rallied to where it could have on our models at the 147 level. Yet we do not see the dollar rally that will then by DEFLATION on this side of the pond just yet.

The capital flows show tremendous investment still pouring into the US from Europe with smart money trying to get out in anticipation of the 10% confiscation. Others have been shifting within Europe to the DAX. Those raising money for fund here in the States are all reporting the biggest investors are Europeans. The retail American public is just not ready to jump in yet when the TV financial evangelists keep touting the end is near because the S&P is up 70% and household income is down 4%.

One interesting comment called me “establishment” because I speak to people in government and therefore I have to trash gold and preach the dollar. Of course it is someone who lost most of everything investing only in gold. This is just insane when I state that we will end in default and people like Glen Downs is willing to step out and speak because he too does not like what he sees coming. Talking up the dollar will not save the day. Nothing will save the day.

1900$X-M 1931 Sovereign Debt

But Hoover in is Memoirs made it clear. The dollar rallied dramatically and they were clueless as what was taking place and why. The Great Depression began with the default in Austria. They are getting violent in Europe and marching with pitchforks. They are still fat and happy in the States.



This is the DEFLATIONARY rally to the dollar in the 1930s. The rise in the Euro is not drastic and it is less than what I would expect so far. But the rise in the Euro will create more unemployment just as we saw the Bonus Army march on Washington in 1932. They used tanks on the streets killing even women and children. Why do you think Homeland Security bought 2700 tanks for domestic use? It is the ECONOMY that forces change. That change will not come without pain.

A rise in the Euro is NOT a good thing. This is how the greatest amount of social pressure is applied. Nor will the rise in the dollar that will then cause massive defaults among many who borrowed in dollars overseas to save money and DEFLATIONARY social pressure here be bullish for the future. People will not get mad and protest in a bull market. Only when it costs them something and historically that is ALWAYS a recession or depression. We NEED this type of havoc to create the major political change that is on the horizon. If anyone thinks this is establishment or talking up the dollar to trash gold, you are in serious trouble because if you do not RATIONALLY comprehend the seriousness of the situation we face, you will not survive.

Capital is fleeing from bonds to equity because it is safer and institutional pension funds have NO CHOICE but to try to earn something more than the interest rate or they will go bust after 2015.75

We will be launching our Asset Portfolio Allocation models shortly as well and they are about jumping off the computer trying to get away from bonds without me saying anything.