But the risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets “delevers” with a vengeance. This is a “short squeeze” on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed is having to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies. The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again. ---- Can anybody explain that in simple terms. I think it is critical to understand what happens with PM and other commodities now. Dollar moves in the opposite direction than many of us expected.
This is a very important point that all of us longs need to consider. The vast destruction of liquidity and credit is surpassing the less vast injections of liquidity and credit (which DEFINES inflation). It's a tough call, but the dollar bulls are winning this battle... for now.
Two things auger in the dollars favor against other currencies, but have nothing to do with gold or silver.
The world is still based in dollars.
The world copies us, therefore, has paper just as bad as we do for the same reasons-folks can't pay and
they bought our bad paper.
They've abandoned lowering interest rates to inject liquidity into the economy, so they're making the same mistake we did during th Depression, and everyone is aware of that.
So fiat to fiat, dollars are winning.
Leadership in the US is on a powertrip, appearing to manipulate vast economic forces with decisive action that, gasp! means Congress can't take their traditional holiday off--gee--we must be serious, when the going gets tuff, the tuff stay put and do a bailout.
Now that all paper is being compared to each other, everyone has conveniently forgotten, all the paper is being inflated against specie to do all of the above. Meddling with economic forces appears to be strength, but in relation to specie, it's like hitting the enemy in the fist with your face. Nobody gets it yet.
HOWEVER, auguring on the supply side, poorer nations, like India, have dropped gold like its hot at $950 an ounce, to the tune of importing 36%, or 36 Tones, LESS that previous month.
That demand "deduction" has spiraled gold back $100, so we'll have to see how much that affects demand positively,