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Tuesday, September 23, 2014

THe Dollar Wins the Ugly Contest: For NOW

Right now there are only three world reserve currencies: the dollar, the euro and the yen.

The Euro and the Yen are dying.  Stagnation, aging populations, mass unemployment, overwhelming tax burdens: vast structural problems that are insoluble.

Money is now flowing out of Europe and Japan into the US.  And as it does the dollar will only rise and rise.  It's a one way bet.  And this will keep pressure on gold.  And put a floor under US assets.

And this will add ballast to the absurd claim that the dollar rise is proof of a recovering US economy.

Here's the huge and obvious problem.  There is no US growth either.  We simply have the deepest and safest markets in a deteriorating financial universe.  But the structural problems here: wage stagnation, mass underemployment, growing wealth inequality and tremendous unfunded liabilities,  - all dependent on perpetual negative real rates - will, in short order, be EXACERBATED by a STRONG DOLLAR.

The very false emblem of our "recovery" will crush our ability to export, and push a stagnant economy back into outright recession.

Then the game will be over.  There will be no more engine (no matter how feeble) for global growth.

Confidence will finally falter.  The dollar will have to be devalued.

And then Gold and Hard Assets with experience the final thrust into a hyperinflationary spiral in a world that is otherwise in a mass depression.

We're not that far away.  Don't be lulled.

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