$100 Oil. $850 Gold. Federal Reserve Easing. China mentions diversifying, loosening the peg, letting the yuan rise. Dollar tied firmly to whipping post:
Potential Wolfe Wave-type reversal mentioned in previous post has failed spectacularly.
Are we headed for $150 oil, $1200 gold and $2.00/euro? I don’t believe so. Note that a falling dollar would be the market’s natural method of correcting the ills of a massive trade deficit and a spendthrift government. (Here’s where I get to link to my diagram from over a year ago).
I still think the impending debt-deflation from an imploding mortgage market will outstrip the Fed’s ability to inflate us out of this crisis by once again rapidly expanding the money supply.
I would like to point out that, equity-wise, neither a catastrophically falling dollar nor a catastrophically rising dollar is a positive thing. We are on a tightrope here.
Even though I’ve discussed the potential for a falling dollar for years, I currently lean in the direction of a dollar bottom and rise because that’s now the extreme contrarian viewpoint, and I’m, well… me.