The US Dollar Rally Will End in a Crisis of Confidence

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The US Dollar Rally Will End in a Crisis of Confidence

12 May 2009
The US Dollar Rally Will End in a Crisis of Confidence

The constraint on the monetization being done by the Fed and Treasury is the value and acceptibility of the US dollar and bonds.

Export dependent countries should begin to prepare for a collapse in the US import markets. We expect this to happen earlier than 2010.

The invisible hand of the market moves slowly, but inexorably.

We expect this crisis in the US will resemble the crises in Argentina and Russia rather than Japan. The pain will be distributed heavily to those countries dependent on US dollar debt and consumer markets.

Nassim Taleb likes the protection of gold and copper. We prefer gold and silver, as it will be more difficult to increase its supply in the short term.

There will be serious discussion with regard to the annexation of Canada and Mexico into a North American government as the crisis worsens. Mexico should adopt a silver monetary standard and Canada must find its own economic independence again as it did in the Great Depression.

There is a strong likelihood that Obama will be a one term president at most unless he acts quickly to reform the growing corruption in the Democratic Party and within his own Administration.

Dollar Rally Will End, Rogers Says; May Short Stocks
By Chen Shiyin and Haslinda Amin

May 12 (Bloomberg) -- The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after nine weeks of gains.

The advance in the U.S. currency has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.

We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers said. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.”

The dollar has climbed against all of the so-called Group of 10 currencies except the yen over the past 12 months, according to data compiled by Bloomberg. The U.S. currency was at $1.3592 per euro today from $1.3582.

Rogers joins “Black Swan” author Nassim Nicholas Taleb in avoiding the U.S. currency. Taleb told a May 7 conference in Singapore he preferred gold and copper to the dollar and the euro as the global economy faces a “big deflation.”

Gains in U.S. stocks also signal a “correction,” Rogers said. He’s avoiding equities for the next two to three years because prospects haven’t changed, he added.

Disclosure: Jesse is long gold and silver.

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