The Dollar Rally Will Not Last
By Greg Hunter’s USAWatchdog.com
Almost everything but the U.S. dollar took a hit yesterday. Oil sold off nearly 4 bucks a barrel, the Dow was off nearly 270 points, bonds tumbled and gold plunged nearly $50 per ounce. The dollar was bought because the euro sold off due to debt trouble in Southern Europe. There are fears of a debt default in Portugal, Italy, Spain and Greece. The “safe haven” of the U.S. dollar is the beneficiary of those consternations.
The odd thing is, the job market in the U.S is showing signs of more trouble. That was an additional weight on the stock market because out of work people do not spend money. Word is, there is going to be a very large revision to the jobs data to the downside. I have been saying for months there were bigger job losses than reported by the government. For example, a month ago, I did a post called “Unemployment 5 Times Worse than BLS Reports.” Now, Bureau of Labor Statistics is making a huge revision to the unemployment number. This should not be a surprise to regular readers of USAWatchdog.
The BLS says 1, 360,000 more jobs were lost in the last year (or revision period) than was originally reported. That means the recession job losses were 19% worse that what the government has been reporting. 8.4 million jobs have now been officially lost in this recession! Instead of concentrating on this giant revision, the mainstream media reported only the monthly unemployment number which unexpectedly shrank to 9.7% from 10%. The reason it shrank, according to economist John Williams of shadowstats.com, is an accounting gimmick called “seasonal-adjustment.” The “seasonal-adjustment” was made because there were not as many post-holiday layoffs. Williams says, “I think companies didn’t layoff as many as usual because they did not hire as many to start with.” Williams is predicting “serious jobs and unemployment deterioration in the months ahead.” By the way, if there was no “seasonal-adjustment,” the official government unemployment number would have jumped to 10.6%. If unemployment was computed the way BLS did it prior to 1994, it would be 21.2% according to shadowstats.com.
Spiraling unemployment is very dollar negative. For one thing, it is revealing a much weaker economy than what is being reported in the mainstream media. It will also light a fire under Congress to spend more money to “fix” the problem. There is a $150 billion “jobs” bill going through the Senate, and it will probably pass soon. That will certainly not be the end of the money spending. Almost every state in the union is facing some sort of budget shortfall. California alone is $20 billion in the hole right now! A bailout of every state in need will cost between $100 billion and $200 billion this year alone. What do you think the chances of a bailout for financially troubled states are in an election year? All this spending adds to an already record deficit, with no end in sight.
Wild spending, record deficits and bailouts are just a few of the reasons not to be bullish on the buck. There was an excellent article in Market Watch earlier this week that named 20 triggers that could set off the debt bomb that will blow away your financial future. Please read this story called “20 Reasons Global Debt Time Bomb Explodes Soon.”
All this news of debt, default and deficits are dollar negative and gold positive. Financial expert Dan Norcini gives some of the very best commentary and market analysis in the business. He summed up yesterday’s market sell off this way, “Nothing really has changed except that gold is getting sold off from a higher level which means it will also find support at a higher level as it continues its steady climb higher.” (Click here for Norcini’s complete commentary)
Meanwhile, I want to bring your attention to a clip that first aired on CNBC Asia in November. The CEO of Nine Points Capital, Damon Vickers, says the dollar will be “utterly destroyed,” and big changes are coming to America and the world because of the dollar’s demise. Vickers heads up a very successful hedge fund with serious money to invest, so you should listen closely.
We’re on the same page. “Helicopter Ben” has arrived. I’ll be 57 in March and I don’t see full recovery in my lifetime.
SGS reports the actual inflation rate at about 9%. We shouldn’t experience hyperinflation and thus currency devaluation until the credit markets thaw and all that new paper begins circulating.
Money, according to me and Jack Weatherford in “The History of Money” is a virtual expression of value. It is not real and shouldn’t be confused with anything that is real. (Note: I was decade ahead of Jack. He’s a bright guy just a tad slow.)
Our current economic model, which can be summed succinctly as “privatize profit, socialize loss” is not sustainable. No way, no how.
Our Republic has twice previously been similarly cornered with our backs to the proverbial wall. The Civil War and again 1941-43 when we really didn’t know if we’d be forced to learn Japanese and/or German.
We came through then. We’ll come through again.
Winston Churchill said it best, “You can always trust the Americans to do the right thing. After they’ve tried all the wrong things first.”
All the Best,
I like how you highlight your points with historical factoids.
We now privatize profit, and socialize loss if your company is politically connected. Goldman is Too Big To Fail while Lehmnan, et allia, are allowed to fail.
How much profit will high government officials reap from saving Goldman and other TBTF companies.
I am a bit younger than you are. I agree with your opinion that full recovery will be decades away.
Old article re TBTF: http://online.wsj.com/article/SB124762129423442667.html
First Obama says we are going to “Spend” our way out of debt. In his State of the Union speech, Obama said, “We are going to “EXPORT our way out” of this recession. Exactly what will that look like; Starbucks and McDonalds? We allowed all those ugly manufacturing jobs to go outside of the US. What are we going to export? What do we make here; besides printing vast piles of US Dollars?
Our Congress is re-titling a stimulus bill as a “jobs” bill. Will the next one be titled an “Export” bill? When are we going to demand sensible government?
I agree with your statements.
I heard network reports that the dollar was gaining strength because EU gubmints are in serious financial trouble. So much for exporting our way out of recession and debt.
“Exporting our way out” is a prayer or hail-mary. We need to get back to sound economics and support people and groups of people (corporations)who are endowed with the ability to create taxable wealth.
My wife and I had dinner with a couple last night who have a daughter. This daughter is highly educated. She does not like working for organizations that make profits. She has received a grant of Stimulus Money to move to Chile and study Chilean society and law. Great, the gubmint borrowed money so this women and her family could move to Chile, live on the beach for a year, in order to stimulate our economy.
Gubmint does not spend money efficiently.
Thanks for the information. Brad will be happy to read about the doom-and-gloomers. Are they all right-wingers?
You wrote: “Spiraling unemployment is very dollar negative.”
HAVE YOU HEARD THAT UNEMPLOYMENT IS DROPPING! Go to: http://www.bls.gov/news.release/empsit.t15.htm
Question: How do weekly unemployed numbers go up in all but one week in the last 5, and the monthly average end-up lower? The markets assumed an increase in the U3.
I could understand the U3 stat going down while the U6 stat goes up. However, U3 and U6 both went down!*&^%$#@#$%^&
I am sensing a protocol or formula change at BLS. You know, facts don’t lie but liars figure?
Or, am I a paranoid suffering with cognative dissonence?
Thanks for updating this article with info about the unemployment numbers. I now understand.
U3 should be 10.6%; however, BLS used a “seasonal adjustment” to compensate for lower than normal post holiday lay-offs.
Thanks for the no nonsense reporting. It’s what the world needs now, instead of love sweet love.
I would like to know what crystal ball Mark Mudgett is looking at. Could it be the BLS and their ever latent and always revising downward statistics? Greg, you are correct to witness that we must always follow, The Money. This administration and the Congress have been egregious and completely malfeasant in handling the overall economy with our money supply. It seems that our government has shown, once again, that it cannot correct itself with all of its mismanagement. The BLS is suppose to show the real numbers on working and non-working labor, but those numbers seem to be erroneous, static, and variable. With this type of effort, many are willing to hand over the responsibilty of our health care to bumbling bureaucrats? The administration and Congress were looking forward to using the 1/6th of this country’s economy of health care to pull us out of this mired recession. It if finally happens, this country will not be anywhere able to be considered the bastion of overall freedom. November 2010 cannot happen soon enough.
Greg, thanks for the vine.
LOL AZ. Do you really think a change in Congress will improve your situation? In 2006 the Dems promised to get us out of Iraq if we elected them. In ’08 Obama promised to fix everything if we elected him. four years later, we’re still in Iraq with no end in sight. After a year in office all I can say is Obama talks like FDR and governs like Jimmy Carter.
So you want to replace the Dems with Republicans? The Republicans are currently opposing a chump change $100 billion jobs bill but can always find trillions for the paper money boys, will filibuster to protect the fat cats in health insurance and have never seen a war they can’t support.
We need a third choice but it sure ain’t those pot bellied crackers calling themselves the Tea Party.
Well done article. Great facts and support. I really found a lot of meat to think about.
I stumbled onto your site after hearing a blip of you on Coast to Coast. I am glad I did! I can’t read these articles fast enough. I’m wondering what the “average” person should do to secure their financial future? It would be hard for me to buy and amount of gold other than a bar or two and would that really help? How difficult is it to sell if you need cash? This might not be the place to submit questions but for now, it is all I know about your site. I will keep reading and thank you for offering clear, concise articles that the average person can understand.
Vickers offers alarmist rhetoric entertainingly.
There is a value for the USD that when reached will bring about massive investment in the USA. I don’t know what the specific value is but it will be reached when the value of the USD offsets our higher labor and compliance (environmental, other regulatory) costs.
Watch for companies that have moved operations offshore to begin returning.
Actually Greg Hunter is right in his headline, “The Dollar Rally Will Not Last.” Our long standing policy of monetizing debt has not changed.
If anyone can time the next collapse in the USD, please share, we’ll be rich beyond our wildest dreams. We’re talkin’ George Soros kind of rich.