U.S. Dollar Unhinges (Review), Commodities Surge

There was a massive flash crash in the dollar this weekend -

If this crash in the DXY (seen below) had happened during regular hours, apparently driven not by the dollar but by DXY component EUR (there was no comparable move in other USD pairs), it would have created a complete market collapse. Luckily it happened an hour after close.

Followed up by issues Sunday night -

Goldman came out with a report basically demanding (you know how these guys are) $4 trillion in money printing - so says the FX chatter and Zerohedge.

The result? The dollar took an instant header, down more than a 1/2% this evening alone.

How about the price of some of the things sensitive to threats of monetary debasement? These are all price changes since the futures started trading this evening - that is, they're six hour changes in price. These are all things you need to buy, either directly or indirectly.

Oil, up 1%.

Wheat, up 1.49%.

Corn, up 2.05%. (Oh yeah, and ethanol on your gas will soon be mandated to be 15%, not 10%.)

Soy, up 1.5%.

Rough Rice, up 1.51%.

Oats, up a stunning 4.27% (!)

Cotton is lock-limit up 500 ticks. To be fair there's a crop disruption related to Cotton, which is adding to the problem. Dollar debasement, of course, isn't helping.

How is the dollar fairing overall?

The dollar's slump could get far worse if the dollar index takes out last year's low, Robin Griffiths, technical strategist at Cazenove Capital, told CNBC Monday.

"If the (dollar index) takes out the low that was made roughly a year ago I really think that will not only encourage more sales, it will cause a little bit of minor panic," Griffiths said. "A year ago it was deemed too cheap, if it goes any lower than that it's actually become toxic waste." 

The Real Effect
We have made no secret of the prediction that the dollar was going to get thoroughly trashed -

August 5, 2005 -

Look for an increasing economic slide of the economy in the 2nd half of 2005 that causes the dollar to slide even further against the Euro setting the stage for a Union currency proposed to be called the Amero.

August 10, 2005 - 

I believe that the globalists are attempting to strip the American Economy by devaluing the dollar, weakening the American military through multiple prolonged conflicts and the removal of what was outstanding American influence over many countries in order to prepare us for a Global Union.

July 11, 2008 - 

The dollar continues to tank with countries virtually lining up to fling it off the monetary cliff. This is while costs stack up from the Afghan/Iraq conflict.

June 15, 2009 -

The US dollar is going to tank (think Iceland) 

Notice the escalation in rhetoric over the years as the position of the Real Effect goes from "slide" to "tank"? This is because we are looking at long term trends, not immediate conclusions. So while the dollar may go up for a little while from here, it will continue to return to this position repeatedly, creating new lows along the way. Then, at some unfortunate point, the entire situation becomes uncontrollable and the US becomes a banana republic.

This position seems closer every day, but I believe that the illusion needs to be maintained until after the Republicans regain seats in Congress, then the situation can be "blamed" on them.