Sudden, rapid and leery appreciation of U.S. Dollar - Supernova before another collapse?

This wacko shift seems like it will end up into a real-life depiction of 'Jack and the Beanstalk' .. climbing up, up and up and then down, down and down ... but without the hen that lays the golden eggs.

Nothing has significantly changed in the U.S. economy yet.   It's still sluggish.  Consumer spending is weak.  Jobs are scarce.  Official unemployment rate is 6.2%.  The real figure is twice as high at 12.6%.  Prime rate is still stuck near zero and the Federal Reserve won't even talk of raising it by a tiny quarter percentage point.  But the U.S. dollar has suddenly been taking giant steps and soaring at a breakneck speed.

The ploy provoking falling oil prices is being touted by the business media as a helpful development that will reduce the costs incurred by businesses, boost trade and reduce household costs on petrol. But these pretty words carry little weight beyond the short term; they will be unsustainable once the complete downside of low oil prices shows up.
Moreover, slumping oil prices are also being utilized as a tool for political hype.  No one ever forgets that! Quoting a few lines of a stupid and gossipy story posted today at Yahoo News .. "Hezbollah, the Shiite militant group, is facing a new enemy: financial austerity.  A slump in global oil prices and nuclear-tied sanctions are squeezing the group’s patron Iran, which is already funneling billions of dollars to the Syrian regime.  As Iran tightens its belt, Hezbollah has had to impose salary cuts on personnel, defer payments to suppliers and reduce monthly stipends to its political allies in Lebanon, according to a wide range of political and diplomatic sources in Beirut."  While tattle-tale myths like these carried by the U.S. spy network prowling in Lebanon are peppered across mainstream news sources, the vital issues that need to be told are conveniently evaded.  

There is an eerie silence on the long term impact of oil deflation on the global economy which is already frail and shrinking.  Oil prices are expected to continue falling through 2015, unleashing depression in Europe, leaving countries like Japan and China in a quandary, and worst of all having a devastating impact on assets linked to oil revenues .. and consequently a collective fiasco in the corporate world and decline of bank profits.  How do you think all that would eventually affect the common masses who are miserable enough already?  As per some weird gerrymandering, low oil prices have always helped the US dollar to strengthen against all other currencies.  Is this reckless conspiracy of global oil deflation worthwhile only to protect the US dollar?

Neither should it be difficult to guess why OPEC has persistently refused to cut oil production.

The creepy saga of the sudden dominance of U.S. dollar goes beyond tumbling oil prices. The seesaw with bond prices and bond yields is drifting into a very unsettling scenario.  European and Latin American countries recently issued billions of bonds in USD which will require conversion of all local currencies into U.S. dollars for repayment. That's another setup which is helping the dollar look more impressive than it ever did in the past seven years.  But as the price of bonds rises, its yield steadily declines.  This is precisely the story line unfolding in Europe at the moment ... in addition to all its previous burdens.   We only read and watch stories on Mr. Putin's struggle with sanctions and the falling ruble.  But that's only one side of the story.  Economies of U.K. Germany, France, Italy, Spain and Portugal have already been under immense pressure because of sanctions on Russia.   And now, after issuing billions of bonds with falling profits, layoffs are getting common and unemployment is rising much faster than anticipated.  With prospects getting gloomier and Europe heading for depression, Mario Draghi may have no other choice but to print more money.   Firing up the mint machine is another frightening sign.  Its purpose is to pay for the extravagance and corruption of governments, prolong the agony of the people and push the U.S. dollar to explode by its own energy.

A simpler way to understand the European "development" from recession to depression is through an old joke that says, "Recession is when your neighbor loses his job.  Depression is when you lose your job."  That says it all.

As serious as the situation is getting, the helpless onlookers might as well take it as a joke and laugh at the international con guys.


  1. Very, very interesting one, Sister Zeynab. I've also been wondering over this sudden uncanny twist,, and you know what? The buggers are trying to push oil prices down to raise prime interest rate. As you stated, it's been almost zero in US. In Canada only 1% since 2010. Canada always follows US, and with the US economy hardly showing signs of real improvement, they needed to artificially create a scenario conducive for higher interest rates.

  2. hummm .. but won't low oil prices slow capital spending as well as hiring in business sectors. I would think both US and Canada are oil exporters. Oil getting cheaper would mean growth being affected, or no?

  3. Yes correct but I guess that would be on the slightly longer term. It will take a little while for the pinch of low oil prices to be felt globally including north America. At a glance people will tend to think "oh, low oil prices so we pay less for gasoline, less for exports .." and so on. That might delay the immediate ruckus generally caused soon after prime rates are raised.

  4. This sh*t will not work. Dollar going up like a bazooka in the international market but weak at home with no buying power. How the heck will it help the Americans?

  5. Very interesting. Well, it's to be seen for how long the game goes on. Some ""analysts & experts"" are saying it won't go on for long and in 2015 CAD will be on parity with USD. But what they call "experts" are actually expert conjectures and speculators.


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