Take the dollar index for example. It is weighted over 60% towards the Euro, which makes for a completely ridiculous situation. Why do I say this? Because the equation for the last few months have been :
Bernanke Printing - Worry about European defaults = 0
The dollar is crashing, except most other currencies seem to be as well. The yuan is pegged. The yen is being managed. The EUR is doubtful if it has a future. The CAD is very closely tied to the USD, and in addition Canada as well as Australia has housing market issues coming up. The small currencies have been pushed as far as the markets dare, due to them being small and volatile. The GBP gets kicked in the nuts everytime it is discovered that the British STILL haven't started reducing their monthly deficits. In a word - they're all trash.
And today, we saw something quite interesting. First, the dollar was massively down, and gold, silver and the commodity spectrum gained heavily. Then, a Treasury auction turned out pretty sour, and lo-and-behold, the bond market gets a date with gravity, and the dollar ..... rises. I know, there is probably a nice equation why the dollar rose at this time. The commodities, however, continued their run for escape velocity. Screw the dollar, seems to be the sentiment.
I know that the "paper money returns to its intrinsic value"-story is a bit cliché. And it sure won't do it by tomorrow, or the day after. But it seems that currency movements are becoming increasingly disconnected from everything else. Obviously, this is because currency movements have become nothing put temporary gauges of how unevenly inflation is workign its way through the global economy. In the end, we're all liquified, drunk and ready to fall face first into the gutter.
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