Dollar collapse possible within a few months on new technical analysis

28 Mar

A dollar collapse could be in the cards within a few months as new technical analysis shows the the reserve currency support eroding and within the parameters of uncharted territory.

On Friday, March 25th, the dollar reached a low of 75.48 on the index.  It had not fallen to that level since shortly after the credit crisis of 2008 ravaged both equities and the monetary system.  Massive bailouts and Federal Reserve intervention helped the dollar to recover, and it moved past 80 on the index over the next two years.

However, since the Fed also began implementing Quantitative Easing (QE) I and II, the dollar has been under a continuous assualt as the the total amount of dollars has increased, and inflation has moved at a very fast rate in the last six months.  Technical analysis shows that before we reach the end of QE2 in June, the dollar could fall below the index level of 72, which is the lowest we have seen in the modern era of the dollar after President Nixon took us off the gold standard, and simply floated the currency as a pure fiat entity.

What makes this dollar collapse possible is a number of fundamental factors on top of the technical ones we are seeing in M1 and M3.  Foreign servicing of our debt has dropped off, and in fact, may go in reverse very shortly as Japan will sell treasuries to pay for basic needs and the rebuilding of their industry after the disasters this month on their mainland.  Additionally, the US government is bankrupt, and now in a legislative debate on whether to raise the debt ceiling.  Should Congress refuse to do this, then the US will not be able to sell debt instruments to keep the government functioning, and pay for the multitude of programs that are part of the nearly $100 trillion in unfunded liabilities.

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Posted by on 03/28/2011 in Financial/ Economic


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