Unintended consequences from a flood in valueless Quantitative Easing using a variety of fiat digital printing tools are ricocheting through interconnected markets throughout the world. The West thought sanctions was a great idea imposing them on Middle Eastern dictatorships, Russia, and certain friends of our enemies. Unexpected was a huge upset in energy products and other commodities.  A similar crisis appeared in the U.S. 1907-1908 Panic and in October of 1929 in New York as trades could not be settled nor filled. Brokers did not have the cash to settle trades as buying and selling was so lopsided.

A current trio of very frightening non-liquidity examples is found in Russia, Europe and Japan. The Asian open on Bloomberg on 1-5-15 has presented some very scary situations in Iran with Japan being most prominent. Iran admitted they cannot grow with external trade cut-off. Russia has lost 50% of its national income in oil and gas. Europe is ready to cave-in as ECB President Mario Draghi scrambles to cover credit markets. The global bankers’ greatest fear has arrived. Bond traders are not in the game but are rather playing defense. A few more “No-Trade-Sessions” in 10 year JGB Japanese bonds and it could fly out of control. Being in the early stages of credit collapse, traders are running from weak sisters and buying U.S. Dollars. -Roger

From Bill Downey at Gold Trends: “The move higher in the U.S. Dollar ​is a short covering move from dollars borrowed to try and re-liquefy the global market place.  The reason QE’s didn’t bring on inflation is because the demand for U.S. Dollars was global.  Borrowing of the U.S. Reserve Currency at virtually zero rates and then using them in the emerging markets at 3% to 5% yields was the modus operandi. The world expected resurgence in (our) global market place and thus a bull run in commodities and metals etc.  Roger: It is not happening.

But too much debt, too little wage increase (for) the working stiff, has basically removed all non-discretionary spending and in the end, a global economy (that) is stagnant when all (that’s left) is enough for food, shelter and clothing.  That in itself will not provide growth, but pretty much stagnation. This has in effect squashed the commodity supply/demand picture.  Not that there isn’t any demand, but that the supply factor and mal-investment that was fostered to try and recover the ever expanding fractional reserve system we are on did not materialize into a new round of credit expansion by the public as the capacity to produce commodities is more than sufficient at the moment.

The continuing plunge of economic reality in the global markets is the one link that binds all…commodities and they have plunged. Gold, by continuing its move lower and bonds higher, certainly has the look of manipulation.  But fundamentally, it is a warning of a grave danger called a liquidity squeeze.  That is something that I have been staunch on for quite a while and the implications it has…and why I have been bullish on the USD.  Gold going down along with interest rates is a warning that an Implosion…NOT an Explosion… is the real danger is. Roger: This is correct.

The (dollar chart) should not be interpreted as a new demand that (traders are) going to exit the dollar but the total explosion of a powerful rally being witnessed is the BORROWED DOLLARS ($9 TRILLION) that were invested in OTHER CURRENCIES and markets are now in total PANIC to cover positions as the trade turns against those who are short dollars.

What the FED is doing is choking the global market of the liquidity it needs.   This is the DEMAND for dollars I speak about in a world where the toxic debt has literally wiped-out all levels of HIGH COLLATERAL.   By ending QE, the FED is actually making the squeeze harder because the unwinding that has begun is unleashing forces, which are contrary to popular conceptions. Roger: The markets are reacting as they expect higher interest rates from the FOMC who will not dare make the move. This is why I expect interest rates to remain near zero and in some markets beneath zero.

Turkmenistan, the former Soviet republic, devalued its currency against the U.S. dollar by -18% for (2015). Turkmenistan is energy-rich and this is the latest sign of seriousness of the collapse in oil. This will contribute to…force the dollar higher as commodities decline… energy producing nations will be compelled to devalue their currencies in an effort to try to make ends meet. Devaluations will result in an attempt to create inflation to offset deflation. We are in a major economic collapse on a global scale. Most people do not understand that this is the real threat we face.

The USD is in a powerful move higher, regardless of the reason. We are now at the next long term price resistance line. Odds favor a pause in the uptrend that should develop in our current price and time frame. But make no mistake (the dollar index price) can certainly probe higher to the next (resistance) if panic increases here.”  –Bill Downey GoldTrends.net 1-4-15

Roger: These market conditions will offer more volatility in currency markets. To trade them you need to understand the technicals on charts and have the experience to make moves offering a chance to earn money with proper risk control. In Trader Tracks Newsletter I intend to step-up our efforts to recommend more of these trades in for 2015.

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