Friday, March 13, 2009

Another Possible US Dollar Index Top That Could Be Really Important

The gold price and the silver price can benefit from a declining US dollar. After all, they are real, actual, time tested monies.


"Heidi is the proprietor of a bar in Berlin Germany. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around and as a result increasing numbers of customers flood into Heidi’s bar.

Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi’s borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80 %.

The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers."

End Detour

Second Detour

"The Federal Reserve is the culprit."

"A central bank setting interest rates is price fixing, and is a form of central planning." ... "Let's end the Fed."

[Central planning is a major tenent of Communism. The USSR imploded on itself without going to war, and broke up into pieces. It looks like most Americans learned nothing about a history making event. Mental lazyness and ignorance can be extremely costly.]

End Second Detour

Again, the US dollar index has broken down through it's short term uptrend line, a bit more than the last time during this short uptrend.

It may be forming a more overall double top with the the right hand top being higher, being a final stronger shake out of the weak US dollar shorts. By the end of next week, we should have a better idea which in turn gives us a better idea of where the gold price is going.

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