The Relentless Rise of The US Dollar

     My base case is the US Dollar is going to 140.  Yes, that sounds absurd, but that's what I think is going to happen and it's my blog.  One might wonder how?  And the short answer is the disintegration of the Eurozone because its design goes against human nature.
     There's not a word the dollar bears say that I don't agree with, but the EU has all the same problems PLUS the design flaw of how it's structured, and since the Euro is 57% of the DXY, if the EU monetary union comes undone, the dollar goes boom to the upside.
     Betting on the dollar going down is betting against the entire history of humanity.  Humans in power always do whatever is most advantageous to them in the short-term, regardless of the long-term consequences to anyone who is not them, and the Euro acts as a restraint on politicians to do what they do best: lie, cheat, and steal other's people's money for political favors and unrealistic promises to voters to stay in power.  So the logical conclusion of the restraint of the Euro on the European politicians is they will break it just like the restraint of gold was broken.  Politicians must be able to spend without limitation so the voters can steal from future generations to pay for their pensions, entitlements, and feasts of free!  So being bullish the Euro is betting against human nature, but a successful trade is direction and timing, and this is the kind of fundamental idea that can get you into trouble without a technical guide to manage the risk, so the question is: where is this idea wrong?

EUR/USD monthly.  While this has a year or so before it's boxed in, I believe this will break to the downside on a continued fracturing of the Eurozone over the coming years.  If right, the reward is thousands of pips to all-time lows.

Here's the zoomed in view of the weekly chart.  There are three levels where I'm looking for a reversal and four dates when I'm looking for it to happen: this Wed the 26th is Fed day; Thursday, Oct 25th is ECB day;  Thursday, Dec 13th is ECB day; and Wednesday, Dec 19th is Fed day.  You'll note there are dueling H&S bottoming patterns trying to emerge on both.  I'd call the Euro neckline to be at 1.1880. 
   

Here's the DXY.  I don't pay any attention to the summer spike shakeout.  The neckline breakout level is 95.  And the best risk/reward is if a reversal happens to form the right shoulder, particularly on one of those central bank meeting dates.   The H&S pattern failure happens if the dollar takes out the left shoulder low at 91.  I don't believe that's how this will play out, but you have to know your levels.

An interesting hedge is to be long oil in half size against a long dollar position, mostly because the political/geopolitical dynamics in the oil market could keep a bid under it even in the face of a stronger dollar, and if it reasserts it's traditional inverse relationship, it makes a decent hedge until the dollar breaks out.

Gotta go.  On a personal note, I did end up buying a small business on July 25th.  This is so contrarian that I can't even say it out loud because it's cringe worthy, but I'm betting on the power of intuition to triumph over rationality.  I'll be happy to tell the story after I spike the ball in the end zone, not before.  Till next time...       

The Universal Dollar - Follow Up

     Last time, I focused on the thousands of corporate currencies that would be created if we decentralized credit by allowing corporations to issue their own currency, and how the value of all the currencies would be measured against one another through a new unit of account called the Universal Dollar, but there's a flip side to this coin, and it's a much better way to explain it.
     Instead of seeing the thousands of currencies, there would actually be only one worldwide currency called the Universal Dollar, but every Uni would be denominated in someone's name as a legally binding instrument of purchasing power that anyone could create to whatever extent the market would allow.  This is the solution to our repeating cycles of debt because it uses the power of choice in a free market of competing currencies and decentralized credit that has accountability.
     Everything would be priced in Universal Dollars, but instead of trying to figure out how many Apple Unis are worth compared to Google Unis, the value would be worked out by the market and be reflected in the price of their products and services, so instead of seeing 1 Apple Uni is worth 2 Google Unis, the price of an iPhone would be 1,000 Unis vs the comparable Galaxy at 2000 Unis.  While the price of one product is not a perfect reflection of the value of the currency, that's how the value of the currencies would express itself in the marketplace of goods and services that use the same unit of account that doesn't itself change in value. 
     The idea of having one world currency would be a really bad idea if we used a government-issued currency and centralized institutions of debt creation that have no accountability because there's no legal liability attached to the currency they create, but the best way to think of how the Universal Dollar system would look is to imagine if the entire world used US dollars to price their products and services and pay their employees, EXCEPT every dollar was in the person or corporation's name that spent it into existence, which legally obligates them to redeem those dollars they created with their labor, product, or service.  The market sorts out how much currency each person or corporation is allowed to create through its willingness to accept the currency.  This is how we eliminate the ability of politicians and bankers to manipulate the money supply and continue to repeat the booms and busts of endless debt cycles. 
     I haven't figured how I'm going to make this a documentary yet, but I'm going to do it because this is not only the ideal monetary system - made possible by our technology - and beneficial to everyone except bankers and politicians - but I think it's inevitable.  So rather than ask how it's possible it could happen, the better question is how is it possible this doesn't happen?  Boom.