Death Certificate

Sara Sidle: "Clothing, $85. Earrings, $30. Latte, $4. Getting away with murder..."
Gil Grissom: "Priceless."
--CSI: Crime Scene Investigation

During commercial breaks from the box monster last nite, I surfed thru a couple of President Obama's press conference comments on the economy. The snippets I heard were downright laughable. One of them was that the US dollar is 'extraordinarily strong' because investors are confident in the economy.

Not quite. During fat times the entire globe was short trillions of dollars while engaging in a carry trade. Investors borrowed dollars at a cost held artificially low by the Fed. They then sold (read: shorted) the dollar to buy speculative assets of all shapes and sizes (stocks, bonds, real estate, derivatives). This was a great trade as long as prices increased. However, prices have been declining over the last 6-18 months, prompting investors to sell these speculative assets and then buy back dollars to cover their leveraged bets. It has been this massive short squeeze that has juiced the dollar higher.

For those in doubt of the ultimate consequence of all this government intervention, Mr P and Minyan Peter weigh in on this week's Private Public Investment Partnership (PPIP). Fil Zucchi sketches the downstream outcomes of last week's debt monetization scheme.

Don't take what politicians say at face value. Think it through. When you do, you may conclude that, while the dollar may rally more in weeks or months ahead, the crime scene suggests a case of premeditated murder.

position in USD