Will the Almighty Dollar Get Mighty Again Soon?

What’s the worst thing that could happen right now to traders? A dollar turnaround. [The Rude Awakening] February 10, 2023 [WEBSITE]( | [UNSUBSCRIBE]( [Ed. note: Important housekeeping note: Coming soon, your emails will be coming from a new email address: rude@mb.paradigmpressgroup.com. Ensure delivery of every email in your subscription by following [these simple whitelisting instructions.]( Will the Almighty Dollar Get Mighty Again Soon? - Is the USD turning around for the second time in six months? - What’s a dollar squeeze, and will there be one? - What’s the dollar doing right now, and how does that affect gold? [CUSTOMER SERVICE: We’re trying to reach you.]( Your important customer care message can be [found here.]( You are by no means required to act on this opportunity. But I believe it’s in your best interest. You have just days to act. [Please click here for more information.]( [Click Here To Learn More]( [Sean Ring] SEAN RING Happy Friday! It’s time for that final cup of joe for the week. You deserve it. But not nearly as much as that adult beverage you’ll imbibe this evening at 5:01 pm. That Hersh report yesterday wound me up so much that I’m finding it hard to pick up my figurative quill again. It’s like winning a big game and then having to play again a few days later. Getting the juices going again is more difficult than usual. Pam’s birthday is tomorrow. She’ll turn a ripe, but young 42. She looks amazing. I’m loath to take Warren Beatty’s advice to trade her in for two 20s. Speaking of Old Shagbark (sorry, I couldn’t resist!), let’s talk about the dollar today. We may be getting another reversal in the dollar index. Dollar Liquidity and Why It Matters… For Now. I’m unsure if we ever went through this, but it’s good to know. What do we mean by “dollar liquidity” or “offshore dollar funding?” From the [Bank of International Settlements]( The US dollar dominates international finance as a funding and investment currency. Although the United States accounts for one-quarter of global economic activity, around half of all cross-border bank loans and international debt securities are denominated in US dollars. Deep and liquid US dollar markets are attractive to non-US entities because they provide borrowers and lenders access to a large set of counterparties. The pre-eminence of the US dollar as the global reserve currency and in trade invoicing further motivates its international use. Let’s parse out the above. But before we do, understand that US dollars outside the United States are called “Eurodollars.” That’s not a reference to the EURUSD cross-currency rate. (In fact, “euro-” is the most overused prefix in finance and causes loads of confusion for newcomers.) To be clear, offshore dollar funding refers to borrowing US dollars from sources outside the United States. Again, these are called Eurodollars, which have nothing to do with the euro currency itself. This type of funding is vital for several reasons: - Access to capital: Offshore dollar funding provides companies and financial institutions access to capital they may not be able to get domestically, particularly in countries where local currency funding sources are limited. (Think Africa and Latin American countries.) - Diversification: Borrowing offshore in US dollars provides diversification benefits by reducing exposure to currency and interest rate fluctuations in the borrower's home country. (Think Argentina.) - Cost savings: Offshore dollar funding can be cheaper than borrowing in local currency, particularly in countries with high local interest rates. (Think Australia.) - Global trade: Offshore dollar funding is critical for many multinational corporations that conduct business in multiple currencies and need access to US dollars to pay for goods and services. (Think Fortune 500 Companies.) - Liquidity: The US dollar is the world's most widely traded currency and is often seen as a haven during times of financial uncertainty. (Think of all the big players in a regular market.) That’s the upside. Here’s the downside. Say you’re an Indonesian nickel miner who borrows in dollars (and, therefore, must pay back that debt in dollars). But your revenue is in Indonesian rupiah. If the dollar/rupiah rate roofs it - that is, the dollar strengthens hard against the rupiah - your rupiah revenue doesn’t buy enough dollars to pay back the interest on your loan, let alone the vast principal. So when there’s even a whiff of a dollar rally coming, international companies who borrowed in dollars try to buy USD as fast as they can at a lower price. Of course, the price doesn’t remain cheap, causing the dollar to strengthen further. If the buying doesn’t diminish, it may lead to the dreaded “dollar squeeze.” What’s a Dollar Squeeze? A dollar squeeze is a shortage of US dollars in the global financial system. This happens when there is a rabid demand for US dollars relative to its supply. It’s insane to think with all this money printing, those dollars can get scarce, right? It can. Most dollars are electronic. So, no pallets of paper are moving around on ships. Just entries on a computer can change the supply of dollars. As for the demand for US dollars, it can increase for several reasons, including: - Financial stress: During financial stress, investors may seek safety in US dollars, increasing demand for the currency. - Trade imbalances: If a country has a large trade deficit, meaning it imports more goods than it exports, it may need to purchase US dollars to pay for the imports. This can lead to a shortage of US dollars in that country's financial system. - Sanctions: Sanctions can limit a country's access to US dollars, making it challenging to obtain the currency it needs to pay for imports or service its debt. (Yes, these stupid sanctions are why Russia and China are trying to build a parallel financial system independent of the US dollar.) A dollar squeeze significantly impacts the global economy. When US dollars are in short supply, it can become more expensive for countries and corporations to obtain the currency they need, leading to higher borrowing costs and increased financial stress. It also causes foreign currency depreciation. That harms a country’s asset values and its citizens’ purchasing power, as most central banks print more money to “solve” the problem. With all that theory behind us, let’s look at the USD now. [The #1 Way to Hedge Against Rising Inflation]( [Click here to learn more]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [Click Here To Learn More]( What’s the Dollar Doing? This chart is the Fibonacci chart I “borrowed” from JC Parets of AllStarCharts.com ages ago: [SJN] Let’s zoom in on the last decade, as it’s much easier to see: [SJN] Once we hit 2021 or so and bounced off the 90 level with a double bottom, it was straight up for the dollar. And once we got above 101.57, I thought we’d hit 120 in no time. That wasn’t meant to be. We hit 115 and then crashed back down to 101.57 again. We held that level and have rallied back to 103.11. If you are a [Strategic Intelligence Pro]( subscriber, my friend and colleague Dan Amoss sent a trade alert yesterday regarding this subject. If you haven’t read it yet, please do! Could This Be a Whipsaw? Maybe. If the dollar turns up from here, we may get a reversal of the stock market rally. But not necessarily. And the same goes for gold. Remember this critical market axiom: correlations work… until they don’t. So, it’s perfectly possible that if the dollar rallies, gold may also continue to rally. But I’d err on the “wary” side of a dollar rally. Wrap Up. I hope this piece cleared up any misconceptions about the dollar and its importance in overseas markets (for now, anyway). If the dollar turns and strengthens, it doesn’t necessarily mean the rest of the markets will crash. Yes, a weak dollar helps assets. After all, you’d need more weak dollars to buy goods and services than strong ones. But correlations don’t always hold up. And that’s what we need to look out for. In the meantime, have a wonderful weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening P.S. I wrote yesterday’s [Morning Reckoning]( on bailouts and bail-ins and how you can avoid both. Head over there now if you missed it! In Case You Missed It… Nordstream: Seymour Hersh Points Finger at the USG. [Sean Ring] SEAN RING Good morning from brisk Northern Italy! Yesterday was one of those great regular days. You know, when everything seems to go right. I knocked out yesterday’s piece with ease. Later in the day, I attended our weekly editorial meetings with some of the brightest minds I know. But my friend, colleague, and Daily Reckoning editor Brian Maher was missing. Brian doesn’t usually say much in meetings. But he’s always there. Not this time. We often chat via the Slack direct messaging system. So, I was happy later in the evening when his handle popped up on my phone. But it wasn’t a DM. It was a post in our editorial chatroom from the great independent journalist Seymour Hersh: [SJN] Credit: [Substack]( To paraphrase Beavis and Butthead, I had morning wood in the late afternoon. In this Rude, we’ll talk about why this is such a huge story - and see if we were right the first time we wrote about it. Who’s Seymour Hersh? At a robust 85 years old, Seymour Hersh is an American investigative journalist and political writer. He’s best known for reporting the Vietnam War and the My Lai Massacre. He also broke the Abu Ghraib prisoner torture story. Hersh has won numerous awards for his journalism, including a Pulitzer Prize. He’s widely regarded as one of the foremost investigative reporters of the 20th century… and maybe now the 21st century. Hersh has been known for his aggressive reporting style and willingness to challenge government officials and powerful institutions throughout his career. I also encourage you to read Hersh’s “[Why Substack?]( post, where he describes himself. What Happened Again? On 26 September 2022, covert bombings and subsequent underwater gas leaks occurred on the Nord Stream 1 and Nord Stream 2 natural gas pipelines. Why? According to [Hersh]( America’s political fears were real: Putin would now have an additional and much-needed major source of income, and Germany and the rest of Western Europe would become addicted to low-cost natural gas supplied by Russia—while diminishing European reliance on America. In fact, that’s exactly what happened. Many Germans saw Nord Stream 1 as part of the deliverance of former Chancellor Willy Brandt’s famed Ostpolitik theory, which would enable postwar Germany to rehabilitate itself and other European nations destroyed in World War II by, among other initiatives, utilizing cheap Russian gas to fuel a prosperous Western European market and trading economy. And what did we write earlier in the [Rude]( Let’s face it: America benefits massively from this. If you look at the Heartland Theory of Halford Mackinder, America is on the periphery right now. [SJN] Credit: [Wikipedia]( Eurasianism is on the rise. If German manufacturing married cheap Russian energy and sold those finished products to the Chinese middle class, well, you kind of don't need America anymore. And that is the main point of this argument. America is on the verge of obsolescence. It’s ironic because the very thing that allowed America to breathe and to grow in its infancy, its geographic isolation, is now its Achilles' foot. And you wouldn't think that geography matters that much in our highly interconnected world. But this version of our interconnected world is not terribly globalized and raw materials matter. So, he who has the raw materials runs the world. America, bountiful and rich with its amber waves of grain, is not the only player in town, especially when it comes to rare earths, potash, and oil. Conclusion: Europe now requires American LNG, and it keeps the US in the game. Ok, Who Did I Originally Accuse? Here’s what I wrote in the [Rude]( about the US (probably) blowing up the pipeline the day after it happened (bolds mine): US/UK/Poland(?) Here is President Biden talking about how Nordstream 2 is never going to happen if Russia invades Ukraine. [SJN] Credit: [@ABC]( Here is a video of America's Sweetheart™ Victoria Nuland, telling the world that Nordstream 2 was “one way or another” not coming online. [SJN] Credit: [@StateDept]( Here is Gonzalo Lira in this fantastic Rumble video explaining why it's actually in America's interest to blow up Nordstream 2. [SJN] Credit and click here to watch: [Rumble]( Of course, I don't know if they actually did it. But thanks to the high-level threats issued by the President and his Under Secretary of State for Political Affairs, it looks like America had plans to do this. And if you want a full explanation of America’s motives, watch [this video of Condi Rice]( from back in the day. What really didn't help was Poland's former foreign minister thanking America on Twitter. He's been married for 30 years to Anne Applebaum, who is a Pulitzer Prize-winning writer for The Atlantic. And a fierce Putin critic, of course. [SJN] Credit: [@radeksikorski]( It's a really bad look. Of course, the American “elite” would be high-fiving because now American LNG will have to go to Europe somehow, some way to keep the place warm. And, Norway will have to pump more gas through the pipelines into Europe. Denmark will have to do the same. Russia pretty much now is cut off from Europe. But here's the thing, Russia doesn't really care because Russia is selling oil to China and India which desperately need that oil and gas. [Japan is already buying Russian crude and gas.]( [SJN] Credit: [Bloomberg]( The Rich (90th percentile above) got richer, while the bottom 10% got much poorer. With numbers like these, Biden has a job to do in the next two years. As for this Fed Chair, well… [“Biden Blackouts” coming this winter?]( [Click here to learn more]( A former advisor to the CIA and Pentagon just made this dark prediction: Calamity Joe’s sabotage of the Nord Stream pipeline [His Evidence Here]( was suicide. In the next 75 days, Americans will face fuel shortages… …widespread blackouts… …empty grocery shelves… …up to $1000 energy bills… …drained retirement accounts, and… …a massive crime wave. This former CIA advisor says most Americans will suffer this winter. But a few will WIN big from the turmoil. [Here’s how to be one of them](. [Click Here To Learn More]( Did We Really Blow Up Our Ally’s Infrastructure with Their Blessing? I’ll admit I didn’t see this coming. According to [Hersh]( What came next was stunning. On February 7, less than three weeks before the seemingly inevitable Russian invasion of Ukraine, Biden met in his White House office with German Chancellor Olaf Scholz, who, after some wobbling, was now firmly on the American team. At the press briefing that followed, Biden defiantly said, “If Russia invades . . . there will be no longer a Nord Stream 2. We will bring an end to it. If I’ve read that correctly, the Germans were not only aware of it but supported the bombing. It’s sheer lunacy and self-sabotage. Who else? Back in Washington, planners knew they had to go to Norway. “They hated the Russians, and the Norwegian navy was full of superb sailors and divers who had generations of experience in highly profitable deep-sea oil and gas exploration,” the source said. They also could be trusted to keep the mission secret. (The Norwegians may have had other interests as well. The destruction of Nord Stream—if the Americans could pull it off—would allow Norway to sell vastly more of its own natural gas to Europe.) Ok, the Norwegians. Anyone else? The Norwegians joined the Americans in insisting that some senior officials in Denmark and Sweden had to be briefed in general terms about possible diving activity in the area. In that way, someone higher up could intervene and keep a report out of the chain of command, thus insulating the pipeline operation. “What they were told and what they knew were purposely different,” the source told me. [SJN] Credit: [Seymour Hersh]( Ok, the Swedes and Danes weren’t really involved, though I’m sure they were happy with the outcome. And I must apologize to the Poles and Brits. Apparently, they had nothing to do with this. Wrap Up. Never believe anything until it’s officially denied. And boy, has it! It appears the Americans and Norwegians teamed up with the German Chancellor to blow up Germany’s infrastructure. The Danes and Swedes were briefed but didn’t really know. And the Poles and Brits were excluded from the operation. Amazing. Thank heavens for men like Hersh… and Greenwald and Taibbi. Without them, we’d never get to the bottom of the story. Read Hersh’s entire piece when you’ve got 20 minutes free. It’s impressive. Now, Biden must face the consequences of his inability to keep the operation covert. [SJN] Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening P.S. Watch out for the Morning Reckoning, coming to your inbox shortly. In it, I cover bailouts and bail-ins and how to avoid both. See you soon! [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. 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