Dead Ben’s Amazing Ascent

USD: Prettiest girl in the ugly parade. [The Rude Awakening] September 05, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Dead Ben’s Amazing Ascent - With all this fiscal expansion, why isn’t the dollar getting crushed? - Because it trades against other currencies. - And those currencies are in more trouble than the USD. [Tiny AI Stock Targeted For Buyout Deal?]( [A massive buyout alert has just been issued]( on a tiny AI company that could skyrocket in the coming months, weeks, even days. And according to James Altucher, a man who has made millions of dollars on these kinds of deals… This could be a once in a lifetime opportunity for you to make a fortune. He’s revealing all of the details in the video below (including a leaked memo from Google). [Click here to learn more]( You can watch it by [clicking here](. [Click Here To Learn More]( [Sean Ring] SEAN RING Good morning from a rather grigio (gray) morning in Northern Italy. Last Friday, I had the pleasure of interviewing Jim Rickards for our new, yet unnamed video series. Jim skillfully and thoroughly walked me through the entire banking crisis of early 2023, with Silvergate, Silicon Valley Bank, Credit Suisse, and First Republic. And with precise dates! Jim was positively Sherlockian in dismantling the “crisis is over” thesis. I can’t wait until the piece gets through post-production and into your hands. But before I let Jim sign off to drink his Aperol Spritz - Americans have finally discovered this fine aperitif - I asked him one question. “Are you a dollar bull or bear?” As a long-term macro thinker, Jim didn’t hesitate to say, “Bull.” That may surprise you. After all, the dollar has been printed willy-nilly since 2008. The Fed’s balance sheet has exploded. Biden keeps sending dollars abroad to Ukraine. When does it stop? And that’s the irony. Despite all this printing, the dollar is still the prettiest girl in this ugly currency parade. In this edition of the Rude, I’ll go through why I think Jim will ultimately be proven correct, and perhaps sooner than anyone would have thought. The Last Two Years First, let’s look at the chart so we can get our bearing: [pub] Throughout 2022, the USD index furiously rallied alongside Chairman Pow’s steep and sustained interest rate hikes (big green up arrow). Well, until October. At that point, the market was convinced Powell would have to pivot and start cutting soon. This match lit the equities rally we’ve had for the past ten months. From its high of 114.75 in October, the USD index fell to 102 in the first week of January 2023 (first big down red arrow). Since then, we’ve had at least two sucker’s rallies (blue arrows). But the USD index has been predominantly rangebound between 101 and 105 for the year so far. That big dip to 99.25 had many traders believe it was the end of the dollar. But that now seems to have been a false breakout to the downside. Since that false breakout, we’ve rallied back up to 104.58. If we get above 105.50, there’s a lot of room for a sustained run back up to at least 111, if not the previous high of 114.75. [Will Inflation’s Second Wave Wipe Out America’s Middle Class?]( [James Altucher]( During the 1970s, inflation lasted for years and came in three separate waves. Each wave was far worse than the last. [Today, the same exact thing is happening again.]( Is the price of food, gasoline, housing and more about to skyrocket even higher? WARNING: The next wave of inflation could wipe out America’s middle class. [== > Get ready for “Inflation’s Second Wave.” Click here now to see my urgent warning.]( [Click Here To Learn More]( Currency Pricing The trouble with pricing a currency is that you compare money to… other money. It’s much easier to visualize a stock price. There’s one share, and it has a price. With foreign exchange, both “things” or “monies” represent a price. So, what would make one piece of paper more valuable than another? It’s informative to remember Benjamin Graham’s quote about stocks: “In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” This applies doubly to currencies. So, what do we mean by “voting machine?” The Voting Machine In the short run, when a country raises its interest rates, it offers lenders (such as banks, institutions, and investors) a higher return than other countries. Consequently, higher interest rates attract foreign capital seeking the best investment return. This causes increased demand for that country's currency. This increased demand tends to push up the price of the currency. - Short-Run Supply and Demand: Most currencies are traded on a global foreign exchange market. Their values fluctuate based on supply and demand. If more investors or institutions want to own a particular currency, its value will increase. - Interest Rates: Currencies from countries with higher interest rates often have higher values because they offer better returns on investments denominated in that currency. As you saw, the Fed rate hikes caused much dollar buying. - Market Speculation: If traders believe that a currency will strengthen in the future, they will buy more now. The Weighing Machine In the long run, the strength of the economy, low inflation, and high real interest rates will drive the “smart money” to the best country’s currencies. - Economic Indicators: Data like unemployment rates, manufacturing output, and consumer price indices influence a currency's value. Strong economic performance usually strengthens a currency. - Political Stability: Currencies from countries with stable governments are generally more valuable because they're seen as less risky. - Relative Interest Rates: It’s not just the absolute interest rate in a country that affects its currency's value but also how that rate compares with interest rates in other countries. If one country's interest rates rise while another country’s remain the same, the country with the rising rates will see an appreciation in its currency relative to the other. This is especially true in the case of highly traded currency pairs. - Inflation and Real Interest Rates: Higher interest rates help control inflation. A lower inflation rate in a country compared to other countries can increase that country's currency's value. When comparing interest rates across countries, traders often look at the "real interest rate," which is the nominal interest rate minus inflation. A higher real interest rate will be desirable to foreign investors. Digging Deeper Into the Index First, let’s look at the dollar index basket constituents: - Euro (EUR) - 57.6% of the basket - Japanese yen (JPY) - 13.6% - Pound sterling (GBP) - 11.9% - Canadian dollar (CAD) - 9.1% - Swedish krona (SEK) - 4.2% - Swiss franc (CHF) - 3.6% The euro isn’t dead yet, but it’s on life support. Germany is turning into Europe’s Rust Belt, thanks to the stupid “Russian” sanctions. The Bank of Japan has attempted to murder the yen for the past thirty years. Andrew Bailey, the Governor of the Bank of England, couldn’t find his bare ass with either hand. Those currencies (EUR, JPY, and GBP) make up over 80% of this basket. How can you be bearish when you’re up against ECB Chief Christine Lagarde and this crew? The only currency that has beaten the dollar consistently over the past two years is the Swiss franc, but that’s only 3.6% of the basket. Even so, the dollar has rallied against the franc lately. Quick note: The first currency quoted is the base currency. For EURUSD and GBPUSD, the euro and the pound sterling are the base currency against the dollar. That’s why their charts are going down (since July). The dollar is the base against the other currencies we’re discussing here. That’s why it comes first in these pairs: USDJPY, USDCAD, USDSEK, and USDCHF. Here’s a chart of all six versus the dollar: [pub] The first chart is the EURUSD: since July, the EUR has fallen. The second chart is USDJPY. Since July, the dollar has rallied. The third chart is GBPUSD. The GBP has fallen since July. For the bottom three charts, the USD has rallied since July. Wrap Up Looking at the constituent charts of the dollar index makes you wonder why anyone would be bearish on the dollar. The dollar’s opponents just aren’t fit for purpose. The EUR, JPY, and GBP are in trouble, primarily because their central banks are even worse than the Fed. Look for the dollar to rally further, putting pressure on the stock, bond, and crypto markets. And have a great week ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… The Great Wealth Migration [Sean Ring] SEAN RING Good morning Reader, Since we’ve got a long weekend, I thought I’d show you my latest piece from the Morning Reckoning. I realize you may not even know I write for the Morning Reckoning on Thursdays. So here’s my latest. I hope you enjoy it. --------------------------------------------------------------- Greetings from a gorgeously cool and autumnal Asti. We’ve only had a six-week summer here in Italy. It was cool until mid-June, and as I stand here typing, it’s a mere 69F (20C). The global warming nuts are having a tough time with this. The weather maps are blue and green, even in environMENTAL Germany. Though we’re still three weeks away, autumn is my favorite time of year. I get to cool down and think again. As David Landes wrote in The Wealth and Poverty of Nations: In India and other tropical countries, I have noticed farmers, industrial laborers, and in fact, all kinds of manual and office workers working in slow rhythm with long and frequent rest pauses. But in the temperate zone, I have noticed the same classes of people working in quick rhythm with great vigor and energy, and with very few rest pauses. I have known from personal experience and the experience of other tropical peoples in the temperate zone that this spectacular difference in working energy and efficiency could not be due entirely or even mainly to different levels of nutrition. Weather matters. It really matters. I noticed this when I lived in Southeast Asia's sweltering, humid air. In fact, it was one of the main reasons I wanted to get back to the West. I needed cool air to regain my intellectual and physical vigor. After a long train trip through Europe over the past two weeks, I feel I’ve finally “returned” to the West. A long walk through the Louvre will help that out. Walking through seaside Barcelona, the canals of Amsterdam, pristine Brussels, and the tight alleys of medieval Antwerp will erase the rest of the Eastern residue. Kipling once wrote: Oh, East is East, and West is West, and never the twain shall meet, Till Earth and Sky stand presently at God's great Judgment Seat; But there is neither East nor West, Border, nor Breed, nor Birth, When two strong men stand face to face, though they come from the ends of the earth! What I love about this passage is that the first two lines don’t deny the immense difference between Eastern and Western cultures. But the third and fourth lines of the poem contradict the first two, allowing that individuals of diverse cultures can easily get along, no matter where they’re from. Unfortunately, no one reads Kipling anymore, as he was an unabashed Empire lover. For if they had, they’d know he was no racist. Kipling was a realist. With this in mind, let’s tie together economics and politics to explain why governments, even Italy’s, opt for the intellectually lazy open borders strategy. [New “WiFi Crypto” Token is Going NUTS!]( Only a handful of crypto investors know about this… But there’s a tiny, affordable device… That’s paid investors real crypto – every day, with zero work… Just for having a working WiFi connection! It sounds crazy, but it’s true… And [this 3:28 video]( explains everything. [Click here to view it NOW](. [Click Here To Learn More]( Ultra-Low Rates and Ultra-High Asset Prices: Ethically Offensive I’ve written about this many times and am sorry to keep beating a dead horse. But sooner or later, we’ve got to learn that a central bank can’t keep its foot on the yield curve for years and expect good outcomes. Even if we allow for the argument that a certain amount of money-printing enables the economy to restart itself, there’s simply no excuse for keeping the spigot open for multi-year periods or, in the case of 2008-2021, over a decade. In his masterpiece, The Ethics of Money Production, Jörg Guido Hülsmann writes: The characteristic feature of fiat inflation is that it is done openly and legally. However, official approval does not diminish the pernicious effects of inflation; and it is far from removing its ethical offensiveness. Hmmm… “ethical offensiveness.” Yes, depriving prospective families of the means to have children is ethically offensive. And by that, I mean the ability to have a family in a well-priced house on a single income. I genuinely don’t think that’s too much to ask. In the old days, Dad bought a house for $50,000, Mom stayed at home until at least the third kid was in grammar school, and the family wasn’t left wanting. How people try to say we’ve “progressed” on that front is beyond me. You simply can’t progress when a couple needs both people to work and still can’t afford a down payment, let alone a house, because they’re still paying off their student loans. This is because central banks hold rates on the floor far after their stimulating effects have been extinguished. And it transfers wealth from the poor to the already wealthy in the stealthiest way possible. As a result, demographics are disastrous. Not Mass Migration, But Forced Integration And what’s the answer to this demographic disaster? Politicians think it’s mass migration. Unfortunately, politicians also think these migrants will easily fit into their new societies. This clearly isn’t the case. And while France has a terrible integration problem because they were horrific colonial overlords — see Niger and Gabon (currently) — the UK has had similar issues integrating its immigrants. This “forced integration,” as Hans-Hermann Hoppe calls it, is where the demographic project falls. As Sean Gabb writes in [Property, Freedom, & Society]( [Hoppe] regards the mass immigration of the past half-century into Western countries as an instance, not of libertarian open borders, but of “forced integration.” It is different from free trade in goods and services so far as it is not a free choice of individuals to associate as they please. Instead, it is a product of anti-discrimination laws and state welfare policies. In a democracy, politicians will have an interest in importing those most likely to vote for big government, or those most likely to lend themselves to an electoral balkanization that puts an end to the accountability of rulers to ruled. Given enough pressure by the majority, these politicians will make immigration laws that look tough. But these will lead, at best, to random acts of oppression against the sorts of immigrant who, in any rational order, might be welcomed. The policies of indiscriminate welfare that attract paupers into the country, and of political correctness and multiculturalism that prevent the majority from resisting, will continue unchecked. Hoppe wrote about this in 1999 in his now-famous essay, [On Free Immigration and Forced Integration](. Despite all this, the latest country to fall for this codswallop is my very own Italy. They Like Me! They Really Like Me! Once upon a time, Giorgia Meloni was one of the most ardent anti-migration voices in the European Union. As an opposition politician, she warned the New World Order would substitute native Italians with ethnic minorities. She even promised to put in place a naval blockade to stop migrants crossing the Mediterranean. Someone’s pants are on fire. Now that her EU colleagues have shown her some respect, Meloni has presided over a spike in irregular arrivals. She also introduced legislation that could see as many as 1.5 million new migrants arrive through legal channels. From [Politico]( Meloni is presiding over a country that is economically stagnant and in demographic decline. Over the last decade, Italy has shrunk by some 1.5 million people (more than the population of Milan). In 39 of its 107 provinces, there are more retirees than workers. It’s numbers like these that prompted Italy’s Economy Minister Giancarlo Giorgetti to warn earlier this month that no reform of the pension system would “hold up in the medium-to-long term with the birth rate numbers we have today in this country.” Meloni’s legal migration decree estimates Italy needs 833,000 new migrants over the next three years to fill in the gap in its labor force. It opens the door to 452,000 workers over the same period to fill seasonal jobs in sectors like agriculture and tourism as well as long-term positions like plumbers, electricians, care workers, and mechanics. Meet the new boss. Same as the old boss. Wrap Up It’s the same story all over the developed world. Central banks stomped on the yield curve, lowering interest rates to artificial levels. That goosed the asset market for far too long, which made housing, cars, and children too expensive. To clean up the mess, governments didn’t interfere with central banks’ stupid decisions but opened the borders to mass migration and forced integration. In a few years, Italy may be experiencing the same problems France, the UK, and the rest of the developed world face now. Where’s Kipling when you need him? All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( [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. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting Rude Awakening.](