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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: regli	5/8/2006 12:07:56 PM
	Read Replies (5) of 116555

A few interesting points: news.goldseek.com "... Look back a couple of years and we saw the $ reigning supreme. Then warnings were given against it as the Trade deficit began to grow. The Fed or the Administration then allied itself to the euro, giving it the respite it has enjoyed over the last year. Now there seems to be a breaking down of the $ of late and some Central Banks switching to the Euro out of the $. These were three distinct stages. The next stage is for the $ to fall heavily against the Euro and Euro oriented currencies. Next will come the defence of the $ until the weight of selling pressure exhausts the $ against other currencies [please note the U.S. has few foreign currencies left in its hands with which to defend the $, but the Fed put in place measures to allow it intervene in the international foreign exchanges.] This could delay the fall for some time, but history has shown that when a Central Bank defends a rate in the market, it gives in periodically and devalues. If insufficient it has to defend again and again. I have no doubt that Central Banks will use this defence to unload their dollars back to the States. At some stage the U.S. will have to impose Controls to prevent foreign capital from exiting the States and rejecting dollars coming home. These are called Exchange Controls. When this happens many currencies will begin facing the same problems as their reserves become suspect too and they cannot defend their own Balance of Payments deficits. At this point for the global economy to function adequately, a new “Global Currency” will have to be established and be supplied sufficient so as to regain global confidence. We cannot see this happening without gold in there to a greater or lesser extent. Of course this will have to be at prices believed by all nations, not just individuals! ..."

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