T Nation

Here It Comes!!


"Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar"

John P. Hussman, Ph.D.

In short, quantitative easing is likely to induce what the late MIT economist Rudiger Dornbusch described as "exchange rate overshooting" - a large and abrupt shift in the spot exchange rate that occurs in order to align long-term equilibrium in the market for goods and services with short-term equilibrium in the capital markets.

This adjustment is depicted in the diagram below. In response to the monetary shock, a modest but long-term depreciation in the dollar (a rise in the U.S. dollar price of foreign currency) is required, depicted by the blue line. However, since nominal interest rates in the U.S. actually decline, ongoing equilibrium in the capital market requires that the U.S. dollar must be expected to appreciate over time by enough to offset the lost interest. As a result, quantitative easing is likely to result in an abrupt "jump depreciation" of the U.S. dollar (that is, a spike in the value of foreign currencies)."


As sure as 2 + 2 = 4. Hope y'all are ready.


Stifles yawn

Still waiting...


Have you taken a look at the dollar index recently.


Yep. Either the currency must depreciate relative to other assets or interest rates must rise. Investors must have SOME compensation for holding the currency or they dispense with it, causing the currency to decline. In either case, the standard of living for Americans must fall.

When this begin to roll, there will come a flash point, a flash crash. That will be quite a day!


Oh good, I was hoping to see another "sky is falling" thread. I'd thought you'd given up the ghost but should have known better. Today I will purchase more stock in honor of your thread.


Zeb, have you seen a co. called Alumina Limited (AWC). Man has it been on a run. I wish I had a something to put into that.


I just took a look at it, they're really on a tear. I like the chart too looks strong.


Ha! (1) The Dow will hit 50,000.

 (2) A gallon of milk will be $50 and gasoline $25/gallon.

Those stocks will be so good!!




And you will need a fork truck to haul the gold bars required to pay for it.


bet on your paper napkins. I stick with real money and the companies that mine it.


Psst..we're not on the gold standard. Dang I hated to break that to him.


I read the wiki on the hyper inflation of some countries. Can't wait till three eggs cost over a trillion dollars. Want a new car? That will be $1.24x10^15 dollars. Wait, I forgot the tax, title, and license.


Anyone who thinks inflation is going to reach epic proportions in this country is consuming something other than Surge.


Shiny stuff with very little commercial/industrial application.

When engine blocks, rims, construction materials, and aerospace applications come back up, your gold is going to be for the fools.

Alumina and aluminum alloys are to industrial metals as flash memory and carbon based micro circuitry are to technology.


Actually I'm just goofing with you a little, HH. It's good to see the conviction that you demonstrate concerning a secure future. Although it could be a misguided amateur move on my part, I do think that AWC and AA would be good moves to make for growth and future earnings wrt their current cost, growth potential, and the future of industrial metals.

I was just thinking about Jim Cramer and his Mad Money clown show where he was screaming BUY!BUY!BUY! even as some companies were crashing through the floor, ultimately costing a lot of people who actually trusted the schmuck. I have to doubt that the guy has a genuine bone in his body after seeing such duplicity as he is capable of.


thanks, just checked this and I can invest my 401K in stocks. let you know how it goes.


Interest rates are the lowest since the 1960's. What will happen when interest rates start to rise?

NEW YORK (Dow Jones)--Treasurys were lower Wednesday as doubts about the Federal Reserve buying government bonds on a large scale dented demand for a $35 billion sale of five-year notes.

Demand for the notes was still healthy as they were sold at a yield of 1.33%, the second-lowest auctioned yield for the maturity. The record-low yield was set at last month's sale at 1.26%.

But the yield was above the 1.322% traded right before the sale. The higher yield means bidding prices were weaker than market participants had anticipated.

The auction was 2.82 times oversubscribed, compared with 2.86 for the previous four auctions.

The indirect bid, a proxy of buying from foreign investors including central banks, was 39%, compared with the average of 45.7% for the previous four auctions.

"Indirects were slightly soft, but overall an average auction amid a correcting bond market, and we look ahead to the seven-year tomorrow, which we feel has the best potential to succeed," said John Briggs, U.S. interest rate strategist at RBS Securities Inc. in Stamford, Conn."


Do you guys think that, just maybe, rising interest rates are bad for stocks?


Stocks like this crash terribly when the market tanks. Rising interest rates will cause a market drop. This stock probably won't even exist in 5 years.

Good luck! You'll need it.


I could see why some would think so, but others aren't necessarily looking for very safe but low yield investments.

CDs are very safe too, but people don't want 1.5% apr. They want 7%+growth.

You weren't bitten by the gold bug because it is a staunchly safe and conservative investment were you? Or was it more of a "Holy Moley Look at it go!"?