On the Edge of Historic US Dollar Bull Market

Jeffrey Snider at Alhambra has been doing the yeoman's work of explaining the global dollar deflation. His latest is here: ‘Rising Dollar’ Again To Start This Week

At FT Alphaville, Izabella Kaminska digs into how dollar shortages affect global trade financing in: Dollar shortage *alert* (plus global trade *alert*)

She relays a recent speech by Hyun Song Shin, Economic Adviser and Head of Research at BIS. The first chart below pretty much says it all though. The collapse in leverage at U.S. securities firms is the collapse in eurodollar funding which has been Mr. Snider's focus. To boil it down into the most simplest of terms, the money supply is made up of money and credit. Credit far outstrips money as a share of total money supply in nearly all modern economies. The credit created on U.S. securities firms and mega bank balance sheets in the form derivatives such as credit default swaps was the outer edge of credit supply. It collapsed in 2008.
Look at that first chart of leverage compared to this chart of credit default swaps posted by Snider in The Eurodollar Decay
Money "printing" by central banks was a drop in the bucket compared to total deflation.

The Trump win takes ongoing economic trends in the global economy and steps on the gas. Even if Trump does nothing but pursue a pro-American domestic agenda, he will achieve his trade goals because the Federal Reserve won't stop the dollar deflation. Higher interest rates, higher U.S. dollar, lower energy imports and more domestic manufacturing. If there's even a little bit of trade balancing, we could see an incredible rally in the U.S. dollar and a collapse in emerging market currencies before the cycle completes.

The index to watch is the U.S. Dollar Index. It hit a multi-year high today, intraday. We'll see if it holds or not. I expect it will based on everything I've been blogging about the past several years, but the market is final evidence. A short-term pullback in the dollar is likely, a possible handle on a large saucer bottom.
The Asian Dollar Index has broken it's long-term uptrend, fell below 105 in the past week. ADXY is calculated the opposite way of DXY, falling ADXY shows USD strength.
US dollar also consolidated for 2 years after early 1997 breakout. We are approaching 2 years of consolidation following the 2014 breakout. The long-term chart of the dollar also shows a similar pattern stretching bank 18 years. An upside breakout is imminent assuming the analog holds.

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