Banana Republic Update

We’re still on the way. We have a president driving his political party ever deeper into the Guyanese jungle, even as some jump off the wagon in disgust while others remain parched, ‘mmm, gimme that Koolaid.’

After all the pardons are given out and the cult leader is banished we will be left with extreme political division and rancor… and the same monetary-economic situation as before. Massive amounts of debt, massive amounts of people living on the edge and the Continuum still permissive of ongoing inflationary monetary and fiscal policy.

30 year bond yield

While I think Janet Yellen is a million miles better than the clown in Treasury today, she will need to get with and stay on the bailout program just like the outgoing guy. The Biden admin and the incoming special interests will demand it, just as did the outgoing special interests.

It’s all aimed squarely at Uncle Buck. The oldest macro parlor trick in the book. Devalue the currency. Nobody is able to do it quite like the US because nobody else controls the world’s reserve currency. As long as interest rates and inflation expectations are not out of control, they can basically do as they please and the people will love them for it (paraphrase straight out of Gladiator).

DXY is cracking further below the breakdown point and what’s worse, daily RSI is not nearly as oversold as it became at the last two lows.

us dollar index

The monthly chart shows a vulnerable Uncle Buck eying the next two support areas. The first coincides with a 50% Fib retrace of the cyclical bull market and the second around the 62% Fib. I think this chart has built up enough downside fuel to reach 83 in due time.

dxy

Here again is what you see when you look behind the veil of normalcy. When you decide that you’ve been making it all too complex when it really is this simple. US dollar down (inverse up), stock market up. So the bears should be staying tuned to the currency situation rather than their dogma and indeed one might say, cult of their own.

America is going Bananas and the rest of the world is along for the ride.

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