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 Nickel Ranttm:
Mr. Mental Explains -
The US Dollar Index

by Edgar J. Steele

September 30, 2007  

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Mr. Mental Explains the US Dollar Index
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My name is Edgar J. Steele.  This is a Nickel Rant.

Ok, ok...I get it.  Though I try to keep things pretty simple around here, many who follow my mutterings simply have not read them all or paid attention or ... something.  So, let's review and consolidate for a moment.

Introducing Mr. Mental

Or, perhaps I should adopt the superhero persona I have for so long used only among my family members and closest friends:  Mr. Mental.  "Aha, puny Earthlings!  No wonder you are dazzled and befuddled.  How could you possibly hope to keep up with the master of your universe ... Mr. Mental?"  (blare of trumpets)  "Mr. Mental knows all.  Mr. Mental sees all." 

The last time Mr. Mental put in a sustained appearance, at the local bowling alley (yes, I admit it - I go bowling with my kids about once every 3 or 4 years, whether I need to or not), he pointed toward the pins and laughed with contempt. 

With maniacal laughter and an imperious tone:  "Pay attention, mere mortals, for Mr. Mental is about to show you how this ridiculously easy game is played.  Watch, as Mr. Mental performs what you would find impossible and bowls five straight strikes."   My son was doubled over with laughter.  Perhaps I've gone too far, I thought, as my wife smirked at my youngest daughter and her new boyfriend, Ringo.  Well, at least I don't look like him, I thought.  Now I gotta do it.  Turning to the pins, I threw a perfect strike, which added to the general hilarity.

Normally about a 110 bowler, I stood up each of the next four times and pointed, Babe-Ruth-like, to the pins, insulting the "insignificant human creatures" about myself and daring them to watch the perfection of Mr. Mental in action.  Yep.  Five strikes in a row.  They began to look at me strangely.  Secretly, I began to wonder if it was an acid flashback.  This is a true story.

Almost Always Right

Lessee now, what was the point of all that?  Oh ... yeah ... I'm generally right.  Often, unbelievably so.  No, seriously.  Yes, I know you think you are always right, but you and I both know how that usually works out, now don't we?  Well, I am!  Right, that is.  If you don't think so, then you obviously haven't read the economic and world war chapters in my book.  Would Mr. Mental lie to you?

US Dollar Index

Probably the most repeated question I get is about this mysterious dollar index I keep harping on - the one that I keep saying is so significant. 

The US Dollar Index is an average of six foreign currencies, weighted in accordance with somebody's perception of their relative importance in the year 1973, when the world's major nations first let their currencies start to float "freely" against one another:

1. Euro - 57.6%.
2. Japanese Yen - 13.6%.
3. British Pound - 11.9%.
4. Canadian Dollar - 9.1%.
5. Swedish Krona - 4.2%.
6. Swiss Franc - 3.6%.

In 1973, the Index started with a base of 100 for the US dollar.  Last Friday, for the very first time, the figure fell below 78, the previous low-water mark set long ago.  That means that the dollar has decreased in value by over 22% versus those six currencies since 1973.  Here is a chart of the US Dollar Index for the past 30 years:

 

Yes, the dollar was as much as 60% higher than the index of those six currencies in the early 1980s.  Then, in 1992, the dollar reached almost all the way down to 78 briefly.  In fact, the US Dollar Index managed to threaten the level of 82 only a half-dozen times in its history, crossing under 80 only once.

Looking at the chart, do you see now why I made a such a to-do about 82 and why the Feds have moved heaven and earth to defend the dollar at that level for so long?  Do you see why 80 was even more important?  Do you see why 78 was ever so much more important?  Now you should understand why I said that I could not believe they would not at least pay lip service to the 78 dollar. 

Here's the same chart for the past year or so, since the chart above ends in mid-2006:

 

When the markets closed on Friday, the dollar was at its all-time low:  77.61.  It is twitching slightly just now in the overseas markets, but tomorrow morning will tell us, finally, whether WhirlyBen and his Mad Hatter Tea Party crowd at The Fed are throwing the dollar overboard.  If they don't pull the dollar back up, then pull out the party hats, because it is time to play musical chair.  That's just like musical chairs, except only one person gets to safety when the music stops.

In reality, the damage already is done.  The world watched the dollar breach 78 and then sit there over the weekend.  Now they know it is possible. 

All those foreign holders of massive dollar stashes have got to be eyeballing each other, wondering when the first will make a mad dash for the exit and try to sell his dollars before they become totally worthless.  That, alone, now ensures the dollar's demise.

How is the Dollar Like an Israeli Soldier?

It's just like Lebanon during Israel's most recent invasion of that hapless little country, wherein the much-vaunted IDF got its head handed back by a bunch of hole-popping Arabs firing anti-tank RPGs.  When the smoke cleared and the Israelis went yelping home, tails between their legs, all the Arabs throughout the Middle East looked at each other and said, "Sumbitch!  Who'd a thunk it?"  Actually, it sounded more like a lunch order from Ahab's All-Night Falafel stand, but you can translate from the Idahun, can't you?

Israel is in much greater danger since its Lebanese escapade than ever before.  And deservedly so, I say.  Well, so is the dollar, now that it has been allowed to see the underside of 78 and been left swimming in uncharted waters.

What I mean is, abandoning all historical support levels indicates that hyperinflation now is the adopted policy of the United States of Zion.  Oh ... that was that movie, wasn't it? The Matrix or The Diary of Annie Strangelove or something or other.  You know - hyperinflation, as in you say, "dollar" and I laugh.  Hyperinflation, with kids dead of hunger, your sister hooking for cigarettes and families living under overpasses.  Mass disease.  World War.  Police State. 

So, what's new?, you might ask.  You have no idea ... really.  None, whatsoever.  This is going to become truly ugly, folks.  And it is why I harp on things financial.  Just another way of telling where we are in the program.

Better you should ask what that whistling sound might be.  Hint:  it's just like the sound of air slipping ever faster past your ears.  Such as  when you hang your head out the car window with your dog ... or as you plummet into the yawning abyss below.

Ok.  That was the good news.  That didn't sound so bad, did it?  The dollar is down by half in 20 years, but things could be worse, you say?  Half.  That's why your wife has to work while your mother didn'tHalf.  As in half a loaf.  Literally.

Now for the Bad News

Now for the bad news.  All the currencies used in the US Dollar Index are inflating, meaning becoming ever more worthless.  In other words, on our plunge into the abyss, we simply are falling a little faster than the Japanese and the Brits and the Europeans.

Then how do we tell how we are doing?  That's where so-called real money comes in and why the bankers have been so eager to disconnect it from their increasingly-worthless paper money in their attempt to convince you that it is just a relic. 

That's the ultimate definition of fiat currency, you know:  it is worth its intrinsic value.  In Zimbabwe today, the currency actually is a much cheaper alternative to toilet paper, believe it or not.  What's a US dollar worth?  What's a hundred-dollar bill worth?  Yep.  And, yes, that is exactly where the dollar is headed, folks. 

What's real money?  Gold and silver, but especially gold.  Here's a chart of "CPI-adjusted" gold.  The problem is, the government lies about everything now and says that CPI (Consumer Price Inflation) is just 2% or so.  In fact, it is close to 15% and has been for a while.

 

An honest chart of gold would look more like the silver chart, below.  Problem is, the silver chart also is "CPI-adjusted," which tells you just how cheap silver really is today (cheaper than it ever has been, save only a couple of years ago, when it jumped from 6 to 14 in a few days).

 

Before things get worse, they will get much worse, rest assured.  And you will be able to tell just how bad by the prices of gold and silver.  The central bankers are on the verge of losing control of the price of real money.  The first paper gold seller to default will topple the entire house of cards.  That is why I issued the call to exit all ETFs recently.  Who will it be?  Why do you suppose they are so adamant about bailing out their buddies in the big banks?

Real Money

The US Dollar Index shows us just a part of the problem - the part that is getting bad faster than the economies of the other countries that make up the Index.  But, truth be told, things are going bad over there just as fast (faster in Britain, some might say).  We are all going to Hell in a handbasket, as they say.  Who happens to get there first is about as relevant as who is in the front row of a crashing jetliner.

Problem is, we will be in the middle or aftermath of WWIII by then.

When the prices of real money, gold and silver, take off like skyrockets, then you will know that they have lost control of them and only then will we learn just what a dollar is worth.  This business of gold and silver doubling in price over the last couple of years was peanuts, compared to what is coming.  Me?  I'm using dollars to stock up on toilet paper, meanwhile, because that is a choice I simply do not want to have to make.

New America.  An idea whose time has come.

My name is Edgar J. Steele.  Thanks for listening.  Please visit my web site, www.ConspiracyPenPal.com, for other messages just like this one.

-ed

Copyright 2007, Edgar J. Steele

Forward as you wish.  Permission is granted to circulate both the written and audio version of this Nickel Rant among private individuals and groups, post on all Internet sites and publish in full in all not-for-profit publications.   The audio version of this Nickel Rant may also be freely used in its entirety by for-profit broadcasting entities, but is not to be included in any recorded format which then is sold to others.  The audio version may be rebroadcast, either live or archived on the Internet, either copied or linked directly to my web site, profit and nonprofit alike, so long as it is used in its entirety.  In fact, I encourage any and all radio hosts to use it freely.  Contact author for all other rights, which are reserved.

 

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