Sunday, March 22, 2009

US Dollar collapse: Inflation watch, Budget Deficit. DXY, HUI, XAU, TNR.v, RMK.v, SBB.v, OK.v, MGN, GBN.v,, BTT.v, ASM.v,

This is US Dollar Long Term Monthly chart. In the big picture scale this levitation Rally and Flight to "Safety" of US Treasuries is a Bear market sharp reaction rally. We have shown before that US Dollar now in a Double Top reversal weekly, Recent High is a Lower high, we will slide from here to retest 72 level. Fundamentals are stunning to say at least with trillions of debt, budget deficit and other obligations, lets examine the current situation with Budget Deficit, Debt and Currency.
Budget deficit, Debt and Currency value explained in English.

US Corp has became the largest unregulated Hedge Fund with Ponzy Scheme of Social Security services. The chart above indicates that World and Investors of US Corp are paying attention: cost of Long Term Debt - 30 year Yield is Rising.

The U.S. could be in the hole $2.3 trillion more than expected--and that's if the economy performs well.

"WASHINGTON, D.C.--As President Obama prepares to send his budget to Congress next week, he's run into a bit of a stumbling block. The Congressional Budget Office said Friday that the national debt under the president's budget will be $2.3 trillion deeper than the White House estimates.
Now for the real bad news: Both estimates are optimistic. If the economy continues to deteriorate faster than economists project, those numbers will balloon further.
Over the next decade, the CBO projects that the White House budget will run $9.3 trillion in deficits. The White House projection had been $7 trillion. The problem for Obama, as his budget moves to Congress: Lawmakers tend to trust CBO figures over all others. "CBO's word is the gospel," Sen. Chuck Grassley, R-Iowa, the ranking member of the Senate Budget Committee, said in a statement."

Currency is a common stock of US Corp. - its strength based on strong fiscal discipline (profit), Tax revenues (Sales) and perceived market value. In order to finance Budget deficit US Corp is issuing new Debt, aside from main business (serve and protect its citizens for their tax payments) it is running a hedge Fund by buying Assets nobody wants otherwise and now it is printing new shares and calling it Quantitative Easing, will you buy the stock of this Company? Today we would like to explore one more time the Debt side of things:

Lets check Budget Deficit, Debt and Social services Financing - How much will it cost to service all that debt?

"In Fiscal Year 2008, the U. S. Government spent $412 Billion of your money on interest payments* to the holders of the National Debt. Compare that to NASA at $15 Billion, Education at $61 Billion, and Department of Transportation at $56 Billion. -- As of 28 February 2009, the total interest spent so far this fiscal year is $148 Billion."

Do not count on Quantitative Easing to bring rates down and keep it there, Long Term TYX yield is rising already, who in their mind will buy 30 year IOU when the Issuer is declaring we will put more of this staff on the market and debase - dilute the stock - currency? US Corp will be caught between scissors of diminishing revenues due to recession and rising outflows to service its Debt with rising real rates.

Gold, Silver, Grains and Oil have pronounced Inflation last week after FED action and move to QE. We are stunned with Budget Deficit this year at 2 Trillion (now official figure is 1.85 Trillion), but wait until rates will double due to Inflation and Only Debt Service payments could reach 1 Trillion dollars before any "Operational Cash flow Budget Deficit".

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