Monday, May 31, 2010

US Dollar Collapse: Canadian Currency Appreciates as GDP Rises Most in a Decade TNR.v, CZX.v,, ASM.v,, CGS.v, CGP.v, MGN, GDX, SLV, F

For all those looking for Inflation signs we will advise to cross the boarder to the North of Green Buck Fantasy Land. China is tightening monetary policy with Brazil, Norway, Australia and now Canada will follow. Notice the similarity: they are all connected to the places where the Growth is and Commodities are coming from. Real decoupling is well under way and all recent bail out will end in Inflation.

"We will leave the situation on how technically stock like P&G could drop 50% in fifteen minutes to be investigated by the mass media, but will confirm here one more time: it was second Deflationary Test with sudden drop in liquidity this time driven by sovereign debt crisis. Call it Run On The Bank among Big Guys. Fifteen minutes made no mistake about the state of the market and economy in deflationary environment - we have seen the future and it is ugly. Deflation spiral means death of financial market by thousand cuts - financial system is insolvent and the only way to run it is to keep liquidity high enough that nobody is testing it to deliver. QE will provide flood of money, debt will be rolled over and by destroying the value of FIAT currencies Debt will be Inflated out in the end. This time it is different - it is not only our theory, but confirmed market action. This time the most important here is that Gold was at almost all time high at the moment of test, Gold was moving up against all currencies and this time in a sharp contrast to the events of 2008 it was sharply up and over 1200 on the day of Market Crash. This new round of QE (when Europe has not even started!) will be going already from this very high base in Gold value and rising Inflation in Commodity and Growth driven economies. We will not go into the debt issue today in details and will only point out that it is a notch under 13 Trillion and in dangerously close proximity to 100% of GDP of U.S.
After pictures from Greece we do not think that anybody will go there in U.S. Corp. Deflation will be prevented by any means, it is easy and price to pay is not so obvious. Newly printed US Dollars are "free", but price to drop them is not: you need Oil to keep you helicopters flying and here will be our first conundrum: At what point price of Oil becomes prohibitive to use Helicopters by Ben Bernanke in his open market operations?"

Canadian Currency Appreciates as GDP Rises Most in a DecadeMay 31, 2010, 11:18 AM EDT

By Chris Fournier
May 31 (Bloomberg) -- Canada’s dollar rose after a report showed the economy expanded at the fastest pace in a decade in the first quarter, increasing pressure on the country’s central bank to raise interest rates tomorrow.
“Very good GDP, strong numbers,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer. “It certainly looks by all calculations like the bank should be raising rates tomorrow. Dealer sentiment has swung strongly in favor of a rate hike.”
The Canadian currency advanced as much as 1.3 percent to C$1.0414 per U.S. dollar, the strongest level since May 20, before trading at C$1.0478 at 11:07 a.m. in Toronto, compared with C$1.0546 on May 28. One Canadian dollar buys 95.45 U.S. cents.
Twenty-five of 27 economists in a Bloomberg survey say Carney will tomorrow increase the record low target lending rate by a quarter-percentage point to 0.5 percent, the first Group of Seven central banker to do so since last year’s global recession.
Crude for July delivery gained as much as 71 cents, or 1 percent, to $74.68 a barrel in electronic trading on the New York Mercantile Exchange. Crude is Canada’s largest export. The loonie tends to follow movements in crude oil and stocks.
Canada’s dollar has depreciated 2.1 percent this month versus the greenback along with other higher-yielding currencies and the euro amid concern the sovereign-debt crisis in Europe may hamper the global economic recovery.
The yield on Canada’s 10-year bond dropped as much as 40 basis points last month, from 3.65 percent on April 30 to 3.25 percent on May 25. It traded today at 3.32 percent.
--With assistance from Greg Quinn in Ottawa. Editors: James Holloway
To contact the reporter on this story: Chris Fournier in Montreal at
To contact the editor responsible for this story: Dave Liedtka at"
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