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The Coming Currency Crisis


Can the US dollar dominate any currency arrangement today?

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a FREE 2-week trial, click here.

And then the man he steps right up to the microphone
And says at last just as the time bell rings
Goodnight, now it's time to go home
And he makes it fast with one more thing.

Sultans Of Swing (Dire Straits)

Over the last month, I've shown what may turn out to be a pivotal period for the Federal Reserve -- and therefore for the US as a whole.

95 years from December 24, 2008 is 1913, when the Federal Reserve Act was signed (when much of Congress was on vacation), and the Fed was born. 76 years from 2008 was 1932 and the heart of the Great Depression. It took less than 20 years for the mother of all panics to play out into the economic death spiral of depression. On the Wheel of Time & Price, 95 and 76 are on the same vector -- they vibrate off each other. Moreover, remarkably they align and resonate with the date of July 4, the US's birthday.

Click to enlarge

Something important happened in the stock market in July 2008. The S&P broke below the level of the leg down from the high at the 1250-ish level and began a new death spiral. Did the convergence of July 2008 and the DNA of the numbers 95 and 76 signify the beginning of the end or the end of the beginning of the crisis?

Given that the Fed was born on the cusp of 1913-1914, does that mean that this July will choreograph momentous change as well? Will the red shoots from the second half of 2008 sprout Venus Fly Traps for the bulls in July 2008? Will the steroids of stimulus strike out and the sultans of swing sell out into quarter end? Will the seeds of chaos for the dollar sown in 2008 take root a year later this July?

The International Monetary Fund said it's possible to take the revolutionary step of creating a new global reserve currency to replace the dollar over time. As much as 70% of the world's currency reserves are held in dollars. According to the IMF, leading nations call to diversify their hoards of dollars to avoid excess exposure to the US economy. The fear is stimulated by the quadrupling of the US budget.

Of course, things are different now than they were in the Great Depression. That could never happen again. Then, the US was a creditor nation. Now it's the largest debtor on the face of the earth. Can the largest debtor dominate any currency arrangement today?
No positions in stocks mentioned.

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