Where’s Help When The Fed Needs It? The US Dollar Is In Danger Of Being Destroyed By Wall Street

When the credit market collapse a year ago took down Lehman Bros and threatened its three competitors Morgan Stanley (MS), Goldman Sachs (GS) and Merrill Lynch, the major broker-dealers pleaded with the Fed and Treasury to intervene. As we know today, none of the key decision-makers slept for a week or more during this crisis until the intervention they required to be saved was a fait accompli. Today, the US Dollar is in danger of being destroyed by the same short-selling speculators and the Fed and Treasury are in need of reciprocal help. But where are the key industry players? Conspicuous by their absence.

If the implications are that the Fed and Treasury are not asking for help to stabilize the Dollar, and that a lower Dollar is a policy decision, a momentous mistake has been made, threatening the future of the American worker and consumer, the nation’s taxpayers, and Mom & Pop on Main Street. Life as they knew it in the 1900’s will never return. It’s all downhill from here.

If the world economy grows in the next five years at say 3% and Brazil, Russia, India and China at say 7 to 10%, then the non-BRIC component of the global pie will be growing at less than 2%, which is not going to be sufficient to maintain social order. Rising interest rates, foreclosures, plant closures, higher unemployment, higher taxes, defaults on federal, state and local government debt, and contraction of the social umbrella will be lead to massive discontent.

With the free-flow of capital in the world, this problem will become a death spiral. The giant sucking sound that Ross Perot described of jobs crossing the US border into Mexico - the stupidity of selling Mexico tomatoes and buying back salsa - will now be a global phenomenon. The result will be international trade war and that will possibly lead to depression in the mature economies of the world.

We are at a point where forecasts of analysts like Nouriel Roubini, Marc Faber and David Rosenberg, all known as Dr. Doom by the way, ought to be the only ones you pay attention to. None of them have to kowtow to Humungous Bank & Broker (HB&B) or government administrations or central bankers. They are independent expert observers of the game.

Yes, it is a game. Today the vested interests that control the global financial system are telling you that Alcoa (AA) is going to lead America to economic recovery. What utter nonsense.

The last Value Line report on Alcoa, on July 17, concluded, accurately I say, “investors are advised to stay on the sidelines, at this juncture”.

http://www.valueline.com/dow30/f376.pdf

Other than the Interventionist-inspired spike in equity prices for the benefit of HB&B, and the auto industry bail-out, to give these parties more time to put their houses in order, what’s happened in the meantime?

The aluminum price has fallen in the past nine weeks from ~92 cents to ~80 cents a pound. As befitting inventory at high levels, with a poor outlook for demand, the current aluminum price is well below the average of the past 1, 5, 10 and 15 years, which is slightly above $1.00. These are facts.

http://www.infomine.com/investment/historicalcharts/showcharts.asp?c=Alu…

The only way that Alcoa today beat earnings expectations is because those expectations were easily beatable, having been set down there by HB&B analysts for the purpose of being beat. The fact is that, despite all the lay-offs, divestitures, program curtailments, and dividend cuts to conserve cash for pay-down of debt levels, and show a profit, Alcoa will lose a lot of money this year, and that has not happened for 25 years. In addition to the granddaddy of recessions, the competition from aluminum smelters in China has been devastating to the fortunes of this once great American company.

Worse, the only way Alcoa has a chance to stay afloat is for a lower $USD that would make foreign sales easier - if the Chinese decide to use their aluminum production domestically. Of course, what that means is that Detroit’s global auto manufacturing center will soon be replaced by Shanghai.

That’s the big picture. It ought to be a concern to traders, as well as US workers, taxpayers, consumers and Mom & Pop. Traders, of course, can decide to leave - it’s the Capitalist Way.

And they have been taking their capital abroad, which is another reason the US Dollar is doomed. The only hope for America at this point is for HB&B and the Interventionists to stand behind the Dollar.

As an independent trader, I am surprised the US authorities have put the nation at economic peril to this degree, but I don’t much care. The point is that as $GOLD at $1,050+/oz, which is over 3% above my upside target, I can now see the fundamental problems of America are not going to be resolved by this Administration and Congress with help from the Fed, so I will be directing most of the portfolio to BRIC-related securities, and I’ll be talking more about them in this blog.

It’s only logical that, when faced with alternatives, capital seeks out growth and stability. Therefore, after the next intermediate-term pullback, probably based on a modestly stronger $USD, I will be behind the BRIC movement. I’ll be in there strategically aligned with HB&B.

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