Why does the dollar continue to strengthen, has it really recovered?

Why is it so hard to find somebody who understands the reason for the strengthening Dollar. I will explain my understanding of the dollar's recent improvements and it will take the future to support my analysis, as well as the reader's belief, in my understanding of the points I am about to make.

Reserve Currency Status origins.
First and most importantly, it must be understood that the dollar is the Reserve Currency of the world. Yes, there is a basket of currencies, or SDR, they have more to do with pegging currencies today and are used by the IMF and others as part of the system of world trade -and are not used directly for payments, as, is the dollar. This dollar status has existed following the Bretton Wood Conference of 1944. As the majority of gold in the world was held by the US, followed by France, due to the international payments made by states to the US during WW1 and leading up the Second World War. America found itself with an opportunity to put itself forward, as the world reserve currency, as well as establishing itself as the newly formed world banker, with the addition of the IMF and World Bank. All of these new roles including the Food and Agriculture Organization (FAO) and the Nations Relief and Rehabilitation Administration (UNRRA) came from the Bretton Wood Conference.

This has given the US a unique opportunity above all States in the world. America is able to export its Fiat Currency and monetize (or print) its dollar with impunity to some degree. For as long as it continues to be the Reserve Currency. When central bank's monetize their currencies and are limited to that nation state's borders, this QE activity results in inflation, in most cases.

The background on inflation, QE style.
Now, lets look at how this helps the US at this time, more than any period of the past. When Quantitative Easing takes place with a State's Central Bank(S) (with the exception of the US), printing new Fiat Currency, as a rule, produce results that are very predictable in its effect on the economy. The group who first receive the new fiat currency or QE, feel 'all' of the benefits, because, it has not reached the pockets of the people or purchasers. By that I mean 'below,' the Central Bank(s), Government and Finance as well as Merchant Traders of the system -and specifically in that order. Once the newly available money is borrowed into existence, this money begins to circulate and compete for the existing commodities, goods and services, which begin to drive up the costs due to competition for the limited or existing resources. Where the full damage is felt, is, in the costs of goods and services to the ordinary person, who see the costs of their goods and services rise, due to competition, the additional Fiat Currency which now circulates, dilutes and increasing the costs of those goods and services.

War as an option.
The additional mechanism or option, which must also be mentioned is War. War has historically been very productive for the State and Private Finance, for economic reasons. Firstly, you can print with impunity again. Why? Because armament spending does not reach the streets, comparatively to peace times, during the war effort, due to the concentration of heavy manufacturing, away from consumer manufacturing. People are also more likely to be asked to support the war effort by reserving their expenditure and putting their savings into State Bonds to help the effort. At the end of the War, the potential inflation can be taken off the streets before it circulates -usually, by taxation and social service cuts, (or public spending). This allows the fiscal resources to accumulate, which can be destroyed or taken out of the economy before their effects are felt. The wealthier business owners are very happy to join the State during such times, as it enriches them, during the state contract procurement opportunities that are on offer.

Summary of the above.
With this backdrop, we can now look at how the US is benefiting at the present time. Because of the dollar reserve status, the QE policy of the US can leave its country's boarders avoiding the monetizing effects, as the QE circumvents the lower levels of the internal economy and goes abroad. The US or IMF are securitizing the bailout funding and the new US monetizing policy, can only be describe as the production of monopoly money, as it goes abroad, outside the internal economy and into the international economies of the EU, et al. Why? Because it is used to purchase foreign goods and services (or assets). The IMF are in the process of buying foreign assets with these new loans offered to distressed EU states, with debtor obligation and interest costs attached. Not to mention their sovereignty, which now comes under US controls. All paid for with newly printed Dollars and Bonds, which are sterilized in the process. The IMF/World Bank's debtors, are the real potential economic recovery machine for the US economy. There are very few reasons why the US could not continue to print any amount of fiat currency, without immediate danger to itself, as the US has cleverly expanded its internal monetary system to a world US dollar system.

Potential Danger 1.
The danger, as I see it, comes from a very small number of sources, of which I will now list. The EU monetary system could compete for the Reserve Currency status or be chosen by a group of nations, who no longer trust or are unhappy with America's position and economic condition. This makes the EU's present crisis, the first and main reason for the US dollar strengthening. As long as this EU crisis diverts attention from the US -and the European wealth holders worry, money will run to the only option open between the Reserve Currency options of the US dollar or Euro. Also, I believe they are aware of this point and are choosing to support the dollar as the preferred resting place. This will be more to do with the possibility, that, the EU monetary system is now being judged as a terminal case, to the real wealth holders in the European Monetary System.

Potential Danger 2.
Next, there are countries who are developing alternatives to the dollar system. Iran have been taking steps to develop an International Exchange alternative system to compete with many of the US and UK exchange services for the trade oil exchange markets. It should be remembered what happened to SH for selling oil in Euros back in the late 80's and early 90's.

Potential Danger 3.
Finally, there is a concerted effort on the part of a number of Eastern Block States to look for an alternative mechanism for international or global payment system as well as strengthening member relationships. These organizations were originally open to Anglo-American membership but were looked at as de jure by the western powers they are now de facto and the offer of membership no longer exists.

Summary
Looking back over the above objects and trying to give a view of which of these outcomes may be on the horizon, unfortunately, my understanding of the overall macro political environment sees the second danger having the most likely outcome. If the global powers can not make use of the EU crisis to improve their position and the issues move back to the parities listed in the statement. I see a real possibility of the expansion of offensive foreign policies expanding in the Middle East. This global crisis has not -and will not, go away. Why, because the systems have not changed in their intentions or direction, it has simply moved the next stage of the game.

I little bit of reality, from the late great George Carlin in 2005, a truly missed individual. George died on the 22nd June 2008. His warnings in the show are HERE AND NOW!

Where is the Systemic Crisis now in 2010-11, are we on the way out?

In response to the heading, it depends upon how you interpret the phrase "on the way out". Let's look at the facts. Deflation has taken hold of the world's GWP to the tune of -12% in 2009-10. The US is in a deflationary spiral. Whilst the UK is showing some inflationary conditions, and is throwing sugar coated sovereign debt at the diabetic Deflationary Monster. Where do I see the outcome? Where it has been since 2008, knowing the situation of the financial system of the Central Banking Cartels. The system is bankrupt. The global financial system of capital is completely fraudulent. This is not a politically extremist statement this is an informed objective summary of the state of global finance.

Players in the Crisis.
I see the attempts by Governments and Central Banks who are trying to retake control of the failed financial system of capital, which has developed into a struggle to control and regain control and power. The Systemic controllers and currency value manipulators (Central Banking Cartels and International merchant Banks, Forex and Stock Market players et.al and Industrial Cartels) and the State system, which unlike the bracketed group have civil society to answer too in addition to those groups. The reality is, they (governments) are armatures (prefects' with a badge), part timers, in the art of government and finance. They have no control over their real masters who control the flow of money, and sit in Foundations around the world, philosophising on public policy, the state and money; old money only infer to such subjects.

Quantitative Easing Crisis Response.
So what does the future hold for the West? The Central Banking System and BIS, is doing what they were created to do, to inflate the Fiat Currencies of the world. Even if the Global GWP grows over the next year or two (from its present decline), it will be the result of the East not the West. I see more real deflation (even if Governments become the national employer). Sovereign Debt will continue to rise at an unprecedented rate over the coming years. BIS's national Central Banks with their Quantitative Easing programme have become the Caboose and the coal mine for the economic engine. Whilst this action has helped the Banksters and their minions, it will only rob the average man, woman and child of their comfort -and their futures. I said back in 2008 that, "the inflation of the 1970s will look quite tame" and it will! The interest rate issue will also need to be added to this pot, once cheap money and the BIS stop buying Bonds/Securities and look for private market buyers through improved incentives and their guarantees must be assured. The present Bond Market is already showing explosive fuses and from every marketable type of Bond that is T-Bills and Bonds.

Interest Rates.
By the BIS inflating currencies as is their primary role in life, as previously stated. Their logic is as follows. Monetary Inflation takes place annually in good times, but, whilst the system is debt ridden, QE is the natural mechanism of the central bank, allowing the debt to become both cheaper and payable. The objective is, as the servicing of debt becomes overwhelming to the groups (Banks, Commercial and public as well as private borrowers), by a QE policy you reduce the debt to the Banks and the commercial, public or government groups, with new money. This in tern reduces the value of products and services so increasing the cost to the public. Ironically, the people in turn are expected to produce the market's insulin with their transacting, which will become scarce under such deflationary conditions. Also, reducing their risk of defaulting on their recorded debt with banks et.al. With low interest rates for the banks and high interests for the public, comparatively, lenders gain some control of the system of debt default and can adjust their pressure on the risks.

Deflation and summary.
The double hammer on the cards and unaccounted for by the BIS's system of money control and inflationary policy is the [deflationary hammer]. If the system continues to see deflation and particularly if government interference can not halt the continuing deflation of real GDP, and monetary inflation continues, then, the system has a real risk of collapsing.

What is quite obvious when you consider the facts. How can you have a reduction in production -and labour value, whilst still servicing your debts at a time of inflation? This can only have one outcome under such circumstances DEFAULT. But, when that combination of excessive sovereign debt, debt ridden finance system, systemic market fraud and public debt. And yes there is more. Deflationary market economy, with an economic depression and quantitative easing programme, buying state debt and devaluing the products and services and producing inflation when real incomes are going down. Do I need to say more? Can you see these elements in our western liberal societies. Can you see the markets going back to pre 2007 excesses? I see a real possibility of 20-25% deflation in the West, in real terms on previous output, when you recall production during the credit and debt accumulation period, when both were in vogue.

The East has all the cheap labour and internal markets among themselves. The UK and US and Europe in general, though not so for Europe's Germany, will continue to have balance of trade issues, due to their poorly competitive export products, untrusted and out of vogue, at the table of exports. Equally bad too, after seeing the corruption in the West's finance system the East have no reason to trust the finance services coming to them from the West, where some have already flown off to new markets. Those fresh Eastern markets will be where the West's new Head Offices reside in the future, adding to the Hedge Fund Manager and Bankers already there. In addition to well educated and locally speaking cheap general labour, who are on tap. The developing and new Cartels will be centring themselves in the East in the future, on a flight from the West. It's worth taking a look at my 2008 posts and look for the options and choices to be made.