first majestic silver

Dollar Bills, Bulls and Deficits

April 21, 2002

The strength of the U.S. economy in recent years can be credited in large part to the tremendous strength of the U.S. Dollar index relative to other major currencies. The strong dollar has been a great boon for foreign producers exporting cheap goods to America and has been largely responsible for the robust consumer economy of recent years. The strong dollar has also acted as a bulwark to prevent a sustained gold bull market and has been useful to the financial establishment in many other ways. Lately, everyone seems to be focused on the dollar and its perceived weakness. Many analysts have openly predicted a dollar collapse to begin sometime this year. Is a complete breakdown of the dollar likely in 2002? It's possible that a breakdown could begin closer to the end of this year but dollar strength is likely to persist through the summer. However, the currency outlook will be radically altered next year by a series of unprecedented changes to the U.S. dollar and its purchasing power.

The dollar's weekly chart really tells the whole story. Going back to 1999 you can draw a rising trend line off the August-September lows of that year and project it forward through 2002. Along the way the price line touches the trend line and reverses in January 2000, January 2001, and October 2001. The dominant interim dollar cycle bottoms above this trend line (which also happens to be a magnetic equilibrium center) every time from 2000 onward. This shows that the intermediate-term trend is still up. The dollar is still strong above $116 since not only is this where trend line support is met but also parabolic bowl support. By drawing a succession of concentric curves around the tops and bottoms of the dollar price line the parabolas can be identified. Right now the underlying bowls are stronger than the domes and the most recent dome will be exhausted by early June.

The mid-point of the underlying parabolic bowl in the weekly chart was passed in January of this year. Since parabolas are equilateral in construction, the first half of this bowl took nine months to form; therefore, the bowl won't exhaust completely until early September of this year. This is also about the time when the dominant time cycles in the equities market are expected to turn down hard, so we could see a steep dollar correction in the fall of this year. But until then we expect to see continued support for the dollar. Only if the dollar declines below 115 would be forced to re-evaluate our position.

In a shocking revelation, the U.S. Treasury has announced it will soon issue a new paper currency. The Wall Street Journal of March 19 reported that the Treasury will maintain the design of the old currency but will introduce "subtle colors." This announcement coincides with the dollar near all-time record strength against a basket of other major international currencies. So what does this portend for the future of the U.S. Dollar? Devaluation! There can be no other explanation for the introduction of a colored currency, which will represent a bifurcated dollar policy of a domestic-use-only dollar for Americans and a foreign dollar overseas. The U.S. version of the currency would be valid only within U.S. borders. It also is a rather convenient way of driving out hoarded cash from among U.S. citizens who try to circumvent the banking establishment.

This is the second time the Treasury has attempted a major overhaul of the domestic dollar. The last time was in 1996 when a major redesign of the actual engraving began and was completed in 1999 featuring water marks, security threads, altered portraits, and a script of metallic ink at the bottom of one side of the bills. When run through a scanner utilized in processing checks by a bank, it reveals a hidden code number which allows cash to be traceable. Comments Lawrence Patterson of Criminal Politics magazine, "There has been more manipulation of the money than you can imagine…" The colored money is due out in 12 months or so according to the WSJ, but may be introduced sooner. Advises Patterson, "Convert cash hordes in advances or lose it!"

As one analyst notes, "A colored currency alongside of the regular green currency raises suspicion of a dual-currency system, with the colored currency utilized either internally or externally and the alternate currency limited likewise."

Another shocking revelation concerning the dollar was revealed in the March 20 edition of WSJ. In an article appearing under the headline "Citibank Wins Broader Role in Shanghai," it was learned that the citizens of Communist China have banking options now that Americans do not. Specifically, Chinese citizens can have a foreign currency bank account in the Shanghai branch of Citibank. This means that an ordinary Chinese citizen can denominate their savings at a local bank in a currency other than the local Yuan. This is tantamount to you being able to walk into your local bank and denominate your savings account, a certificate of deposit, or checking account in Pound Sterling, the Euro, or the Swiss Franc!

According to Criminal Politics, "The reason you are not allowed this option, while under Communist rule these options are granted, is because the future of the U.S. dollar is not what it seems! The dollar will be massively devalued because we are approaching unsustainable trade debts of a trillion dollars a year. That's one thousand billion dollars a year.

"The accumulated trade debts over the decades are another figure. That figure is already in the trillions of dollars and cannot be allowed to race ahead. Your standard of living will be taking a drastic decline because imported products will be costing you a lot more so that the trade debts can be reduced. This is why you cannot denominate a bank account in non-U.S. currencies."

This information should be a shock to you, and you should take heed in deploying your assets outside the U.S. dollar.

Clif Droke is the editor of the three times weekly Momentum Strategies Report newsletter, published since 1997, which covers U.S. equity markets and various stock sectors, natural resources, money supply and bank credit trends, the dollar and the U.S. economy.  The forecasts are made using a unique proprietary blend of analytical methods involving cycles, internal momentum and moving average systems, as well as investor sentiment.  He is also the author of numerous books, including “2014: America’s Date With Destiny.” You can view all of Clif's books here. For more information visit

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