American dollarGartman was on BNN the other day and said that Gold needs a good spanking to clear out the Johnny come lately types . I suspect that Gartman needs a good spanking and hes probably getting it . Still I don't doubt gold could lose a 100 in a few days before resuming its climb .
Clearly the US is OK with the drop of the dollar as eventually it will solve the trade deficit , and monetize ( read $crew the holders of most of the trillions of debt out there ) debt . But how low can it go ? In the eighties the Mulroney government tried to support the Canadian dollar by keeping interest rates app 2 % above US rates . In 1992 the Chretien government lowered the interest rates and allowed the Canadian dollar to drop from app 0.85 to 0.60 .
This reduced unemployment and got Canadian industry going again . The point I'm making is that Canada had to drop the dollar by about 35 % to make Canadian industry competitive with US industry . How low will the dollar have to go to make US industry competitive with China , Korea and India . I'm betting its lots lower than it is now .
I'm also betting in 5 years the US will not be able to afford to import energy and we'll have to make do with what is produced in N. America . The US imports about 10 million barrels per day . With the way that Asian consumption is increasing and export capacity is dropping oil is going to get squeezed bigtime . China is using its trillions of US dollars to buy resources while they're still worth something for good reason . And you can bet that once the oil starts flowing to China it won't stop .
Its hard to conceive America restoring its power and prestige in the world with its debt and social problems . Especially with an incompetent in the wheelhouse .