Reprint of Tedbits: Understanding US$ Strength

Quote of the Day: “The ultimate result of shielding men from the effects of folly is to fill the world with fools”
-- Herbert Spencer, English philosopher (1820-1903) Thanks Bill King, of the King Report, for this quote.

Meanwhile, the US Federal Reserve, as holder of the world’s RESERVE currency, is now becoming the lender of last resort and creating UNLIMITED dollar swaps to prop up the dollar requirements of the world’s economies. Why must these swaps be made? It’s because borrowers around the world borrow in Dollars creating a synthetic short position in the dollar. In order to pay off their borrowing they must convert their domestic money into dollars to pay off their obligations. When the Dollar rises against their domestic scripts it is basically creating new obligations that are piling up, this is going on around the globe as the dollar rockets higher in a short covering bonfire.

It is one of the biggest reasons the Dollar is rising and will continue to do so as trillions of Dollar-denominated loans must roll over or be paid off in the next twelve months. But it does not change the fact that when they PRINT the money and send it to the other central banks that the printing occurs out of THIN air, as does the printing of the money by the Bank of England, European central bank or whoever the currency swap was conducted with: Australia, Korea, Singapore, Switzerland, etc.

The Federal reserves BALANCE sheet has now MUSHROOMED by over 120% in the last six weeks from under $1 trillion to over $2.2 trillion now. They REFUSE to report the nature of those assets, as to do so would probably reveal they are holding a good amount of WORTHLESS collateral and have exchanged them for the perceived quality of US Treasury Bills; leaving the taxpayer with the junk and the bill. Can you say FLEECED?