We’ve long assumed that a collapsing dollar would take the global economy with it, but perhaps we were being too pessimistic?  After all, the Dollar Index has fallen by 36 percent since 2002, but life goes on.  Moreover, when the greenback slipped to historical new lows on Friday, hardly anyone seems to have noticed.  Or rather, if they did notice, it was deemed reason to celebrate. The Dow Industrials shot up 135 points as stocks rose across-the-board -- especially precious metal shares, which may finally be starting to reflect fears that there is nothing to prevent the dollar from slipping still lower. Perhaps much lower.  Those same fears evidently are running high at the NYMEX, where crude oil quotes have been ratcheting closer to the $100 mark each time the dollar stumbles.

And where does the White House stand?  In an interview last week, veep Cheney hinted that the government would take a hands-off attitude toward the US currency. "We do believe in a strong dollar,” he said, “but we think that the key is that it be allowed to adjust based on market forces out there, and that's exactly what's happening." To speak of the dollar’s wholesale collapse as an “adjustment” is like saying that the fiery collapse of the Trade Towers was an adjustment to airborne traffic. Not only has the Dollar Index slipped to historical lows in recent days, it has entered an airless void on the charts (see above) without so much as a token word of support from anyone high up in the U.S. Government.

‘He Who Panics First’

Incidentally, it was none other than Larry Kudlow who conducted the interview with Cheney. We have always portrayed Kudlow as a guy who would say absolutely anything to get his face in front of a TV camera. We don’t have the text of the interview, but we would be shocked if the dollar’s slide into oblivion received much more attention than the quote excerpted above.

Some years ago, when bullion turned feisty after dipping briefly below $300, Kudlow suggested in a Wall Street Journal op-ed piece that gold would find “equilibrium” at around (if memory serves) $330 an ounce. Any higher would mean that U.S. monetary policy was too loose, explained Kudlow, and any lower would indicate that money was too tight. Now, with bullion quotes about to blast through $800, we would surmise that the pathologically bullish Kudlow, and just about everyone else with a listing in Who’s Who in Economics, have simply “adjusted” to that likelihood. Gold bugs have adjusted too, in their anxious but canny way, and are poised to reap a huge windfall. As that timeless trader’s adage reminds us, “He who panics first, wins.”

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SEMINAR SOLD OUT,  BUT…

Seats for the November 3-4 seminar online are sold out, but if you are interested in attending the class at a later date, click here and I’ll let you know when the next session is scheduled, probably in December or January.  If you would prefer to attend an on-site class, possible venues in 2008 include Vancouver, Boca Raton and San Francisco.  Please let me know if you’d be likely to come to the seminar if it were held in one of those cities