DXY – NYBOT Dollar Index (Last:101.95)

With the scent of disaster hanging over the world’s markets this morning, the dollar is down. But not by much, and I doubt it will stay down for long. Following is my post in the trading room, a response to a note from ‘Marko’ that Franco-Nevada founder Pierre Lassonde is bearish on the dollar. I am not — and haven’t been for 40 years. Here’s why:

“What reason did Lassonde give for this? I ask because I doubt that he could provide a satisfactory one. The dollar is down somewhat at the moment — against exactly what I cannot figure out — but this is probably because the world hears Trump and the Fed promising to supply more or less infinite dollars to “shore up The System.” Can they do this? I have argued for more than three decades that they could not, but I guess we will just have to wait and see.

Banks Hold Little Cash

Neither Lassonde nor any other bankster I am aware of seems to have thought this through. I have, though, having noticed how difficult it was to withdraw just $25,000 in cash money from a Wells Fargo branch when all hell was NOT breaking loose.  I have also asserted — dozens of times — that a severe shock to the financial system could unravel the clearing network that allows credit cards and ATMs to work. Did Lassonde mentions this little, ahem, problem? Has he or any of his colleagues ever even thought about it? Of course not. Is it nonetheless possible? Yes, inarguably.

And is it possible to keep the global financial system, most particularly the intricate gearwork of the vast repo market, liquid when it is imploding? I seriously doubt it, but I am willing to suspend disbelief for the moment. But it is another thing to keep solvent the Illinois pension system, Medicare and nearly every other Ponzi scheme that depends on checks being sent out regularly. The financial system is not THE system. That is where the inflationists — Lassonde evidently among them — have always gotten it wrong. _______ UPDATE (Mar 21, 2:18 p.m.): The dollar’s explosive rally last week was the one of the most talked-about and consequential stories besides the pandemic. Here’s an essay that I already linked elsewhere from Raoul Pal, who ‘gets it’ with respect to the danger the dollar’s strength poses for a world mired in debt. And here’s my own essay on the subject.