HAVE YOU WATCHED THE DOLLAR SINK?

China’s Plan for the Dollar
And How Authorities Are Quietly Warning You…
Also In Today’s Letter…

* Euro & 1,000 Gold Gang Up on the Buck
* “Don’t Blame Us: We Warned You!”
* How to Protect Every Trade You Place From Now On…

Good day... And a Terrific Tuesday to you!

A long holiday weekend, that was quite good for yours truly! A great tailgate, a great Missouri Tigers victory, 3 of 4 for the Cardinals, and a great end of summer barbeque at the Butler House. Not to mention, I enjoyed the day to recharge my batteries.

Really couldn't ask for much more...

Last night I was checking the markets to see what was happening as I was out tailgating. Much to my surprise, most foreign currencies seemed to be breaking out of their recent trading ranges. As usual, the euro was leading the charge…
Euro & Gold Gang Up on the Buck

The euro was trading 1.4335 when I checked last night. When I turned on the currency screens this morning, the euro has stretched that move to the 1.4480 level! Wow! Looks like investors are really starting to trash the dollar. Perhaps traders are finally starting to notice all the dollar’s debt.

Meanwhile, Chinese stocks were up 2% overnight. That has led to even more risk taking this morning in Europe. It also means traders are more willing to dive into foreign currencies. Wait till the "Big Boys" get back from the Hamptons today and see what's happened since they left for their three-day holiday weekend!

You know when the dollar is not faring well, the usual suspects are generally rising. That includes the euro, Aussie, kiwi, loonie, and Swiss francs. Today is no exception. All the usual suspects are taking liberties with the dollar, but they’re not the only ones…The Japanese yen is also taking off.

And THAT folks is indication to me that maybe, just maybe, fundamentals could be coming back to the head of the class.

Oh! And one other thing is putting a nail in the dollar’s coffin this morning. Last night I checked the price of gold. It was $999 last night. This morning... It's $1,005!

So we've got euros kicking tail and taking names, and gold kicking the dollar when it's down. We've seen this type of dollar decline before. Dollar declines like this used to happen at least once a week before Lehman Brothers collapsed. That's when the markets, traders, and investors, all had their eye on the dollar’s underlying fundamentals. They were knocking the dollar out of the park whenever another piece of bad data came the dollar's way.

If this is the beginning of another period like we saw pre-August 2008, then strap yourself in, and make certain to keep your arms and legs inside at all times during the ride! If it's a false dawn, it sure is a strong false dawn!
China Is NOT Happy with the Fed’s Policy

One of my favorite journalists is Ambrose Evans-Pritchard. I came across an article he did this weekend... This news could also be one of the reasons the dollar is getting sold across the board this morning. Here's a snippet of the story...

"Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing."

The Economist

He went on to say, "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies."

So according to a top member of the Communist hierarchy, the U.S. Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious dollar decline. Also, it could compel China to redesign its foreign reserve policy.

Shouldn't that be enough to compel dollar holders to do the same? I would certainly think so, folks!
“Don’t Blame Us, We Warned You This Was Coming” – U.N.

Also, the United Nations (UN) is talking about creating a new global reserve bank to issue a new currency to protect emerging markets from the "confidence game of financial speculation.”

The UN said it – not me! I don’t know about you, but I have conspiracy chills running down my back.

Isn't this the second time this year that we've heard about a "global reserve bank?" The first time we heard about it, the IMF was to assume that role and issue special drawing rights (SDR's) as a global currency.

Now, we hear something a bit different, but it's really the same idea folks. I'll tell you right now what they are doing. The "powers to be" are releasing small stories like this here and there to make sure we get used to the idea.

That way, when the time comes for them to unveil their plan to have a global currency, they'll be able to say, "We've been talking about this for a long time, and no on had a problem with it then!"
The Yuan Gets a Facelift

And in yet another step toward gaining a wider acceptance for their currency... The Chinese announced they will issue renminbi-denominated bonds in Hong Kong. This would be the first renminbi denominated bonds to trade in the Capital Markets. It’s also a huge step for the Chinese and their currency.

Speaking of the renminbi... The Chinese allowed the currency to gain vs. the dollar by a wide margin overnight. This is the first significant move vs. the dollar in some time.

And with all these strong currency moves... The dollar index has dropped to its lowest level this year at 77.24. This is a significant move folks. In the first quarter, the dollar index fell to 77.40. Analysts thought that 77.40 level would prove to be the resistance level for the year.

But here we are again…and we’ve already past that level. I would think that having the index remain below 77.40 for the day and overnight would be HUGE!

So let's recap... The dollar has fallen big overnight. The Chinese are not happy with the Fed printing dollars. The UN is talking about replacing the dollar with a global currency that is issued by a "new global reserve bank." All foreign currencies and precious metals are rallying on this news.

All in all, it’s a good day to be a currency investor.

That’s it for today! I hope your Tuesday is as Terrific as it can be!
Chuck Butler

EDITOR’S NOTE: This is the reality: the dollar is sinking. Right now, there are hundreds of trades you can place to hedge your dollar exposure. In fact, you can buy foreign currencies right through your regular stock brokerage account – and earn a possible 200% for your trouble. Click here to find out how.