Why The Dollar Rally Has Started Again
In order to find the truth we must go to the place where no financial journalist will go, namely statistics over central bank behavior hidden in the release over the Fed balance sheet (this release BTW contained a lot of other extraordinary numbers which I will return to later today or tomorrow). After having slowed their purchases (something which correlated with the interruption in the dollar rally) foreign central banks suddenly bought an unprecedented $44 billion of Treasury and Agency bonds in a week. And that is a lot. That's roughly equivalent to 3 times the trade deficit and would if sustained for a year mean $2.3 trillion in purchases. So what we have here is a very dubious (to say the least) racket where the U.S. government is borrowing huge sums from central bank to prop up failed U.S. financial institutions.
Of course, the "mainstream" financial media won't reveal that to you. Which is why you are lucky to be reading this blog.