Weakening Dollar, Rising Urban Unemployment

On Wednesday the Treasury’s five-year auction yield was 2.69% with 21.15% allotted at the high and bid to cover was 1.92 to 1. The average of the past ten auctions has been 2.20%. Indirect, central bank participation was 35.7% versus an average of 36.8%. Overall that was weak demand. Do not forget the Treasury has to raise $2 trillion by 9/30/09.
            The result of these mediocre to poor auctions has to be more pressure on the dollar, as budget deficits continue to widen.
            Mortgage applications fell for the first time in four weeks, driven by a drop in demand for refinancing loans. Both purchase and refi loans fell 6.3%.
            This is an early appraisal of the Chinese visit to Washington. There is no question the Chinese have the Illuminists stymied. The big question is has China demanded the rest of our high technology expertise that Bill Clinton was unable to deliver to them? Or have they pledged government properties to the Chinese?
Unadjusted yoy labor Department jobless claims are up 35%.
Commercial paper outstanding fell by $27.6 billion to $1.066 trillion outstanding from $1.093 trillion the prior week. In August it was $2.2 trillion. Asset backed CP outstanding rose $900 million to $437.8 billion, after falling $4.6 billion the prior week.
The Treasury’s borrowing need have been exploding and the auctions are getting progressively weaker. This presents a serious problem for the dollar. Once 78 on the USDX is broken the index should freefall. We expect the government will staunchly defend 78, but will lose the battle probably in October or at least by the end of the year. As a result you will see more bonds being issued in foreign currencies such as the yen, yuan and euro bonds. Wal-Mart just issued $1 billion in Samarai bonds in yen. Issuance of foreign currency denominated bonds by corporations and eventually by the US Treasury will signal that the day of the dollar as the world’s reserve currency will be coming to an end. Lenders will want to get repaid in a currency they know will have future value. This kind of issuance puts more and more pressure on the dollar. Issuance of bonds in a foreign currency will be a clarion call that dollar hegemony is ending. The result will be other currencies will gain in strength versus the dollar, but the flip side is that they are all fiat currencies and all will fall versus gold.
As we view the sham hearings of the CFTC and position limits on oil in particular, we are reminded that the hearings are a political cover for higher prices. Constituents are complaining of higher gasoline prices and government is more than willing to respond. What the insiders behind the scenes want to do is suppress oil prices not only to assuage the citizens, but also to keep gold from rising as oil rises. Today suppressing oil prices is truly an awesome task given the composition of sources of supply and demand. Exploration is at a low and that can only eventually bring higher prices.
            The unemployment rate climbed in all of the U.S.’s biggest urban areas during June, and 18 places had joblessness of at least 15%.
            “For the sixth consecutive month, all 372 metropolitan areas had over-the-year unemployment rate increases,” the Labor Department said in its report Wednesday.
The numbers in the department’s Metropolitan Area Employment and Unemployment report are not seasonally adjusted.
The report said 144 metro areas reported jobless rates of at least 10%, up from six areas a year prior.
            El Centro, Calif., had the largest jobless rate from June 2008, at 27.5%. Yuma, Ariz., was second with 23.1%.  The lowest rate was in Bismarck, N.D., at 3.8%.
            So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.
            Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure. Over half the members of the House now support a bill giving the Government Accounting Office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board.
            Support for the bill has grown now that the Obama administration is proposing to give the Fed greater economic regulatory powers. The Fed, which sets U.S. monetary policy, was created as an independent agency to keep it free of politically-motivated interference.

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