The US is trying to reflate the economy with QE and stumulus. This creates problems for every single other currency around the globe. They are trying to inflate their economies simultaneously because they fear deflation. It is a race to the bottom. First to go was Viet Nam who devalued their currency last year. Next is Venezuela who is doing the same. The weakest are falling first. Other nations are doing it quietly in the form of controls on the influx of dollars. (Brazil and many others)
So what is Japan going to do? They are going to have problems continuing to borrow @ 1% and there is risk the yen carry trade may spark up again. They will work to weaken the yen and encourage exports, absolutely essential to their economy. They cannot rely on borrowing much longer to goose their deflationary economy.
Why did India and now some suspect China is accumulating gold? One to diversify their dollar holdings.
Both these countries have massive amounts of dollars coming in due to trade deficits. This is causing deflation in their territories which is a nightmare.
China may link the RMB to the dollar but there is lots of leakage on the black market (just ask Venezuela) and corruption beyond belief with recent news of $50B exported (stolen) by high level communists. The leakage is on its way to becoming a crisis.
So what are they going to do about it?
Easy, they are arming themselves to be able to prop up the dollar and protect their currencies by offloading gold in the future. (By buying it now)
Every single nation on the planet has a motive to support the dollar, to protect their currencie, improve export competition and prevent deflation. (I.e. inflate their own currency by deflating the dollar)
Final conclusion, all forces are aligning for a strong dollar.
M2 and M3 are negative. There is no "dollar printing" there is dollar destruction. But there is dollar BORROWING from foreign holders.
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