Meet the dollar vigilantes

Meet the dollar vigilantes

Editor: Vlad Rothstein | Tactical Investor

Meet the dollar vigilantes

One way or another – interest rates are going up. The Fed and/or markets will see to that. The dollar is going to be de-valued. The dollar vigilantes will see to that.

First – some history. In the early 1990s, so-called “bond vigilantes” threatened to sell U.S. government bonds in the face of exorbitant spending plans by the Clinton Administration that would have significantly increased the national debt. There were political repercussions.

From late 1993 to late 1994, the ten-year Treasury note climbed from roughly 5% to 8% in a selloff. That led to a Republican takeover of the House of Representatives, the first time in forty-two years. Clinton’s plans were halted because borrowing costs were too high.

America’s Debt Is Rising

Now America’s national debt is over 105% of Gross Domestic Product, much higher than in 1994. With no economic growth to speak of these past eight years, inflation has been subdued.

However – Trump’s planned tax cuts and regulatory reform will spur economic growth, but also fan inflation. A week after he was elected, the ICE U.S. dollar index hit its highest level since 2003. A month after the election, the dollar had strengthened 4.3% versus the Euro, and the recent 25 basis point hike by the Fed, while not much, can only make the dollar more attractive. Despite all of this, though, the rally in the dollar is a mirage. Full Story

One of the inspirations for our name, The Dollar Vigilante, was what used to be called the Bond Vigilantes.

Last seen in full force in the inflationary early 1980s, bond vigilantes were anti-establishment figures who were said to have rebelled. They had decided to keep central banks and governments honest by raising long term interest rates in the open market. They would do so whenever the authorities kept their own interest rates too low, or let budget deficits grow out of control.

It was in 2010 that I overheard the term “bond vigilante” on a radio program once again and laughed for a moment, saying in my own head, Ah, yes, with interest rates at near-zero or negative per cent, Quantitative Easing to infinity and budget deficits in the US stretching the boundaries of belief, where are the bond vigilantes now?

And I thought to myself, I guess the system is so far out of control now that you can’t sell bonds to keep central banks or government under control as they’ll just print up unlimited money to keep buying it.

I then had an epiphany and told myself, “What we need today are dollar vigilantes!”

That’s what started this all…

In a sense, George Soros is a fellow dollar vigilante. An outsider who once tried to break the system… and he did. Full Story

Other articles of interest

Feds Interest Rate stance equates to Rubbish-Economic recovery is illusory  (Dec 24)

Stock Market Bulls, Stock Market fools-Market Crash next or is this just an Illusion  (Dec 21)

Trump Effect Rally-Useless Dow Theory and Stock Market Crash  (Dec 17)

Gold fools-dollar bulls and the long-term outlook for both Markets (Dec 9)

Inflation the Silent Killer Tax that’s destroying Middle-Class America (Dec 5)

Dominant Stock Market Trends under President Trump (Nov 22)

Bears State Crude Oil Destined to Crash-Utter Rubbish (Nov 18)

50 Trillion in Cash illustrates Mass Anxiety-Dow Industrials will soar not Crash  (Nov 16)

Trump’s victory Does not Sink Global Markets Proving Experts are Jackasses (Nov 10)

Trump-The New Stock Market vix Factor (Nov 6)

Crude Oil Market-Higher prices or Market Crash (Oct 28)

American’s fear the Stock Market-Understanding Market Sentiment key to winning  (Oct 24)

Foreign banks Dump whopping 356 billion in US Debt  (Oct 20)

Corporate Americas Share buyback Binge only force Keeping Stock Market Bull Alive (Oct 13)

Stock Market Earnings Recession Nothing to Fear-Market Still Trending higher (Oct 7)

Fed Directly limiting Market Downside Action-Expect Stock Market rally not Crash (Oct 6)

Dow theory no longer relevant-Better Alternative exists (Sept 30)