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Again, from The Daily Pfennig, a free currency newsletter written by Chuck butler and published by Everbank.

On Friday morning, I told you about the dollar rally that was kicked off by a stupid statement in the FOMC meeting minutes about ending Quantitative Easing (QE) in 2013. Recall that I said it was stupid for the markets to have reacted they way they did, for the FOMC didn't say "when in 2013!" they could continue with QE until 12/31 and it would still be 2013! And I think that calmer heads began to pop up and prevail on Friday, as the ugliness of the morning, didn't last all day. Friday's, end of day, price action in the currencies and metals wasn't good, but at least it wasn't as bad as earlier in the day!

You can watch the 10-year Treasury most of the time to get the pulse on what the Fed is up to. On Friday morning I told you that the 10-yr Treasury yield had risen to 1.96%... A little later that morning, I was talking to the Big Boss, Frank Trotter, and I said, "you watch, I think the Fed will be in to buy, for they can't have the 10-year' yield breaking through 2%". And guess what? Or better yet, guess where the 10-year yield is this morning? Back down to 1.90%...

So, the Fed is intervening in the market? Like, do they really think they have enough money --taxpayer money, YOUR money-- to keep interest-rates down if traders want to bid them up? A battle is shaping up, folks, between the bond vigilantes and the Congressional/Federal spendthrifts, and we *know* who's going to lose that one.

Chuck continues on.

China and Brazil have renewed their currency swap agreement, which allows them to remove dollars from the terms of transactions between the two countries. So, Brazil can sell oil to China without having to use U.S. dollars to settle the transaction. The first time I read about these currency swap agreements I saw them for what they truly were. and told you! These agreements are to lessen the role of the dollar. China has signed these agreements with a medium list of countries, and continues to look for more countries that no longer want to be saddled with depreciating dollars in their reserves! Australia and Japan signed last year. And there are still rumors of the Arab countries signing an agreement with China. Should that happen, then the dollar's relevancy in the world will have taken a HUGE blow!

The currency markets are HUGE, like, 3x the daily dollar volume of all other securities markets combined.That isn't a group of traders you want on the other side of your trade, which amounts to this, "Yes we can spend our way out of debt, because our misreading of what Keynes actually said tells us so."

Mauldin, Schiff, Rogers, Bass, and that most astute of all Yale economists, GWB, are all saying the same thing, "This sucker's goin' down." Maybe not this week or the week. But there's no way Congress will increase revenues and/or cut spending in a timely, meaningful way. So, bond prices are going to fall (and stock prices, and housing prices, and every other asset inflated by the Fed's multi-decades long policy of easy money). Look to Japan for a preview of what's coming here.

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