Last night I saw an image of a wounded bull, bleeding between the shoulder blades, and taunted by a matador with a sword. Then, instead of doing what he was expected to do (stare his executioner in the eye and die), the bull charged into the crowd, scattering the blood-thirsty spectators.
Of course, the bull died anyway. But not without a fight.
That’s what this chart below tells me about the dollar in 2007. The buck is going to rally. The alternative is its immediate destruction as the world’s reserve currency, and as I show here and here (and with a great chart here) the dollar is too important to global liquidity right now to simply disappear overnight.
It will take a lot of creeping inflation…and the bursting of the derivatives bubble before demand for the dollar falls. And with U.S. interest rates set to stay high from an inflation-fearing Fed, the bloodied buck may still have some stuff to strut, at least for awhile