Remember the famous German general von Kluck, from whom we get the expression, ‘you dumb kluck?’ Von Kluck was chasing the French down the Marne in 1914. Victory looked like it was close at hand. The French were pulling back. Von Kluck, who had orders to attack Paris, decided instead to pursue the French army. He was convinced that they were beaten. All he had to do was keep the pressure on…and they would surrender.
Some of his field commanders, however, noted that they were picking up very few prisoners. Normally, an army that is beaten throws off many discouraged and confused soldiers. Since there were so few, the commanders reasoned that the French army was still intact; it was merely retreating in good order and could turn and surprise the Germans at any time.
The commanders were right. France’s aging general, Gallieni, who was in charge of the Parisian garrison, realized that the Germans were making a fatal mistake. By pursuing the troops down the Marne, rather than attacking Paris, they exposed themselves to a counteract from the city itself.
“Gentlemen,” he is said to have said to his staff. “They offer us their flank.”
The French took the offer. They attacked. Using thousands of taxicabs, they moved troops to the Marne Valley as fast as possible and caught the Germans unprepared. The Battle of the Marne turned the German army around and ultimately cost them the war.
We bring this up now because we have a feeling that the dollar is not broken. It is merely retreating in good order. At $1.49 per euro, it is not at the record low you’d expect after so much negative press. And it is not giving up more ground. Instead, it is holding.
Yesterday, the dollar price of stocks went down. The dollar price of oil and gold went down too. The dollar has not yet counter-attacked. But the dollar bears are vulnerable. We wouldn’t be surprised to see them hit hard in the weeks ahead.
Of course, in the very long run, the dollar bears will prove to be right. We have little doubt that the coin shooter who finds a cache of US Treasury bonds in the year 3,400 – like Mr. Herbert in 2009 – will have tears in his eyes. Though perhaps not for the same reason.
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