The Re-Inflation Dollar and Short-Wave Analysis

Independent investors often see a direct relationship drawn between the value of the dollar and commodity prices, like oil.

Currencies are akin to a commodity, providing a safe haven for preservation of value that, for a concentrated capital, is mostly an evasion of the gamma risk.

Evasion of gamma risk is not a reflection of fundamental value--it does not measure a causal relationship between the dollar's value and the price of commodities, for example. What it does measure is the determining effect of capital consolidation in the current economy.

A few analysts in popular media do have occasion to recognize that the relationship between the dollar and commodities is not a fundament of value (not money seeking the best value, but the value is caused by seeking it). The value is an effect, meaning that the value is affected by the movement of the capital alone and not a reflection of a fundamental investment that effects economic growth and economic recovery. In other words, the value of the currency and commodities presents significant false indicators for the manipulation of prices and, therefore, the predictive capacity of technical trend analyses.

For short-wave analysts, the fundamental attribution error can be a critical failure. The latter part of the accumulation phase of the business cycle is where short-wave analysis tends to false indicators because the causal determinants are a function of a long-term over-accumulation that results in a short-term arbitrary valuation of risk that can be the dollar today, gold tomorrow, and oil the next. It appears as randomness, but it is not. Running short regressions to induce the evidence of a trend is just an exercise in randomness unless, of course, you are controlling, commanding, the capital that causes the trend.

Analysts generally agree that the technical indicators lose predictive capacity in the kind of economic, and political, environment we have now with volatile beta (mergers and acquisitions, for example), and gamma (possible policy alternative), risks.

The macro modeling indicates the probable short-term trends.

The re-inflation dollar is highly probable to minimize the gamma risk to the consolidation of the capital. Treasury secretary, Geithner said today, for example, that time should not be allowed to lure the system into a false sense of security.

The re-inflation dollar will buy the time to minimize the gamma risk to the high systemic risk/reward still in place. With interest rates to remain below 1 percent for an extended period, according to Bernanke today, not only will the dollar be poised for pro-growth to assist demand for goods and services but for the overleveraging that causes demand reduction (unemployment). It is the formula for stagflating into the next liquidity crisis and forgetting about the high systemic risk/reward that causes it.

Keynesian expansion of the economy out of the recessionary (demand deflation: unemployment) trend will inflate the value of the dollar. The re-inflation will fuel the "happy days are here again" sentiment that Geithner is warning us about (and that is a good piece of public service that speaks truth to power...I wonder how long he will be able to keep his job if he keeps doing that).

The re-inflation dollar will be the counter-measure for not allowing the high risk/reward ratio of the embedded systemic risk to be correlated with the high unemployment measure. Rather, the high risk ratio will be argued the cause of the "growth" that will not be growth at all, but simply a retrace of the cycle; the argument will be a material misrepresentation--a fraud--that is endemic to the corporate (bureaucratic) organization and management of the economy.

The short-wave analytic will be conflicted with the inflationary and deflationary tendencies working together. The dollar inflates and seeks value in commodities which will deflate demand by increasing costs. The economy is essentially right back where it started supporting the deflationary trend and a high risk/reward benefit that is largely financed with a high unemployment number (demand reduction that supports a low interest rate).

Rigging the market for a low interest rate keeps financials profitable despite the overleveraging that causes demand reduction with slow growth investment. Thus, profitability without employment...it is capitalist heaven!

Utopian plutocracy is with a false free-market legitimacy, however. It is a dystopic risk (the gamma risk) that runs ever higher. It is an accumualtion of risk that plutocrats must continuously manage politically in the name of what a free-market economic system would otherwise legitimately provide: The General Welfare.