28 April 06
The Non-Paradoxical Fractal Evolution of the
The US dollar has taken a recent beating as it nears the conclusion of
of its first multi weekly growth fractal.
While all fiat currencies have their weaknesses, the weaknesses of
the leading currencies are relative. The Euro, the Yen, the Yuan, and
the US dollar - all have enormous structural problems with underlying
inherently unstable fractional lending banking practices and lack of prudent
regulations throughout the domestic lending, and hence, money creation
industries. The market determines the pecking order of the international
relative worth based on interest rates, GDP growth, rates of money creation,
stability, and utility of the currency.
The last major devolution of the US dollar index against the summation of
other fiat currencies lasted over three years and occurred in a monthly
fractal decay series of 8/19-20/12-13 months. The dollar's very low saturation
decay resting place after its great fall from its high end valuation five years
ago; its utility in purchasing oil; and the premium of rising short term
US debt instrument interest rates over those of the Euro and Yen - have
synergistically attracted traders to the US dollar, resulting in a
fractal growth evolution.
From the low of the monthly dollar index devolution there has been a
close to ideal weekly fractal growth progression of:
11/26/22/14 of 14-16 weeks.
The third growth fractal ended on a low rather than a high with the
1.5X decay pattern rising above this low and falling off in a
nonlinear fashion during the last two weeks. Ideally the sum of the
lengths of the first two growth fractals equals the sum of the third
growth fractal and the decay fractal or:
x + 2.5x = 2x + 1.5x
The low on the dollar index concluding the first fractal would ideally
equal about 84.5-85.5 which approximates the high of the first X (11)
week fractal. Go to the links to TFC charts for the dollar index.
A new dynamic driver for the US dollar index may soon be operative.
The initial slopes of incipient second fractals can occasionally be
nearly vertical. Shortly ahead those who have dollars may find its purchase
power greatly increased relative to depreciating US assets and mirage
markers such as trading index spiders. An analogy could be made to
the rise in value of mattress dollars in the early 1930's - only
greatly magnified in 2006 as a result the inevitable devastating
implosion of US housing prices and wrong sided negative net equities.
The selling of even a small percent of the plethora of US debt
instruments for redemption into dollars will propagate, at least for a
time, a positive feedback collapse of held US debt issue valuations.
US bond holders will watch the relative value of their currently held
bonds sink and attempt to sell them to both gain dollar currency
holdings and prevent further loss from bond devaluation. As has been
annotated in prior posts, the rise in interest rates represented by
TNX and TYX are on a near term collision course with equities, housing
valuations, and commodities.
The inverted Wilshire fractal daily count from the high on 11 January
2006 to the upper defining available money asymptote:
13/33/31 of 26-33 days :: x/2.5x/2-2.5x
And the daily fractal growth count for the Wilshire since the October 2005 low:
24/60/ 54 of 48-60 days :: x/2.5x/2.5x
And on a long term weekly bases:
30/75/75 weeks :: x/2.5x/2.5x
with a potential daily extension including the 75th week of the third
75 week fractal of:
14/35/35 of 35 days :: x/2.5x/2.5x ....
The 4.7 percent growth rate in the US GDP during the first quarter
represents on an annual basis about 650 billion dollars. A well-sized
scoop of the GDP's goods and services sold in the US represents over
800 billion dollars of imported goods sold by American salesmen to the
American consumer and 600 billion dollars of new governmental debt
obligations for Iraq, Katrina, and the usual suspects.
The world's economists know the globally unbalanced system will break.
Asset valuation fractals may prove to provide the quantitative road
map for this inevitable collapse and the
very profound reequilibration of the complex money-debt-wage-asset system.