ECB Hikes Rates, And The Dollar Runs To Hide!

September 12, 2022

* Currencies & metals rally on Friday, last week

* What’s Frank Trotter up to these days? 

Good Day… And a Marvelous Monday to you! Wow! 2 consecutive days of 9th inning rallies gave my beloved Cardinals a 2-1 edge in their weekend series against the Pirates. Last Thursday, I went to the day game, and watched Yadier Molina hit two home runs!  I’ve seen some things in my days at the ballpark, things like a no-hitter (Bob Forsch), 2 game 7 World Series winning games, and countless clutch hits, stolen bases (Lou Brock), and most of the time through the years, I’ve been at a game with my friends… Sometimes family, and other times with clients… But the point is that I always had someone to share the event with! I HAVE A SPECIAL TREAT FOR YOU IN THE FWIW SECTION TODAY! Scott McKenzie greets me this morning with his song: San Francisco…  You know… “If your’re going to San Francisco remember to wear some flowers in your hair” … That song…

After setting record highs for the dollar earlier last week, the dollar succumbed to some pressure as traders began to look around and see that it’s not just the Fed Heads raising rates…  On Thursday last week, the European Central Bank (ECB) did hike rates 75 Basis Points, to lift the Eurozone deposit rates out of negative territory. The ECB also made noise about further rate hikes being just as aggressive. This rat hike news stopped the dollar rally in its tracks… By Friday afternoon, when the markets closed for the weekend, the BBDXY had fallen over 1%, and ended the week at 1,298.63…   Here’s Bloomberg with their take on the dollar’s moves Friday:

“The tide turned against the greenback on Friday as sentiment toward the euro recovered after the ECB’s jumbo-sized hike left the door open to another big move in October. The dollar’s losses may also have been compounded by expectations that a report due next week could show US inflation eased in August, according to Kengo Suzuki, chief market strategist at Mizuho Bank in Tokyo.”

Gold, on Friday, won back the $9 that was taken from its value on Thursday. Gold finally found a bid last week and was able to build some momentum. Gold ended the week at $1,718.10, and Silver, as usual outperformed Gold on a percentage basis, ended the week at $18.94, after it added 31-cents to its value on Friday.

Friday was a good day for the euro, as the markets digested the ECB rate hike and hawkish words. The euro closed the week at 1.0080. The rest of the currencies fell in place behind the Big Dog euro.

The price of Oil bumped higher from its low point on Thursday morning of $81.49, and ended the week trading with a $85 handle. I would like to think that traders are finally coming to grips with the lack of supply that far outweighs the lack of demand…  Whenever I do get out, and drive around, there are so many cars on the road, and very few of them are electric, so to me, I don’t see a lack of demand for gas, but then that’s just me!

Bond went up, down, up, down all last week, but ended the week with the 10-year Treasury at a 3.30% yield… Strange trading in bonds, folks, and like I said last week, there had to be a Central Bank buying the 10-year last week, after we saw the yield on the bond fall from 3.32% in yield down to 3.10%, and then back up again… That major downward blip had to be a large chunk of bonds being bought… And we have chronicled the fact that the Chinese and Russians have backed away from the Treasury auctions… India has been rumored to have backed away too, that leaves the U.S….  I’m just saying…

In The overnight markets last night… the dollar continued to get sold and suddenly the dollar strength is vanishing quickly. The BBDXY lost over 6 index points last night and trades this morning at 1,292…  The euro has made its biggest intra trading day move since last March, and Gold & Silver are getting bought in the early trading today. 

The price of Oil has risen $2 more dollars overnight and trades this morning with a $87 handle…  

Things can change in a NY Minute, folks, and it does appear to be changing before my eye…  As far as Gold & Silver go, let’s hope this newfound bid is something that sticks like glue…  For I did not like the way Gold & Silver got treated lately with their respective prices falling like pennies thrown in a fountain… 

Well, I sure stirred up the hornet’s nest last week with my FWIW article on the Fourth Turning. I had a couple of readers take great offense that I included it in my letter, and one even told me that I had lost my mind!  Here’s the deal, or skinny, folks… The article was there to make you think… If it caused you to fire off a stinging email to me about it, I made you think!  And remember, The FWIW articles are not written by me! If I truly agree with something, I’ll say so at the end in the Chuck Again section.  I can’t believe how nasty people are when you say something that upsets their way of thinking… Any way, I apologize if I upset your day….

Last week was a very busy week for events… The Queen died, The ECB hiked rates 75 Basis Points,  Gold finally found a bid, former Fed Head, Clarida, told reporters that come “hell or high water interest rates are going to 4%”, A hurricane in the Gulf finally brought some rain to So. California, and Chuck went to a day game!

Of all that stuff, I wanted to take the time to talk about Fed Head Clarida’s comment about interest rates going to 4%, is quite interesting, since inflation is more than double that 4% rate. So, Big Deal, right? Well, to me, and maybe you, this is just a drop in the bucket of where interest rates need to be to squash inflation. And yes, I’m aware that the higher interest rates go, the greater the chance of the US. Economy coming to it knees… But you HAVE to have one to have the other…  Either inflation runs away and ruins the economy for good, or…  A weak economy for a year, that wipes out the excesses of the previous boom, so that we can begin to pick up the pieces and move forward.

It’s like taking a medicine you don’t like for all the side effects it causes, but you know in your heart of hearts that by taking this medicine in 10 days or so, you’ll be better, and ready to take on the world again.

There are problems in the world, folks… And with those problems come opportunities…  And the biggest opportunity you have before you right now is to buy Gold & Silver at much cheaper prices before they take off for higher ground again.   You know… that all this dollar buying that’s been goin on for the last month, is being bought on false pretenses…  It’s being bought because people seem to believe that the Fed Heads have their backs, and they will deliver us from evil… Once the Fed Heads fall flat on their collective faces, these people buying dollars hand over fist, will drop the dollar like a bad habit!   

I told an audience in Orlando Florida, in February 2011, that the dollar would be replaced as the reserve currency by the end of the current decade…. The statement was evident in that all the debt the U.S. was amassing, would eventually bring the dollar down, but that statement wasn’t imminent…  I was wrong, and I’m not ashamed to admit that, because, if you think back to 2011, this was before the debts of Europe were discovered, (remember the Piigs?), and the Fed/ Cabal/ Cartel began to warm up the printing presses… Of course the Fed Heads’ mass printing of dollars, would push the dollar closer to the edge of the reserve currency cliff… But, at the time, everyone, not of their right mind, have you, thought that what the Central Bank was doing was kosher, so no danger to the dollar, as far they could see…

I’m still thinking that the dollar will eventually lose it’s reserve currency status, and to me this is why you buy Gold… In addition to that, Gold is also a store of wealth… not something you buy and sell like cakes at a PTA Bake Sale!  And one more thought here…  All these gyrations in the price of Gold is nothing but “short term noise”, and has nothing to do with your long-term strategy of preserving wealth!

I found this on, and it’s a famous financial analyst by the name of Charles Nenner, and here’s a snippet of what he had to say about the dollar. “” People don’t trust what is going on in the United States. . . . We have seen this happen to other countries.  We saw this happen to the British.   They are going to go to another major currency.  The BRIC countries and China are preparing to have an anti-dollar.  I have told you for years that the dollar is not going to crash, but now it is time.

In a year or so, they will really be getting into trouble with the dollar.  If the dollar goes down, of course, the inflation goes even higher.  So, actually, there is no way out anymore.  Every Federal Reserve President has said let’s keep it going.  The dollar is going to collapse, but not in my lifetime, and now there is almost nothing left to do anymore…”

Chuck Again…  Yeah, this plays into what I was saying above about how I just don’t see how the dollar can maintain its reserve currency status…  And then there’s the Student Loan Bribe…  Yes, I call it a bribe, because who do you think these debtor students are going to vote for in the next election other than the guy that paid off their debt!  But it goes further than that folks… besides it being morally wrong, it’s going to become fighting words between those that got to go to college, and then get their debts wiped out, and those that couldn’t go to college, because they didn’t know their debt would be wiped out.  Social Unrest is the name of that game, and it won’t be fun to play.

And in my opinion, on a side bar here, I would estimate that over ½ of those citizens that went to college, shouldn’t have gone to college, but should have gone to trade school instead, and not amassed such huge debts, and learned a trade that would provide them a career and earnings, and not have them waiting tables with their degrees.

Boy that was quite jaded there Chuck, are you sure you don’t want to take some of that back, before some readers take you to the woodshed again?  Nah… Let the chips fall where they will… 

OK, I got off the subject there, of debt accumulation, not only by our Gov’t, but Corporations, and Individuals…  Do yourself a BIG favor, folks… Get Out of Debt!  About 10 years ago I wrote a Sunday Pfennig where I said that Debt was Slavery…  I meant it then, and I mean it now!

I was reading my longtime friend, John Mauldin’s letter the other day, and he quoted Mish Shedlock, who, like me, believes the BLS’s jobs report is trash!  But here’s something else that we agree on, and that is the thought that with inflation so strong, people are having to take on a 2nd or maybe even a 3rd job, and each time that gets factored in as a new job created… Knock, knock, ahem, BLS… IT’s THE SAME PERSON Not 3 people getting jobs!

The U.S. Data Cupboard is chock-full-of-data this week, starting tomorrow, when the stupid CPI will print for August… The feeling in the markets is that inflation may have weakened in August…  Wednesday we’ll see PPI for August, and Thursday we’ll see Retail Sales, along with Industrial Production and Capacity Utilization.  There’s enough there for traders to get the picture that they shouldn’t be amassing dollars going forward… 

To recap… Maybe the light bulb over Traders’ collective heads finally came on, last Friday… I guess we’ll have to see, eh? The dollar got sold on Friday, after the ECB hiked rates 75 Basis Points on Thursday, and then talked hawkishly… Hey Joe, is it true that other countries have been hiking rates and not just the U.S. as we were led to believe?… Gold finally found a bid, and Silver outperformed Gold, as usual on Friday. Chuck goes into some long discussions about stuff this morning, I hope you didn’t skip over it!

For What It’s Worth….   I told you at the outset this morning that I had a special treat for you today in the FWIW section… That special treat is the link to an interview with my longtime friend, and former boss, Frank Trotter, where he discusses his new banking project: Battle Bank… The Bank is not open as of yet, but if you visit the website:, you can sign up to receive a notice as to when they will go live…  Until then here’s the link to the video… it’s 38 minutes long, so make sure you carve out enough time to watch and listen to my good friend, Frank Trotter…   Battle Financial Interview – Frank Trotter – YouTube

Chuck again…  Frank and I used to give presentations together, and I would always say that he and I had worked together for so long, the Dead Sea wasn’t even sick when we began!  He has always been an excellent writer, and speaker, and I can’t wait for his new bank to begin…  

Market Prices 9/12/2022: American Style: A$ .6867,  kiwi .6138, C$ .7691, euro 1.0130, sterling 1.1674, Swiss $1.0471, European Style: rand 17.0883, krone 9.8393, SEK 10.4959,  forint 399.78,  zloty 4.6468,  koruna 24.2371, RUB 60.33, yen 142.71, sing 1.3968, HKD 7.8489, INR 79.53, China 6.9265, peso 19.80, BRL 5.1487,  BBDXY 1,292.20,  Dollar Index 108.25, Oil $87.28, 10-year 3.29%, Silver $19.38, Platinum $894.00, Palladium $2,197.00, Copper $3.64, and Gold… $1,728.66

That’s it for today…. Yesterday, was our remembrance of the 9/11 terror attacks on our country, on our soil… We Shall Not Forget!   I remember trying to write the Pfennig the next day, and I just couldn’t find the words to write, and I said so, and a dear reader that had been with me for years, wrote to me and told me to “write, and act normal, that will really get under the terrorists’ skin” …  No baseball tonight, what’s a boy to do?  Albert Pujols is now only 3 home runs from becoming only the 4th baseball player to reach 700 Home Runs… The season and at bats are dwindling, I hope he can get it done before he hangs up the spikes at the end the season. I really didn’t have high hopes for Albert, this last spring when it was announced that he would return to the Cardinals… I thought it to be nothing more than a “seat filler”… But he had proved me wrong! And I’m glad he has! The NFL started its season last week… I’m still not all-in on NFL football, but at least now I can watch some teams play…  Like the Chiefs…  The Gin Blossoms takes us to the finish line today with their song: Until I Fall Away…  I hope you have a Marvelous Monday today, and will remember to Be Good To Yourself!

Chuck Butler