From Chris Gaffney, Vice-President of Everbank:

“As most would predict, the Mexican peso (MXN) has dropped significantly, moving down almost 3% versus the U.S. dollar overnight. Fears of a global pandemic have driven investors out of the high yielding currencies of New Zealand (NZD), Australia (AUD), and Brazil (BRL). Risk aversion seems to be back in vogue, with investors moving funds back into U.S. Treasuries and the Japanese yen (JPY).

I read a story over the weekend that suggested the U.S. dollar would continue to strengthen no matter what happens in the global economy. The story said that the U.S. dollar would increase if the administration’s efforts to stimulate our economy worked, and that we would lead the rest of the globe into the recovery phase. On the other hand, it said that the U.S. dollar would also strengthen if the global economy continued to weaken, as investors would purchase U.S. Treasuries as a safe haven.”

My Comment:

This insight about the performance of the US dollar has also been mine.

De-leveraging (which is the collapse of asset values as they’re sold to pay off debt)  is going on now all over the world in different asset classes. And de-leveraging mostly needs the US dollar.

In spite of a few sharp corrections downward, that’s what has held the dollar index (DX) up for a bit longer than dollar bears had anticipated.

Holding up, of course, is not the same as “bull market”.

The dollar’s fundamentals are still bad.

I  don’t have hopes for any currency tied to a government behaving so recklessly. I hesitate to write this, but some of the high-level corruption we’ve seen is actually beyond third-world.

I say this with no schadenfreude. It’s deeply, traumatically, disturbing to find so much rot at the heart of the global financial system. At the very core of the “international community, ” if you will.

The worst criticism of imperialism, or of statism, or of financial corruption didn’t prepare me for this.

And it makes me very afraid.

What example does such behavior set? What message does it send to a world which takes its cue from the West, and from the US in particular. Can we really expect better from other governments?