Dollar liquidity fears. The market remembers what happened in...

Dollar liquidity fears. The market remembers what happened in March. Despite all the money printing the dollar liquidity in the system to support asset prices is hopelessly insufficient. Asset prices have grown at a far greater rate than world central bank balance sheets over the last 15 years. Couple this with a declining US dollar and you end up in a parallel circumstance where the liquidity of the bulk of the financial system which is denominated in USD is also shrinking in value and shrinks at a rate proportional to the fall in the dollar. Remember US equity markets are about 50% of the total of all equity markets, that's why they are the tail that shakes the dog here in Australia and all over the world. It's a self perpetuating situation because as US equity markets which where valued at around $50 trillion drop by 10%, that's another $5 trillion that needs to be found to reflate. We know that the US treasury and central bank are pushing up against political limits when it comes to the next fiscal package and are quibbling over whether the next package is $1.5 or $3 trillion and the Fed is loathed to expand its balance sheet unless we see another market collapse. It's ironic that we can even call it a "treasury" because it has no treasure in it, only $26 trillion of obligations to pay people. The tailwinds for gold come from more monetary expansion not less, but at the same time more monetary expansion leads to greater instability for markets as you go through the print expanded panic crash, print expand panic crash cycle which ultimately leads to two outcomes. Excess liquidity fed into a stagnate economy (hyper inflation) and an eventual complete collapse of the system or a cyclical bear market in the absence of more printing. The former being good for the gold price while it lasts. In the later situation gold will still win on a relative basis but its price may still fall along with everything else, just not at the same rate. My NST bubble call at $13.99 in July last year seems not to be in jeopardy yet. The ultimate test however of any bubble is how far does it deflate. That is why the future is so exciting and unpredictable and all predictions, including mine, are just speculation. I've given up speculating on any predictions including my own so it's all theoretical for me.Esh