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Interesting analysis - >>> Markets Know a Hollow Threat When They See It <<<

https://www.bloomberg.com/view/articles/2018-10-15/markets-know-a-hollow-saudi-oil-threat-when-they-see-it?srnd=premium


In addition to the Saudi topic, the article includes some analysis of the stock market, the dollar, and gold (see below). Over the last several years the US budget deficits are being purposely driven higher by the powers that be (Fed). They encouraged Congress (Paul Ryan) to crank up fiscal stimulus and tear up what was left of the 'sequester's' fiscal restraint.

At the time, Rickards explained that this was the Fed's new strategy since monetary policy alone (ZIRP, QE) had failed to produce the desired inflation, and the Fed desperately need more stimulus to be able to start normalizing rates and the Fed's bloated balance sheet. So they flipped from monetary stimulus (ZIRP, QE) to fiscal stimulus (govt spending, budget deficits, tax cuts).

This new policy has been in effect for several years, and helps explain why the rise of US dollar has stalled in spite of relentless Fed rate tightening and QT. This Bloomberg article says the market's realization of the inevitability of $1 trillion annual deficits could lead to a falling dollar as the dollar bulls throw in the towel. Additionally, the Fed may be forced to put rate normalization on hold as the economy cools due to the trade war and other factors, which will also bring a weaker dollar. Also, if relations with the Saudis continue to unravel, the future of the Petrodollar (already in trouble) could be in jeopardy. Also, China has set up a system by which they are purchasing oil and paying, in effect, in gold via the new Shanghai Gold Exchange -



Excerpt - >>> THE DOLLAR AND DEFICITS

If the U.S. economy is really the strongest in history, then how do you explain the malaise in the dollar? The Bloomberg Dollar Spot Index, which measures the greenback against its main peers, is basically flat over the last four months and is up just 2.59 percent for the year. To a growing number of traders and strategists, the dollar’s lackluster performance appears tied to jitters over what is perceived to be out-of-control fiscal spending that shows few signs of slowing, let alone reversing. For example, the spot index fell to its lowest in more than two weeks on Monday as the U.S. government said its budget deficit grew to $779 billion in the 2018 fiscal year ending Sept. 30, the biggest shortfall since 2012 amid tax cuts and spending increases. “A budget deficit that’s heading toward ($1 trillion) at a rapid pace while the economy’s growing above potential is going to scare the FX market when the slowdown hits, as it surely will,” Kit Juckes, a global strategist at Societe Generale SA, wrote in a September report. “The dollar’s going up by the stairs and risks coming down by the elevator, starting sometime in 2019.” By that reasoning, it’s only a matter time until the dollar bulls, who have raised their bets on a gain in the greenback to the highest since January 2017, throw in the towel and start reversing those positions, putting further pressure on America’s currency. <<<