It's Starting

Why has the dollar been going vertical? Because the mad dash for cash is starting. The Wall Street Journal reported that hedge funds are selling anything to raise cash:

"You couldn't go wrong with gold. It's a very crowded trade. It's been everyone's place to hide. Now people are realizing: Gold does not protect against less consumption," said Mark Lehmann, president of JMP Securities in San Francisco.

Reminds me of this quote:

"In a world awash in credit, in a world of fractional reserve banking, overcapacity, and endless amounts of stuff, cash becomes the real gold standard. How do market participants get cash? They sell stuff. They sell bloated assets. They pay off debt. They even sell gold and precious metals."

The above was blogged right here back on 3/31/2010

In my opinion, Mr. Lehmann nailed it when he noted the problem of less consumption. Less consumption is the last thing the Keynesians need right now. Less consumption is why total money supply is contracting at a pace that International Monetary Research Professor Tim Congdon described as "frightening."