Time for a little pat on the back -- my own.

When I first published Financial Armageddon in March 2007, one of my more controversial calls -- aside from predicting, among other things, the kind of systemic crisis we now see unfolding -- was that the dollar would stage a short-to-medium term rally during the early stages of the unraveling, contrary to the expectations of other prognosticators who correctly foresaw troubled times ahead.

Here, for example, is an excerpt from Chapter 6, "Systemic Crisis":

Initially, those who are exposed will seek to unload the largest, most dangerous, or least valuable positions. As the loss-cutting crowd expands, the upheaval will seep through into more liquid markets. Mostly, the pressure will be felt on the downside. Nonetheless, following the dramatic expansion of complex arbitrage, derivative, and relative value positions accumulated over several years, many markets will also see abrupt and violent squeezes to the upside. Firms with massive bets on a fall in the greenback, for example, could be stung by a widespread scramble to unwind similar positions. This will likely be spurred by a short-term rush for traditional safe-haven investments, an unusually unaccommodating Fed, and a scramble to raise U.S. currency as bankers hurriedly call in outstanding dollar-denominated loans.

And below is a passage from Chapter 12, "Geopolitical":

Still, while little doubt exists about the longer term outlook for the greenback, especially given that U.S. officials will eventually be forced to turn on the monetary spigot full blast, the dollar may well swing noticeably higher versus other currencies in the short run. The combination of massive speculative bets against the currency; widespread margin calls at major financial intermediaries as volatile markets boost collateral requirements; unexpectedly tight monetary policy; and frantic efforts to convert assets of all kinds into cash to service trillions in dollar-denominated loans, bonds, and other obligations will likely trigger a short-term boost in demand.

This move will ultimately prove unsustainable, however, as the wholesale destruction of purchasing power amid a hyperactive increase in the supply of the currency proves overwhelming. With the Fed eventually seeking to monetize anything and everything in sight, those who can will do their utmost to bail out of American currency.