NFP numbers the bond made a predictable jump higher. But it wasn’t long
after that the air started leaking out and the bond closed on the lows.
Why the stinky price action when we get a big miss on NFP number? QE and
the talk of stimulus done it. The numbers were so bad that by 9:30
talking heads and pundits concluded that the tax cuts were coming and we
might just get a break on Social Security payroll deductions any day.
Forget about restraining QE-2; the talk went straight into high gear
with the only question; “How big might QE-3 be?”
So with that gibberish in mind bonds headed to the crapper while gold
set new highs. The confirm that QE is now driving bonds lower came late
in the day when there was a convenient leak of a Sunday TV appearance by
Ben B. The only quote leaked was: “We might do more”. Stocks liked that talk and ended up; while the bonds ratcheted down another notch.
I am pleased that the market has made the connection that more QE and
more stimulus is bad for bonds. The market is the only discipline left
that may slow the insanity creeping over D.C. When market forces turn on
the “New Monetarism” and shut the door on the insanity, the policies
will change. Until they get hit hard over the head the Fed will continue
to print. We are getting closer by the day. Consider this graph of the
long bond since QE-2 was announced:
Long rates have backed up by 40 bp in just the past month. The exact opposite reaction that ‘the Bernank’ wants.
How deflationary is this increase in interest rates? Mildly so. My
guess is that the impact of rising rates exactly offsets the stimulative
benefit of keeping short rates at historic lows. Yes, more debt is
financed short term than long, but a back up in mortgage rates and the
increase in long term fixed rate capital for municipalities and
corporations will offset any benefits from ZIRP.
On the question(s): “Will interest rates fall from the current levels
of ~3% for ten-year and ~4% for thirty-year to the 2%/3% that Bernanke
is trying to engineer? Or will they rise to the 4%/5% that is staring us
in the face?
In my opinion we are headed to 4% for the tens and at least 5% on the
30- year. QE is going to produce the exact opposite results of what was
intended. Consider this chart of where the US stands on debt. Please do
not point to Japan as the example of why rates will have to fall in the
US. Japan is/was in a much different position than America.
At the heart of Bernanke’s dilemma is the following graph on the labor
force participation. Bernanke wants to juice the economy back to a
level where the slack in labor participation rises back up to where it
was in 2005. He believes that this is the Fed’s mandate. He wants to
turn the clock back. But he can’t. The lines on this chart gapped down
as a result of the 08 recession, but the trend toward a lower level has
been in place for a decade. Aging demographics, an economy too dependent
on consumer consumption and globalization that makes US workers less
productive make it inevitable that the US faces a much higher level of
un/underemployment. Bernanke is not buying that conclusion. He feels
that it is his mission to push against the laws of nature. The market is
pushing back. The market will win. Ben will fail.
I am not a fan of Greenspan. I think he got us into the mess we are in.
But I do respect his opinion. On the question of whether the US would
change its ways he had this to say recently:
"The only question is, is it before or after a bond market crisis?"
Too bad Bernanke is not listening. A bond market crisis is inevitable as a result.
Yes, bonuses even though they ignore "accounting irregularities" that would reduce those bonuses. Where's the outrage?
Here may be more layers to this onion, in an article on ZeroHedge:
"This is a huge copper purchase, and represents between 50% and 80% of the 350,000 tonnes in reserves, confirming that JPM is now the dominant manipulator in yet another commodity market. The purchase also pushed the price for immediate delivery to $8,700, the highest since October 2008. It is unclear how China, which is the biggest non-speculative end user, will react to this development, nor whether the CFTC will (ever) take any action against such blatant market manipulation."
http://www.zerohedge.com/article/jpm-corners-copper-market-lme-says-not-worry-all-good
The economic war has started in earnest. This is where it gets interesting.
Caterpillar loves it. Commodities = up ....
Greetings, Mr. Smailes.
As I stated earlier, this won't be a run-of-the-mill, asset-inflation, bubble-blowing, stock-markets-to-the-sky type of inflation. This is food and wage inflation in the heart of Chinese industry.
Just the chaos that would ensue from this, what with local corruption the way they do business, would leave soft and hard commodity markets in dysequilibrium for years to come. JPM has already positioned itself ready to choke off Chinese construction with a reputed corner on copper. Believe, it's on like Donkey Kong.
Also imagine that if Bruce's idea that the Fed "loses control" over long-bond yields, the savings that the Chinese thought they had begins to dry up as our interest rates rocket. There comes a giant dump of US Treasuries, followed by the biggest dump of gold onto the market ever witnessed if only that the Chinese government can hold sway over their increasingly disgruntled nation that much longer.
The biggest sucker-bait the planet has ever known has been the Chinese believing in the United States' miracle of home-ownership. Real estate never goes down...
Therefore, we not only get our gold back at a dirt-cheap price but all that money that the Chinese thought they had (think "wealth effect." Thanks, Alan!) vanishes almost overnight. The West retards any new Cold War with the Chinese and their borders are opened for truth, justice and American manufacturing to capitalise on cheap labor and poor standards of ecology.
Hey, at least we didn't have to nuke half the population. That's a good thing, right? Maybe we'll just slowly choke them with a nice arsenic-based run-off.
Addo:
This is the article I referred to earlier:
http://www.cnbc.com/id/40497262
Ro,
I know what a stop-loss is. I just rarely use them. There is generally no need to use stop-losses because I am looking at giant time-frames and the trading signals I am getting are on relatively vast moves in currency pairs. It is a lot easier to pick tops and bottoms on Daily and H4 time-frames.
For instance, if I may give you a thought process of how to think about shorting the AUDJPY pair before the announcement on Monday night. I apologise if it is a bit long-winded but at least you'll be able to see how I think and see my rationale.
Each week, there is a currency pair that is going to act like a "key" for other currency pairs to move. Last week, it was the Euro (and, yes, the word of my abortion was greatly exaggerated, but anyways...), for obvious reasons. This week, at least in Oz and yen crosses, that key is the AUDUSD pair. The AUDUSD is the main Ozzie dollar cross and will greatly affect the other crosses.
According to my idea, the news coming out of Syndey is going to be "bad" for the AUD. We also know that the beginning of the trading week is going to see some massive "risk-off" trading, meaning the EURUSD and AUDUSD ramp, while the USDJPY tanks. We should work this information to our favour. How?
Step back and get a little macro. Look at the AUDUSD Daily chart. Notice that the pair is going to make a double-top at all time highs on Monday before the announcement. If it doesn't fully get there, it will be pretty close. At the highs of the US market on Monday, my guess is around 1330 ET, note the double-top on the AUDUSD. That is our "key."
Once the top has been put in (to the best of your knowledge...), engage your trades: 0.20 lots per $1000 of Free Margin. (Notice when you get small and consistent you can sleep at night, too...) The trades you should consider are shorting AUDUSD, shorting AUDJPY and getting long on EURJPY (which may have just put in a long-term bottom and will soon ramp considerably...).
Engage the trading plan all at once (3 x 0.20= 0.60 total lots per grand in Free Margin...). Since you sold at the top, you may be able to move your take-profit line inside of the trade, making the trade a no-loss trade. Be careful, though, because this is going to be a pretty big announcement and the vol going into it is going to be very high. In other words, not too close, or you get stopped out. You really want to avoid that. Best thing to do is just watch it. If it breaks above the double-top with a close higher than that on the H1 chart, or if it just starts higher when it should drop like a rock, the trade has moved against you and must die. Since you sold higher than this level, you may still be able to exit a "losing" trade with a profit.
Once the pair begins to move in your favour, decide what is the minimum profit you will accept on the trade, say 100-pips, or 1000 mips (milles pips, or "points," which is not the same as a pip, by the way...). Set a trailing stop for 1000 points or 100-pips. You can use 75% of the Daily ATR to set the trailer, if you must use math.
Now, you have a successful trade in place, your take-profit is inside the trade, making it a so-called "free trade" and your trailing-take-profit is at least 100-pips on the trailer.
Go to bed. Make love to your wife. Watch Dancing With the Stars...anything but don't worry about the trade. It is set and perfectly safe.
There really is no need for such calculations as risk/reward ratios, etc. That's for scalpers and people selling half a position when they get ten pips and hanging on to the other half as profit. Sorry, those trading systems are for the birds, if you asked me. Ten pips and I have to sell half and wait for the other half to profit? Sounds like work! Setting trades off a fifteen minute time-frame and trading the positions off a M1 or Tick chart is just insane to me. Sure way to get you killed.
If I can just get three people to stop trading the way their broker tells them they should, then I will be a happy camper. Hope you will be one of them, Ro. :D
Step back. Think macro. Get rich slowly. Go in small and stay consistent. Five hundred base-hits will get you to the World Series before 200 home-runs every time.
Hope this makes sense.
Orly
Sorry Orly, your thing is too all over the board.
And just for the record I don't trade for 10 pips or points, fx or futures. Currently long the S&P and Oil - deep in the money on both since last week.
You may be right and the RBA may surprise. Who knows except the RBA?
On the other hand Gold has confirmed an inverted HS.
Not to be blunt or mean, but this is ZH; I totally missed the logic of your short AUD/USD, short AUD/JPY and long EUR/JPY call as a 3 way trade???
A long EUR/JPY call implies 'risk on' and higher equity prices.
I think if Oil breaks its trading range higher then its very probable for much higher prices for virtually all risk asset classes.
Sure. I understand. My thing is pretty straight-forward, I thought: when the AUDUSD double-tops, sell him and his buddy and get long EURJPY. Don't see the mystery. But okay.
The EURJPY used to be the "risk-on" trade before it got too compressed. Now it's the EURUSD and, before Monday night, the AUDUSD. The long EURJPY call has more to do with deteriorating Japanese fundamentals than anything else (relative bond spreads...) and the money coming out has to go somewhere.
I guess we'll just call this one a "we'll see."
:D
EJ says the same thing.
He said get out of Nasdac in 99' get into gold in 2002 & called the housing bubble years before the pop....
It’s China’s turn to pop a world-class asset bubble and smash the global economy
• China tried to pop its property bubble once before but the global economic catastrophe caused the US financial crisis aborted the effort in 2008
• This week China re-launched the crash phase of its Greenspan Credit Bubble with Chinese Characteristics
• Watch out for flying bricks
Why don’t central banks, and the governments they front for, ever learn? The only way to prevent macro-economic damage from a collapsed asset bubble is to not allow a bubble to develop in the first place. Once a government takes the path of winning popular favor with the temporary prosperity that’s produced by asset price inflation, there is no easy way out, as Japan re-discovered in the 1990s, the US found out again in the 2000s, and China will experience soon enough. As part of our project to map out the coming decade, this week we investigate the prospect of the collapse of the Greenspan Credit Bubble with Chinese Characteristics.
Monday China embarked anew on a treacherous program of rate hikes to end a property bubble that took root there in 2005.
Here is a game readers can play at home to simulate the genius of a central bank managing an asset bubble down via interest rate hikes.
Find a cinder block and a bungee chord. Place the cinder block on the far end of your kitchen table. Attach one end of the bungee chord to the cinder block and put the other end between your teeth. Kneel down so that your face is level with the tabletop and pull the chord until it is taught.
Now it’s time to begin “tightening” the way central banks try to, bit by bit, to bring an asset bubble to a benign end, or so they believe.
Pull ¼ of an inch. If nothing happens then pull another ¼ inch. If nothing happens then do it again, and again.
Silly game, you’re thinking. A child can see how this will turn out. Sooner or later that concrete brick will sing across the table and smash your face.
As obvious as the outcome might be to a 10-year-old, the brick-in-the-face lesson remains lost on central banks. They must be slow learners because repeat it over and over. Or perhaps there is a common institutional neurosis shared among central banker’s that compels them to repeat the same mistake, to recreate the experience of concrete on teeth.
For years I’ve referred to China’s asset bubble economy as a Greenspan Credit Bubble with Chinese characteristics. This week we find that not only the policies that created China’s bubbles but even the policy responses to attempt to tame them mirror Greenspan’s.
Democracy or dictatorship, credit bubbles buy political favor... while they last
The beauty of a credit bubble is that while they expand both the creditor and the debtor believes they are getting rich. But unless the asset purchased with debt is appreciating, as might a piece of farmland, in fact only one of the two of them is getting richer, the one who holds the loan has an asset on his or her balance sheet. The debtor may increase his or her purchasing power temporarily, but once the cash is spent -- on a car or tuition at a culinary school or a home in the US since 2006 -- all they have left is a depreciating asset and a liability.
After a bubble gets big and fearsome enough, and all of the political benefits have accrued – capital gains tax revenues, high paying appointments to influential political posts such as running Fannie Mae or Freddie Mac, large scale wealth redistribution from debtors to creditors, and so on – and a catastrophic crash looms, first governments attempt to slow a bubble gingerly, such as restricting bank credit and raising taxes on particular classes of capital gains.
But speculators are not discouraged by such half-measures. The specter of marginally higher costs pale beside the dreams of quick riches created by the central bank during years of bubble growth. The speculator believes that the wealth and success they have achieved during the bubble resulted from their own genius, and this misguided view undoes all but the most self-aware of investors in such periods. The idea that excess liquidity and cheap credit were the main sources of their good fortune only occurs only to a small number of those who understand how asset bubbles operate, both economically and politically, as iTulip.com readers have since 1998 when we played the technology bubble until April 2000.
Asset versus wage and commodity price inflation: the central banker’s game
If commodity and wage inflation containment policy is all about managing consumer inflation expectations downwards, then the central bank’s policies that produce asset price inflation, to bribe the middle class into accepting insane levels of income and wealth inequality, is aimed at managing speculators' asset price inflation expectations upwards. Later, affecting an asset bubble policy about-face from encouragement to discouragement is like trying to convince Paris Hilton fans to stop reading her tweets.
The “solution” that the Greenspan Fed devised to quell the technology stock bubble was a program of 25 basis point rate hikes. The theory was that these clearly communicate the central bank’s determination to end the bubble, and cause the speculators to exit the market in an orderly fashion.
The central bankers’ dream is that these tender rate hikes will first slow the bubble, then allow it to deflate gradually to give the macro-economy a soft landing. But that never happens. They believe this despite the evidence that these measures cause the asset bubble to collapse. Every. Single. Time. It’s as predictable as the laws of physics that propel a brick airborne.
The NASDAQ Cinder Block
After six interest rate hike tugs the NASDAQ cinder block flew off the table and smashed the Fed in the face in 2000.
The first five hikes (percent, right hand axis) were quarter point each, just like the Bank of China’s on Monday. The final sixth hike that finally produced the NASDAQ crash starting in Q2 2000 (price, left hand axis) was a full half point just for good measure, nine months after the tightening program began.
Six months later the Fed began unprecedented panic rate cuts from 6% in Feb. 2001 to 1.5% by the end of the year. Many analysts at the time thought it was U.S. 1929 all over again, or maybe 1990 Japan, and a deflation spiral was sure to follow. Within a year, as the FIRE Economy crisis indeed began to spill over into the Productive Economy, median duration of unemployment (weeks, right hand axis) doubled from under six weeks to over 10.
The Housing Bubble Cinder Block
But as it turned out the year 2000 wasn’t 1929. The tech bubble was Greenspan’s warm-up for an even bigger and more macro-economically devastating bubble, the housing bubble. Incredibly, after allowing the housing bubble to grow by ten trillion dollars in fictitious value via asset price inflation, the Fed followed the exact same procedure as before except this time to pull a ten trillion ton brick off the table.
The Fed tugged on interest rates for two years before the housing bubble finally burst and the cinder block went flying. But as we explained in 2004 (See Housing Bubbles Are Not Like Stock Market Bubbles, January 2004), when housing bubbles collapse they don’t pop like stock market bubbles. The process is slow and corrosive, like rust, rather than an sudden like a stock market crash. Bank analyst Chris Whalen can be heard repeating our forecast after the fact six years later.
A stock market crash informs the unfortunate investor of their condition in quarterly stock portfolio statements, but homeowners don't experience their asset price deflation pain until they try to either refinance or sell their home, and that happens over years not quarters. As the realization of losses is gradual, so is the political, legal, and economic fallout. If a stock market crash is a ball of sodium burning up in a bucket of water, and housing bubble crash is pickup truck rusting on the bottom of a lake.
The main reason that the macro-economic damage of a property bubble is far more severe and long lasting than an equity bubble is that property bubbles are debt not equity financed, and a debt is an asset on the balance sheets of the politically protected commercial banking class whereas stocks are owned by a politically diverse group. The losses of banks are pawned off on the taxpayer, and if the taxpayer can't cover it then the nation's balance sheet takes the bad debts on.
This is why, ultimately, private credit risk (See Credit Risk Pollution, April 2006) expresses itself as currency risk, and why we bought gold in 2001.
Interesting.
Except we have somehow talked the Chinese into being the one testing the bungee cord for us. It won't be the US taking it in the teeth.
Nope.
Uncle Ben is really not that dumb, but you already knew that.
Short AUDJPY before the rate announcement 2230 ET Monday. Initial downside target: 75
:D
Where is your stop Orly? And, what is your time horizon for the price target?
Stop at 75. I think we did this already...
There is no stop-loss built into the protocol. If the trade moves the other way, don't take it. (I just don't see that happening, barring some major surprise...)
Here is the thinking:
On Monday night, the Australians are going to announce that their economy is slowing and that they may need to lower interest rates sooner rather than later to help spur economic growth. There is even a chance that they will lower rates in this decision but it is not likely.
This is a double-whammy for the Japanese because they have been relying on the 4.75 rate for a nice carry. With cautious language, the carry trade will begin to unwind somewhat. With really cautious language, the carry could begin to unwind a lot. If there is an unexpected rate hike, you could see the Japanese selling Ozzie dollars hand-over-fist.
Either way, this is the top for the Australian carry. Their economy is in for a slowdown, JPM is trying to corner copper and inflation in China is about to run rampant. This does not bode well for Chinese imports of Japanese goods or Australian commodities.
________
As far as a time-frame goes, it is fairly impossible to say. My deductions are not based on time-frames but on major Fibonacci retracement levels. With all these things being thrown at the Ozzie dollar in the near-term, the AUDJPY pair could move two complete Fibonacci levels to the downside. This is what I expect to happen but, of course, that end may change. Use your sense: when it looks like the trend is curling up, take your profit.
Note that the actual Fibonacci range is around 0.76424 but pairs have a tendency to overshoot the support level, especially when coming such a great distance before a stop.
:D
P.S. This is not at all to say that the pair will not rise on Monday in the meantime while waiting for the report. Any intra-day ramp should be viewed as good if you're planning to short it.
If you are short the pair at or just over/above 82 then the stop must be above that price of 82 - if your price target is 75 to the downside then you are looking for 700+ pips profit (Limit buy order to exit while you sleep).
Also, if oil breaks higher to the $100 mark my guess is AUD/JPY will follow and if I were taking that trade my stop would be just over 83........risk 100 pip loss for a potential profit of better than 2/1 (your scenario at 7/1).
Trade price.
The banks are sitting on 20 years of leverage via the shadow banking system. The primary bankers & hedgefunds (all the big banks are giant hedgefunds).
Think of a jet at 40,000 feet and the gas is running really low (shadow bank crash- deflation). The shadow bank created 60% of extra gas/credit for the jet/us..
The banks have no credit to hand out. The leverage throughout the system will drink up this credit as the loans/bad debt will take years to bring down. Global.
The shadow banks/credit/debt created a false sense of wealth for many,many people. The housing market in the US underpinned all this false credit - credit cards - student loans - all created extra credit via the (shadow bankers/securitization) sloshing across the globe.
China is in big trouble. She built a manufacturing complex that benefited from this credit orgy ...
No matter how big the QE 1,2,3,4 it will take the plane a long time to land or stabilize.
That gas tank held Trillions upon Trillions in gas/credit.
I'd like to hear from some bankers. I suspect they are getting contradictory messages. The politicians want them to lend, but their regulators, auditors, and the bankrupt FDIC are telling them "do not dare add risk."
WB7 and others are great sources on China, etc. Washington didn't care about the Orient, until they needed a scape goat for their failed policies.
"QE is going to produce the exact opposite results of what was intended." Who knows what intentions lurk in the dark labyrinth of TheBenBernank brain?
"At the heart of Bernanke’s dilemma is..." To me, TheBenBernank has only this lemma before him: shear the sheeple till their soylent greens and their wikileaks. (Screenplay coming to a landscape near you.)
The Traitor Bernanke is trying to save the biggest banks. He doesn't give a rat's ass about anything else. Bruce is spot on about rates. Bonds are finally pricing in some default and inflation risk. About time, but what are the consequences?
Rates have been artificially held down since the Greenspan Panic in 2001. Banks, Fan/Fred, pension funds, bond funds, insurance companies, are loaded up with ridiculously underpriced long term paper. When short rates bump up, they will be stuck with a reversed yield curve, paying more in short rates than they earn on their investments..., until they die. This is exactly what killed the S&L industry. Traitor Ben has killed them with kindness. It's only a matter of time.
Bruce, you are one of the consistently better reads here. And that's saying something as impressive as ZH is overall.
Please suggest to Tyler and webmaster crew to do something about making the scroll of recent articles by 'Contributors' more visible on the front page.
Currently, a lot of readers don't even know that the 'Contributors' tab needs to be clicked to view a lot of good articles, given the 'Contributors' tab is merely placed as one tab among other not-often-clicked items ...
My guess is that many people are missing the fourth or third of ZH's premium content that appears from 'Contributors'. Lots don't realise they can find the additional articles even after they are gone from the 'Top horizontal 3' on the home page.
PS - Bruce, "I believe in red money". That was a great piece of yours, for example: « Red Money »! It may be time for Ben and crew to pull the 'red money' scheme you described so well!
Second that. Took me 6 months to figure it out.
Interesting about that piece. I still get a dozen or so reads a day. Must have struck a cord.
http://www.zerohedge.com/article/red-money-conspiracy-theory-11
What's in circulation, is such a small % that BSB can digitize it in a NY minute. IMHO. Also the 500Euro note is now the preferred mode of cash by the underground economy as it is equivalent to a $700 note and you need 7 times less space to transport it.
all I know is that silver went from 19 to 25 and gold from 1000 to 1120 in euros in 3 months
And now what? A rate hike will kill the euro and stocks. No rate hike will kill JPM and all banks with it. More QE will make Silver go through the roof, thus bringing down JPM. The Fed's days are numbered , there's nothing left but allowing common sense to find its way back to the floor.
"When market forces turn .... the policies will change. Until they get hit hard over the head the Fed will continue to print."
Bruce, but what if they don't stop to print? What is the "Bernank" believes that he can continue to buy (at least for some time) every treasury bond and MBS in sight without triggering a "weimar" or a "zimbabwe" episode?
If he stops printing - I believe gold and commodities would collapse by 50% or more in dollar terms, and the stock market would be back to 6600 in a matter of months if not weeks. If he does not stop - the same commodities will be rising every single day.
Wouldn't it be nice to know Ben's decision ahead of the public? That would be THE trade of the decade, or perhaps THE trade of the century! I'm sure GS and JMP will be "rightly positioned" before Ben renders his QE3 verdict.... Just like past Friday, there will be "some" who will know it ahead of the rest of us, and of course SEC will do nothing about it.
the SEC is an utter joke now.
Someone here once said they would sacrifice equities on the bond altar if it came to it.
I don't think it would work, but I wouldn't be surprised if they try.
not that i think it will work, but i wouldn't be surprised to see some sort of "conversion deal" in the next couple of months to herd IRA/401K money into bonds....
like, put your money in government bonds completely tax free and earn an annuity income in your old age....rather than trust the stock market...
it could work if we see a major market downdraft.....and that is a strategy I certainly would NOT put past these guys.....
then you get the masses in the bond market to take the hit from a dying dollar, and the banks make out once again, doing the conversions -- for a small fee - and unloading their bond portfolios....
the only thing i'm converting my retirement money to is physical gold & silver bullion, and metals stocks.
Fuck you Ben and the horse you rode in on....
All home equity has been stolen or spent; now they will come after what remains of savings in 401ks or the like. April Fool's Day next year would be a good target. But before that they'll have to crash the market to give everyone an incentive to trade any other assets for worthless USTs.
when does the euro tank?
lets have a big round of applause for one round of crises after another. the blind idiots are driving a racecar like a bumpercar.
http://covert2.wordpress.com
@ 1.37
The euro will likely have a big crisis in 2011 - I think Bob Janjuah sees it roughly right - with people in the streets here, and European banks and sovereigns likely both re-structuring - including bondholder haircuts, and re-ordering of the generous European social benefit programmes.
This re-structuring would most likely and mostly be under German direction, across the Continent. Eurozone may even split or yet stay in one piece. It will look like a big mess for a few months, but will be quite good as a lot of the debt here gets written down, and national budgets tighten up, all pushed by the crisis. People in the streets here, revolution-of-1848 style, will ensure it is not too harsh on the commoners.
But how bad comparatively will things get in the US, with money-printing, the Bernank, and US states and localities collapsing? Think it's hard to anticipate if the euro or dollar will look worse in general at a given month up ahead, and they may well continue to trade places on a financial-media-driven yo-yo movement.
Hey, Bank Guy in Brussels you say:
"But how bad comparatively will things get in the US, with money-printing, the Bernank, and US states and localities collapsing? Think it's hard to anticipate if the euro or dollar will look worse"
are you propagandizing the EURO? are you suggesting/implying by CRUCIAL omission that EUROPE will be fine, and Germany will handle it, hand out corrective discipline to its economic children of Europe...its 'dependancies'..which it NEEDSto sustain, for GERMAN self-interests...that ALL THE NATIONAL DEBT issues are/will be solvable and solved...
WHEREAS, the USA "US states and localities collapsing" is quite the different case, NATIONAL, STATE. COUNTY, CITY debts...'municipal bonds' and all that...
ha ha ha ha ah, eh, er...hum did you 'forget something'?? Europe has cities, provinces, dioceses (Roman empire)..ARE THEYQUITE SOLVENT, HEALTHY...are THEY EVEN BEING ADDRESSED? funny i notice a TOTAL OMISSION .,..
i suspect RATHER, that EUROPE is really is STILL WORSE shape, so much so that these broader issues, that presumably reside ONLY IN THE USA?? don't exist in Europe?
Perhaps you need be reminded, just how FAR beyond the internal financial resources of Europe EXISTS a still deeper problemsuch that ONLY the Federal 'swap lines' saved Europes ass...was it a trillion, or merely half a trillion back in 2008? like the scene in 'dirty harry' 'this is the most powerful handgun made...did i shot 5 or 6 punk?? Europe, you've still lots of financial secrets kept suppressed...problems that absolutely cannot be fixed because not 'existing' as problems at all, omissions? lots?? Rhetoric of pretend honesty to support a red-herring logic and a strawman distraction...
It is true, and funny, that Europe has done some things much worse than the US, like bank leverage ... US banks said to be around 30 to 1, here we have banks at 50 or 60 to 1 that are really in deep ... horse stables that need to get cleaned out. Europeans are great at pretending and avoiding with a cheery smile.
And it's true that the EU has benefited from Ben's 'fiatsco flame-thrower' dollar swap lines. ... Yes, Europe would maybe have crashed already without the swap lines, but that would have just accelerated the schedule of re-organisation we need to do here. Ben the Bernanke put out the swap lines not to 'help Europe' but as one more tool to keep his own game going, and Europe was more or less along for the ride. So yes, Europeans took the swap money, it didn't seem polite to say 'No' and screw up Ben's whole game early on, while he was trying so hard and looking so earnest.
And also true that the euro may split in two, or fragment worse than that. Nothing new there for Europeans. Older folks here have seen several currencies come and go in some countries ... one more up in smoke is not overly-dramatic to us.
But localities here are not in the same bad shape as in the US ... the government structures are very different, and the liabilities aren't there to the same degree as in US states and localities. Jim Sinclair at JS Mineset, for example, understands that very well.
Having lived in the US in the past, I can tell you it is truly extremely different here, and a sweeter life, due to some stronger social fundamentals that bear on the economics. Even what you see in the press as riots and demonstrations here, are actually positive, because Continental European citizens are much less repressed than in the US. (Not the culture of mass jailing and lawyer-judge extortions you have there.)
It is really sweet here, despite it all, because there is a better social contract, better legal systems, & better social support systems which don't let people fall too low.
So ultimately, because of the make-up of the societies here, we will actually write off the bad debts quicker and with more fairness here, though there will be demonstrations and maybe a riot or two as we 'sort it out'. The Germans wound up with a certain leading role in the European game, and they will play out their hand to fulfil that role.
In Europe, Western Europe especially, we will still reasonably share our (smaller) economic pie post-crash, so everyone here still has a little comfort in their lives. Hence we're a lot calmer despite the size of the certainly large mess.
Bank Guy in Brussels:
i see that you did not 'omit' the cities/provinces, etc...with intent to mislead...rather...i DID NOT KNOW...that Europe really is different with respect to the hierarchal layering of DEBT thathat exists in the USA ....
you respectfully took the time to fill in my USA bias, misinformation; OTHERS besides me will be much more able to understand
So, roughly drafted you said/say again that Europe really will be able to untie the 'Gordian Knot' after a tough 2011....
"So ultimately, because of the make-up of the societies here, we will actually write off the bad debts quicker and with more fairness here, though there will be demonstrations and maybe a riot or two as we 'sort it out'. The Germans wound up with a certain leading role in the European game, and they will play out their hand to fulfil that role."
the USA will have to Federalize many of USA traditionally 'States Rights' to get untangled HERE....another re-visit to our Civil War issues State/Federal...
thank you, again..
AND ALSO:
"That is not only ignorant, but potentially a disastrous error. The swap lines were instituted, not to save Europe's ass, but to increase dollar liquidity in Europe...to buy U.S. Treasury bonds."
OK, again, i was wrong, too shallow...thanks for taking the time, thank you
It's a pointless tribalist argument. Hurray for our team....
But this needs addressed: "ONLY the Federal 'swap lines' saved Europes ass..."
That is not only ignorant, but potentially a disastrous error. The swap lines were instituted, not to save Europe's ass, but to increase dollar liquidity in Europe...to buy U.S. Treasury bonds. The apparent high demand for Treasury debt from the likes of Societe General, BP Paribas, Deutsche Bank and especially the British banks, is almost entirely a creation of the Fed's dollar swap lines.
You surely did not imagine that the UK had the funds, in the midst of a government crisis, to quadruple their U.S. Treasury portfolio? They added hundreds of billions over the past year, but not with their own money.