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Axel Merk: Why Is Anyone Still Waiting to Sell the Dollar?
From Chris Martenson
"The Fed can buy billions, even a trillion or so, but if and when the market is moving against the policymakers then there is no stopping. The Fed cannot stem that tide. There is only so much that they can manage and so it is something that they have to watch very carefully. At the same time, they are not terribly concerned. If the bond market is falling, you do not know whether it is because of more economic growth or because of more inflation, and you really only know after the fact.
So for now people think “We have economic growth kicking in”, until the next economic numbers are not as great as expected and so it is a bit like a boiling frog syndrome. You print in all this money, you think everything is great and you have some warning signs but you think “Things are moving along” and by the time that you really see the damage you have created, it is quite late to undo this damage and it is going to be very, very expensive and painful."
So remarks Axel Merk, currency specialist and founder of the Merk Mutual Funds, who is perplexed by those waiting for additional warning signs to sell the dollar. In his view, we have all the evidence we need. He and Chris discuss the inner workings of the Fed and the course it is determinedly charting - and the looming dangers ahead for the US dollar.
Click here to listen to Chris' interview with Axel Merk (runtime 40m:55s):
Read the Transcript of the Podcast
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In this podcast, Axel explains:
- Why Ben Bernanke is hell-bent on debasing the US dollar to spur economic growth
- How the politics of the Fed work, where the power lies and which arguments and actions are likely to carry the day
- Why inflation expectations actually matter more than actualy inflation, and why the Fed will not rest until it is satisfied the market expectations for inflation are higher
- That the US is on its way to a fiscal trainwreck - a reality our political leadership continues to lack to backbone to address honestly
- The Fed's powers are prodigious, but not as great as the market. If and when the market moves against policymakers, nothing will stop it. The growing risk is we quickly tip into the inflation the Fed wants, which then quickly leads to runaway prices
- His outlook for gold and why he thinks this "ultimate currency" can go much higher from current levels
- How the US is caught in a Catch-22: our loose monetary policy continues to encourages credit consumption that makes us increasingly vulnerable; but we're so indebted already that if the Fed tightens rates, the economy could easily fall into a full-blown depression
- How currencies mutal funds can responsibily reduce their risk exposure to the US dollar while offering investment gains
Axel Merk is president, chief investment officer and founder of Merk Investments. Axel is a noted expert on world currencies and manages several mutual funds that manage currency risks for investors. For years he has been an outspoken critic of US monetary policy, warning investors that the current course risks seriously devaluating the dollar. The past few years have proven his warnings to be accurate. He is also the author of Sustainable Wealth, a very readable guide to understanding our macro economic environment, the risks today’s investors face, and how they can mange their finances to achieve financial stability .
Our series of podcast interviews with notable minds includes:
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Yes, a trade. More or less short term - weeks to months. Though I wouldn't count out the chance that dollars could outperform nearly every other asset for the next few years. This has been a 10 year bear market in the USD, and we've been bouncing around the lows on extremely negative sentiment since 2007 (though despite all the shouting about hyperinflation and a dollar crash, the dollar index is still no lower than 3.5 years ago).
Great site! I bookmarked it and look forward to reading it often. I like your honesty in critisizing your own trading performance.
Thanks. Glad you like it. It's been a hobby blog and trading log for me since August 2008. Was lots of fun back then since I was hugely short stocks & commodities and long dollars and bonds, one of the few deflationists and dollar bulls at the time. I post less often these days but try to keep up with larger moves, no longer squiggles. Lots of libertarian, anti-central banking stuff on there as well.
This is typically the set-up for a hard dollar rally and sell-off in stocks and commodities.
Stocks,yes.
PM's No, nothing like '08.
We are far smarter, and onto their tricks this time.
Why?, we know how they are playing the game now.
Also, the world, does not see the dollar anywhere close to what it was in'08.
It will IMHO, NEVER be seen as THE safe haven or refuge again.
My money is on PM's, the BEST equities(at bottom dollar),and Oil.
End of story.
Fool me once, shame on you, twice shame on me.
The trucks will be backing up to load up, and it won't be dollars going in them.
If a Miracle from heaven were to rid us of the debt's incurred, then maybe we would have a shot.
Not going to happen, Free Will has made it's bed now we get to lie in it.
Some will just have better beds.(ZH folks I would say for the majority,and those like minded and onto the ponzi).
What are your thoughts on waiting until early summer?
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Why wait? We have the set-up now, and USD lift-off could happen at any time. Definitely nnot the time to be long equities, commodities or CAD/AUD/EUR,etc without tight stops or hedges. Crazy to be long risk at a time like this.
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=188_euro-approaching-another-cycle-top-2011-04
BUY $USD... one word of a rate rise in the US will send the shorts covering like mad !
I recently had an interesting debate about the consequences of allowing the U.S to breach the debt ceiling and it's effect on the dollar.
One side was saying a breach would be dollar positive. The other side was that the breach would be dollar negative. I felt I was right but the counter argument seemed to make as much sense.
Any feedback amongst you all?
Not from me. I don't give a shit.
It's a self created catch 22....how?
Forgetting the debt is fraudulent. One should never cut needed services or print money out of thin air to service fraudulent debt.
Cancel the fraud through Glass-Steagall and there is no catch 22.
It's the pretending that the debt is valid and that we must pay off fraud that is allowing the idiots to say print or cut. Since the print people are in power, that's what they are doing. While the other side, rather than have a real position, says cut to service the same fraudulent debt.
When all sides are idiots, they never get to the point. It's the fraud that is forcing either idiot way forward.
Instead of putting out the fire we got one side saying...knock down the house, while the other side is saying build a new one. How about calling in the firefighters to extinguish the small fire before it gets bigger and burns the place down?
Well luckily Glass-Steagall is a known solution and is akin to calling in the firefighters to actually deal with the real problem, the fraudulent debt.
Most people, even educated people do not have the cojones to defy the consensus in the collective idiocy of the media and their peers who are also unable to think outside the box. We have read countless posts about normalcy bias, here it is. The question is whether more people can shed their normalcy bias before the this crisis gets really bad and a panic removes their normalcy bias for them and their wealth with it.
Think back to 2008. When the crisis hit, some of you hardcore analysts may have understood it but I think a lot of people had a hard time wrapping their head around the events. So a quick fix was formulated and the central bank began to observe the effects of that action.
Time passes, and after a brief improvement all of the indicators begin returning to the same undesirable state. Another action is taken, and more observations ensue.
We have now had TARP, QE1, QE-lite, and QE2. One event is a fluke; two events is a coincidence; three events is a conclusion.
I believe that Ben thinks he has this economy on a string, that he KNOWS it. So now that he has established a pattern and the effects of various policy actions, surely he must have some kind of exit strategy. It's not like Ben doesn't understand that printing dollars decreases the value of our existing dollars. I think that in a way, he is trying to press people who do grasp the decline in the dollar value to spend their dollars. Spending dollars gets the economy moving again, right? Sure, PMs have been the asset of choice lately, but once those have risen above some threshold People begin to look at other assets that haven't had so much attention. The last thing he wants is people hoarding dollars.. they have to spend them for this train to keep its momentum.
Now, I don't know what kind of yarn he intends to tell next week but I suspect that he intends to do a little recent history lesson, that he will try to prove some of his theories based on easing and whatnot, and then unveil his strategy for turning it around. There is a plan, right? This speech by Bernanke has been planned for some time so does the Fed have a crystal ball where they knew that this speech would be necessary around the end of April, or has the market priced in speculation about what he might say, or both?
Feel free to flag, I'm kind of new to this and just hold some silver in an attempt to preserve a little of my past earnings. But if I have it all wrong, I'm very interested in learning from your perpsectives... so reply and correct my misconceptions!
Ben's strategy was in part to increase the velocity of money, just not too much. You are correct about that. They also know they have to manage expectations, so they are likely to make a few hawkish comments sooner or later, depending on how the data goes.
Ben wants to scare people into spending more money, not scare them out of the dollar completely, so he is walking a fine line.
Even at 95% emplyment, all eight cylinders in full swing cannot save us.
The debt is too great.The tax revenues off of FULL employment is nothing comapred to the interest due yearly.
A default, or a new currency/reset will be needed, or we're dead meat.
When an employee who never called out is let go by said company and now thinks it doesn't make sense to work......it's time to panic! It's time to panic!
95% employment saves us because then and only then we can AFFORD the default/reset.
Gotta give everyone something to do first, then you can get away with anything. Folks will sleep in shacks and eat kibble, but only if you keep them busy making a better future.
His mandate is full employment and price stability.
Are you suggesting some sort of coordinated political/syndicate and banking cartel action to achieve some other result?
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a checklist to live by
Monetary policy is for non-sorveign currencies only, Ben can do whatever he wants as long the U.S. is maintaining bases around the world to control trade routes and access to commodities.
Monetary policy is for non-sorveign currencies only, Ben can do whatever he wants as long the U.S. is maintaining bases around the world to control trade routes and access to commodities.
Sorry for double post, I wasn't patient enough, sorry again, I promise never to do it again.
Dobbelpost
Monetary policy is for non-sorveign currencies only, Ben can do whatever he wants as long the U.S. is maintaining bases around the world to control trade routes and access to commodities.
This is a reply to jmc888, i know i did wrong was to eager to reply to do it at the rigth place hehe:
Yes yes yes! thanks for a good metaphor and pointing out the obvious. The debt is fraudulent to begin with. Let them fail, reinstall Glass Steagall act and separate commercial banking from investment banking, and please do away with FDIC!
Libertarians rule now we have the gold.
And Anarchy isn't chaos you dumb fucking clowns. Big government is chaos and corruption. Take your stupid banking cartels and your organized crime syndicate politics and shove them up your baby boomer paper dollar stuffed asses.
I've picked up currency trading again in the last year, and thank GOD I have...and also that Borders has been going out of business, because their finance books are on sale now and it's awesome. Keep going for the yuan, and look for Canada's dollar to increase in value if the KeystoneXL pipeline project passes through Congress.
www.forecastfortomorrow.com