If next Friday the Buck is lower across the board and the BoJ is a bit bloodied Ben Bernanke will light a cigar.
Okay, so our boy Ben is smoking a big fat cigar tonight. He could not be happier. Everything is going his way.
-On the week the dollar got crushed against the majors.
-The Japanese central bank did get its nose bloodied. As of the
close in NY they are down about $700mm on the 9/15 intervention of $25b.
It’s not just the money (actually it is the money). They lost a battle.
The USD/JPY has to go lower. The BOJ has tipped their hand. They are
playing defense. And that is losing strategy. Their internal effort at
QE just got trumped by Ben’s weak dollar policy. They must be pissed.
-Euro group chairman Junker (ZH article) said the weak dollar will hurt EU growth. Sure it will. That is what Ben wants. He wants to export our deflation to our “friends”. They also must be pissed that Ben is dishing this out to them.
-The gold moves were impressive. If I were at the Fed and watching this
near daily slap in the face I would be unsettled. I wonder if they even
care. At one time they did, but not in the last few years. Ben is
probably pleased with the ratchet up in gold. He not only wants to boost
inflation he wants to increase expectations on inflation. High marks on
that score for the week.
-Stocks keep going up. Why shouldn’t they? A weak dollar makes top line
numbers of a big chunk of the S&P look better. Also, you have to
look at what money is competing with. The five-year closed at 1.1%.
After-tax that comes to 0.7%. Against a very low rate of inflation the
tax adjusted yield guarantees the investor a negative 8% return. Not
hard to beat, one would think. So stock multiples have to widen. Right?
If so, can we do this forever? If not, how long can we continue?
-The commodity numbers are blowouts. Sugar, wheat, corn, copper, every
off the run thing you can think of and of course oil are all on the
rise. This is coming home to shoppers soon. Ben is just delighted at
this. He has been preaching the need for inflation.
-Possibly the most significant achievement by Bernanke this week was in
shaping public opinion. Through the press and direct comments from Board
members the word went out, “The Feds gotta do something about the unemployment thing”.
And sure enough the NFP numbers confirm that the private sector is not
doing enough to cover the job losses by the states. So now the thinking
is, “That guy BB had it right. We have a real problem again. I am glad that our pal Ben is going to do the heavy lifting.” Look for the press to confirm this over the weekend. It's part of the propaganda.
So Ben has every reason to celebrate this evening. Everything on his list has a +
next to it. I’m looking at the same list and I want to puke. Raise the
cost of things that we consume by trashing the dollar is what we need?
Destroying savers so they are forced to cut consumption is a cure? For
whom? Piss off our “friends” and “investors" is good
policy? We shall see. It’s hard to blunt the argument that a good stock
market is synonymous with better times. But this market is bought with
POMO. And everyone knows it.
There is another thing that Ben can celebrate this evening. He is
clearly running the entire show. Treasury has had not one word to say on
the monetization of our financial system. I always look into things and
ask why? Tim Geithner is out, is why. We just have to wait for the
election. Between then and now Tim will be used as cannon fodder in a
face saving effort at avoiding a trade war with China. Summers is gone.
So Ben is holding all of the cards. Exactly how he wants it.