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Citi Issues USD Warning: "Significant Downside Risk For USD And JPY If Market Begins To Price In Unsustainable Debt Risk"

Tyler Durden's picture


As anyone who has been following the VIX, US CDS (which is quite interesting as the US catastrophe trade appears to have become selling CDS to fund gold purchases in euros: more on that eventually), or stock markets in general has grown to appreciate all too well, no matter the amount of perceived risks, the market continues to shrug off any bad news: after all, the Bernanke put means that the greater the systemic shock, the higher the likelihood that the Fed will get involved yet again and push up all risk assets. However, the same can not be said about the dollar. The currency which in 2011 has traded like anything but the world's reserve currency is less than 1 point away from 2009 lows. But that could be just the beginning. Citi's head of FX has released a not warning about the potential coming avalanche to the greenback should debt ceiling negotiations hit a snag: "what we are looking at here is very much the tail risk event that the
debt ceiling negotiations unexpectedly hit an impasse. The question is
what the impact would be on USD." Englander's summary observations: 1) The USD will be in big trouble if investors get the sense that the
debt ceiling negotiations have gone beyond the expected choreography
into a zone where there is perceived risk to US credit; 2) More broadly, we think FX markets are increasing the attention they pay to fiscal sustainability relative to monetary policy; 3) The FX response may be non-linear so G10 countries may have a
false sense of security in seeing little FX response to deterioration so
far. Then again, perhaps a major step down in the dollar is precisely what the Fed wants...

Englander's summary view:

  • The 2011 budget impasse was resolved with little markets impact
  • If a breach of the US debt ceiling comes into question the impact will be larger
  • Since September 2009, a 100bps increase in CDS has been associated with 8% currency weakness …
  • … but there also is a level effect as poorer credits have faced larger FX pressures

Full note:

The USD dodged the 2011 budget bullet last weekend and is now facing the debt ceiling cannonball. Although the debt ceiling is not normally considered a tool by which fiscal consolidation is achieved, it seems likely that there will be a fair amount of brinkmanship before the debt ceiling is raised. Investors and most economists expect political posturing as the debt ceiling debate drags on through late May and June, but no event that affects perceptions of US credit quality. So far US yields are showing no pressure and US CDS is trading well within the range of the last 15 months.

So what we are looking at here is very much the tail risk event that the debt ceiling negotiations unexpectedly hit an impasse. The question is what the impact would be on USD.

Below we present a cross-section analysis across more than 30 major currencies on what impact a deterioration in credit has on the currency. The analysis covers the period September 2009 to the present – September 2009 was the trough in spreads between financial crisis related sovereign credit concerns and the European sovereign credit blow-up, so it gives us a good base for comparison.

We find a surprisingly strong impact of credit deterioration on currencies. A 100bps increase in CDS has been associated with 8% currency weakness over this period, but we also find that countries that started the episode with higher CDS tended to fall more or appreciate less than others. Having a September 2009 CDS level 100bps higher in the cross-section is associated with 7% less subsequent appreciation, given no further CDS deterioration. Hence poor credit seems to represent a headwind to appreciation beyond any additional deterioration.

We have three takeaways from this.

1) The USD will be in big trouble if investors get the sense that the debt ceiling negotiations have gone beyond the expected choreography into a zone where there is perceived risk to US credit;

2) More broadly, we think FX markets are increasing the attention they pay to fiscal sustainability relative to monetary policy;

3) The FX response may be non-linear so G10 countries may have a false sense of security in seeing little FX response to deterioration so far.

The debt ceiling negotiations

We have little to add on the debt ceiling negotiations except to reiterate that there is very little evident concern in either FX or FI markets. Both 10- and 30-year yields are in the year’s range, the 30-year Treasury auction on April 14 was very well received and there is no stress evident on CDS. Last weeks budget negotiations probably had a small negative impact on USD, and the concern about the process is a lingering negative, but the impact of any concrete debt ceiling risks would be much higher.

Impact of credit deterioration

We regress the Sep 2009 to April 2011 change in the value of 33 currencies against the beginning level of their sovereign CDS and the change in the sovereign CDS, the correlation of the currency with the S&P and a dummy to distinguish between G10 and non-G10 currencies.

The strongest association by far is with the CDS variables. The results imply that a currency with a 100bp higher CDS in Sep 2009 tended to appreciate about 8% less through Apr 2011, even if the CDS did not move, while a currency with its sovereign CDS rising by 100bps tended to appreciate about 9% less. (We ran our regressions using USD as a base but in a cross-section regression the base currency does not matter.)

The measure of riskiness that we used, the correlation with the S&P, was marginally significant, indicating that over this long period, the CDS coefficient did not reflect the appetite for risk to any great degree. Being in the G10 had a modest negative effect and being heavily correlated with risk had a marginally significant positive effect but they did not affect the coefficients or results greatly.

Figure 1 presents the actual currency changes as well the changes predicted by the model specified above. For such a simple equation it explains a fair amount of the currency variation. Most importantly for the USD it seems to have quite a bit of explanatory power for the currencies that have performed the poorest versus those that have performed the best. In some regressions we included levels and changes in swap spreads, but these did not seem to provide significant additional explanatory power.

We did not include the EUR in our regression since the combination of national sovereign risks was not necessarily linear. However, we did calculate a debt weighted average of CDS and CDS changes and used the estimated coefficients to get an estimated EUR impact. Interestingly the actual change in the EUR very much matched the predicted and the 96bp increase in debt-weighted CDS suggests that the EUR would be about 8% (11 big figures) higher had the EUR sovereign CDS retained their September 2009 level. That would explain much of the deterioration in EURXXX crosses against commodity and other risk-correlated currencies.

Visually we observe that the currency effect seems to become significantly larger when the CDS level was above about 90bp. Moreover the currency impact seems to kick in as soon as there is any deterioration. We do not want to emphasize this, but it comes back to the risk that there is a false security in having seen no effects till now.


This provides preliminary indication that FX markets have come to focus on debt and creditworthiness in addition to the standard macro variables. It suggests both potential upside for the EUR and other currencies that get their sovereign debt situation under control and significant downside for USD and JPY if markets ever begin to price in concrete risk that debt will become unsustainable.



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Thu, 04/14/2011 - 17:52 | 1170515 Quintus
Quintus's picture

If the market does NOT begin to price in unsustainable debt risk, then the market is dumb.  Seriously, is the debt problem going to go away by itself, or will the Teleprompter-in-chief really deal with it?  Answers on a postcard please, to whatever address you like.

Thu, 04/14/2011 - 18:01 | 1170530 AN0NYM0US
AN0NYM0US's picture

Dear Vikram:

Have one of your people scare the markets to make sure the debt ceiling is raised.




Thu, 04/14/2011 - 19:20 | 1170760 OldTrooper
OldTrooper's picture

Bingo.  And there may be martial law, rioting, cats and dogs sleeping together - we're talking disasters of biblical proportions - unless you raise that debt ceiling.

Thu, 04/14/2011 - 20:32 | 1170922 narapoiddyslexia
narapoiddyslexia's picture

Exactly. Believe nothing any of these liars produce.

Thu, 04/14/2011 - 22:01 | 1171077 Ned Zeppelin
Ned Zeppelin's picture

Ditto. The debt ceiling will be raised.  All proceedings before that event will be the foreplay. 

Thu, 04/14/2011 - 22:27 | 1171167 66Sexy
66Sexy's picture

So I am supposed to lend credibility to a TBTF bankrupt bank?


Watch for a dollar RALLY.

Thu, 04/14/2011 - 18:39 | 1170659 Cdad
Cdad's picture

If the market does NOT begin to price in unsustainable debt risk, then the market is dumb.

The market for US dollars HAS priced in the risk.  It is every single OTHER market that has NOT priced in risk [less precious metals, of course].  And this is exactly the point.  Citi waited until TODAY to publicly announce that it perceives a risk to the dollar.  Really?  This is everything the criminal syndicate known as Wall Street has been doing...for decades.

So standby for a fear gap move on the be followed by a dollar rally that will likely crush every last OTHER asset class that you can possibly think of.  Throw on top of that the CME hiking margins, and Goldman suddenly concerned about copper and oil, and what you got is a typical bumble fuck during which the guy with the most natural counter intuitive tendencies wins.

Better yet, go to cash and wait.  And if you don't agree...well, just report to the nearest Google chart...and I think you'll have a epiphany.  In the words of Tyler Durden..."you are warned."

Fire hose please...a couple of them in front of each and every building anywhere near the corner of Wall Street and Broad.

Good grief [and by that I mean, I sure hope all those "special" fellows over at Citi receive my shipment of donated hockey helmets...'cause I think they really need them.]

Thu, 04/14/2011 - 19:47 | 1170823 SamuelMaverick
SamuelMaverick's picture

Sounds about right except for one thing, the rally in the dollar / commodity downturn will be short lived when reality reasserts itself. M1 and M2 are thru the roof, velocity is in the crapper, and the never ending flow of the Fed treasury / bank ponzi fiat that the US gov is spending is unrelenting.  The end of QE2 will hopefully give us a small window of time to buy PM's on the cheap. No joke, BTFD.












































Thu, 04/14/2011 - 19:50 | 1170841 Cdad
Cdad's picture

Sheesh Samuel...ease up on the martinis...and the space bar.  Also, what the Fed is bringing is ANYTHING BUT NEVER ENDING.  It is quite finite...but...

Agreed...any dip will be brief.  My will be violent.  So...going forward from today...the greatest part of the trade will come from not being long the fundamental story while the criminal syndicate known as Wall Street executes/murders/arbitrages existing long positions.  After all, that is the only value added the Street brings...creating the spread between the truth and perception.

I ask...did you read what I said?

Thu, 04/14/2011 - 22:48 | 1171228 SamuelMaverick
SamuelMaverick's picture

Yes , I did read what you wrote. You did not mention a timeframe for trading on the possibility of what will probably happen.  At the end of QE1 the devastation was spectacular. The window for taking advantage of it was only a couple of months. Probably will be the same for QE2. If I am right, I will be buying my silver back somewhere in the $30's, if I am wrong I will be buying it back at $50. Either way ,I will be buying come June and July. Also, no martini's, and no space bar. I have no idea what the hell happened with the empty space in the last post.

Fri, 04/15/2011 - 02:15 | 1171556 narnia
narnia's picture

The timing of this story is obviously politically motivated, but I think Citi is right.  The negative interest rate precipitated dollar decline would be more dramatic to date if the risk free assumption were taken out of the equation.

As long as the Fed continues to artifically keep rates down, I'm not seeing a whole lot of optimism for the $.  Euro weakness? at some point. Foreign flight to US assets? at a certain exchange rate way south of where it is, US would be a bargain. Export explosion? doubt it.

On the other side of that leger, the Yuan could float, Japan could come calling for their savings, the Euro could comparatively improve, the Saudi king could liquidate his $ position, the US municipal bond market could implode, the world can speed up diversifying away from the $ as a reserve currency, etc., etc.  I'm not sure where it will trade from day to day, but the outlook is no bueno. 

Thu, 04/14/2011 - 17:56 | 1170520 Exposer of Inte...
Exposer of Internet Shills's picture

Silver Bitchez!

Thu, 04/14/2011 - 17:54 | 1170521 Dan The Man
Dan The Man's picture


.....ahem!... QE3 ???  Whenever you're ready !!!

Thu, 04/14/2011 - 17:54 | 1170522 Monday1929
Monday1929's picture

Again I ask, Why would anyone listen to anything these failed, insolvent bankers have to say?

Thu, 04/14/2011 - 18:01 | 1170547 NotApplicable
NotApplicable's picture

Because this warning isn't a report of risk, but rather a threat of what they will do if the debt ceiling isn't lifted.

It's the same song and dance we heard with TARP 1, "bail us out, or else the market will crash." Congress votes against it, market crashes, Congress votes again, passing it, and the ponzi lives quietly for another day.

Thu, 04/14/2011 - 18:51 | 1170687 andybev01
andybev01's picture

Just like our dear leaders admitted that yeah, we waterboard people.

So what? Waddaya gonna do about it?

Thu, 04/14/2011 - 19:26 | 1170785 MrBinkeyWhat
MrBinkeyWhat's picture

"This is not a is a threat".

Cough up tax serf bitchez.

Thu, 04/14/2011 - 18:15 | 1170589 buzzsaw99
buzzsaw99's picture

Exactly. Nobody cares what that stupid fascist puke C has to say.

Thu, 04/14/2011 - 17:55 | 1170528 OutLookingIn
OutLookingIn's picture

"The USD will be in big trouble" WILL?????????


Once on the QE road, there is no way off.

Thu, 04/14/2011 - 17:59 | 1170533 silvertrain
silvertrain's picture

And just think that these people are getting paid for saying shit like this....

Thu, 04/14/2011 - 18:02 | 1170541 OutLookingIn
OutLookingIn's picture


Just look at how the fiat's have faired when priced in silver or gold?

All are going into, or are in the toilet!

Thu, 04/14/2011 - 18:20 | 1170600 I am Jobe
I am Jobe's picture

You can only say things like this if you graduated from an Ivy league school. State schools who gives a F? I guess C will provide free Vaseline if one opens an account with C.

Thu, 04/14/2011 - 18:04 | 1170545 virgilcaine
virgilcaine's picture

Tyler.. GOOG!  Timing the article posting on its MISS.

Thu, 04/14/2011 - 18:05 | 1170557 r101958
r101958's picture

They have a firm grasp of the obvious.

Thu, 04/14/2011 - 18:05 | 1170558 vote_libertaria...
vote_libertarian_party's picture

"Unsustainable debt risk"?

What?  I'm sure every person in the country can afford the $57,000 they owe. Leave out kids?  ouch.  Leave out people not working?  double ouch.  Leave out minimum wage workers?  triple ouch.  And we are adding $1.8T per year?...

Thu, 04/14/2011 - 18:10 | 1170567 Hedgetard55
Hedgetard55's picture

"When the world is running down,


You make the best of what's still around."

Thu, 04/14/2011 - 18:10 | 1170573 Camtender
Camtender's picture
"Significant Downside Risk For USD And JPY If Market Begins To Price In Unsustainable Debt Risk" - No Shit........
Thu, 04/14/2011 - 18:15 | 1170583 Racer
Racer's picture

Fake Market to Citi :  (Hearing aid switched to 0 volume)

Thu, 04/14/2011 - 18:18 | 1170594 AldoHux_IV
AldoHux_IV's picture

Translation: QE to infinity.

In other news the race to destroy one's currency just got more competitive.

Thu, 04/14/2011 - 18:18 | 1170595 buzzsaw99
buzzsaw99's picture

Now that we got our bailouts & bonuses it's time for peon austerity bitchez!

Thu, 04/14/2011 - 18:22 | 1170612 Hot Shakedown
Hot Shakedown's picture

US Dollar has now bottomed

Thu, 04/14/2011 - 18:25 | 1170617 Slin
Slin's picture

Englander.....I'm so scared...  Hey crook.. have you ever had your shit pushed in?

Thu, 04/14/2011 - 18:24 | 1170622 Quinvarius
Quinvarius's picture

USD/JPY, what happens when two black holes collide?

Thu, 04/14/2011 - 21:34 | 1171022 YouBetYourLife
YouBetYourLife's picture

You get Malia and Sasha.

Thu, 04/14/2011 - 18:31 | 1170628 virgilcaine
virgilcaine's picture

OT/Other news

TOP STORIES Google 1Q earnings miss analysts' target- AP

Google's first-quarter earnings came in below analyst projections as the Internet search leader sped up hiring and increased spending other areas to

drive up its expenses


-31.32 AH


Thu, 04/14/2011 - 18:32 | 1170640 Deep
Deep's picture

I love Zerohedge and all Tyler does, best site on web, but what I don't get is the constant cheerleading of a US dollar collapse. IMO that is just plain dumb and ignorant. A US dollar collapse will effect everyone, and i repeat everyone. It would be an absolutley devestating event, oil would be at god knows what, the grains, livestock, etc. The world would enter depression quite quick IMO, and wars would start.

I doubt silver or gold would keep up with the system collapse. And even if it did, most would be out of jobs, and everyone on this site acts as if 100% of their wealth is in PM's. I call bullshit on that.

So while everyone here is cheering it on, i think these same people would be then shitting themselves at what is happening around them.

Just my 2 cents.

Thu, 04/14/2011 - 18:51 | 1170683 hack3434
hack3434's picture

Wrong...not everyone is a coward and the issues must be dealt with now instead of trying to pass it on to the next generation. Grow a pair ffs.

Thu, 04/14/2011 - 18:56 | 1170699 andybev01
andybev01's picture

Nihilism, Bitchez!

Thu, 04/14/2011 - 18:57 | 1170707 Deep
Deep's picture

ok so dealing with the problem is to let the dollar crash. good one. you and the fellow ZH'ers here are quite weird. There are other ways to deal with it, like stop spending, raising taxes, reducing military, etc. etc. Ya we will have a very painful recession, probablly a depression, but it's better than a dollar collapse. but let me guess, your whole net worth is in silver, and your house and car are made of silver, and you wear silver clothes.

Get a life pal.

Thu, 04/14/2011 - 19:06 | 1170727 hack3434
hack3434's picture

The situation will dealt by force rather than choice. Deal with it...If you care some much about saving the US Gov't may I suggest you go here:

Donations seem quite low for the year. 


Thu, 04/14/2011 - 19:19 | 1170762 Deep
Deep's picture

Another poster above mentioned it, you really think the FED would allow a dollar collapse. They could raise rates, force congress to get serious, ya it would be very painful for everyone, but this outcome is much better than a us dollar collapse. You think a us dollar collapse is good for anyone? no it's not.

I ask anyone, all the elites and powerful, would they rather have a deflatinary collapse or hyperinflation and us dollar collapse. think about it.

All the dollar bears and speculators in commodities are being ropped in to believe the dollar "is on the verge of collpase"  to get slaughtered by Ben and the boys. Is a hyperinflationary event good for anyone. $300 oil is good for anyone?


Thu, 04/14/2011 - 19:36 | 1170803 hack3434
hack3434's picture


  • A currency "collapse" is not the end of the world.
  • We have ZIRP in place and we are barely getting by
  • Housing can't catch a bid with historically low rates 
  • IR Derivatives are a mess
  • The emperor has no clothes and the "elite" have the means to leave if TSHTF


Thu, 04/14/2011 - 19:46 | 1170826 Deep
Deep's picture

when the currency is the "reserve", ya it would be all hell broke loose. China loses what, 2 trillion, japan loses close to a trillion, all the pension funds all over lose everything in UST. Oil would be at 300+, all grains would be thru the roof, most of the world would starve when wheat is $200 a bushel.

the fact that we have a reserve, the us would not be the only one thats suffered, the whole world would suffer.

all i am saying is, a us dollar collapse is a much worse case then lets deal with the medicine, let the markets collapse 30-40%, slash spending, end QE, write off major debts.

But i guess you would rather have a us dollar collape, for what reason i dont know, but if you are like most ZH'ers, you want to see armagedden. For what reason, i have no clue. 

Thu, 04/14/2011 - 20:31 | 1170923 Howard_Beale
Howard_Beale's picture

Not all of us want to see that, Mr. Deep. Please don't believe this blog is only survivalists with no perspective. We are a very diverse group and I, for one, do not want to see a dollar collapse. I know I am not the only one. 

I have some PM's that were bought long ago. But in no way was my buying based on a currency collapse.

Thu, 04/14/2011 - 20:41 | 1170943 narapoiddyslexia
narapoiddyslexia's picture

Armagedden is the only way to bring down the government, and even then it might not work. What you suggest in your comments is sensible and if it happened then the government in its present form will survive. This possibility is disturbing, as the USG is an abusive, murdering despotism, that is ever more imprisoning its own people for political crimes. If the world has to suffer to give us a reasonable chance to destroy the Evil Empire, then it may wll be worth it in the long run. We won't live long enought to know in any event.

Thu, 04/14/2011 - 21:34 | 1171021 Mark McGoldrick
Mark McGoldrick's picture

Virtually everyone who has the capacity for reason, logic and the ability to understand real-world, civilized solutions would agree with you. Unfortunately, your logic will fall on deaf ears around here.

You need to remember who your audience is here: doomer libertarians, many of whom lust for urban warfare and anarchy so they can play out their bug-out, GI Joe fantasies. 

Doomer libertarians are quite similar to religious fanatics. They'd burn the world to the ground to protect their rigid, archaic ideologies (no matter what the consequences), rather than adapt to the dynamics of modern society.   

Personally, I think some aspects of libertarian ideology have quite a lot of credibility, but, just like Christian fundamentalism, that message is overshadowed by the whacked-out, cult-like devotion that you see among the followers.

When you realize that doomer libertarians are as goofy as faith healers, you'll suddenly find them to be a source of wonderful entertainment more than anything else.  

And that's the primary reason I roam through here...  for the laughs. 

Thu, 04/14/2011 - 22:17 | 1171127 mayhem_korner
mayhem_korner's picture

Thanks for gracing us with your broad-brush.  If we stop being funny, will you leave?

P.S. Keep your protective eyewear on while your in your closet polishing your stinger.

Thu, 04/14/2011 - 22:52 | 1171178 hack3434
hack3434's picture

As if our discussions can change the outcome...Believe what you want, it's a free country (sort of).

Thu, 04/14/2011 - 22:53 | 1171241 Silva Plata
Silva Plata's picture

When asked why he ordered the murder of a guy over a $30,000 gambling debt John Gatti is supposed to have said, "In a business where there is no accountability, there has to be accountability."

Until there is accountability for the crimes that killed the dollar it doesn't matter if we want the dollar to collapse. It's already a done deal. Let's hope next time there's more accountability.

Fri, 04/15/2011 - 00:41 | 1171438 Reptil
Reptil's picture

Postponing the inevitable (downturn of a cycle) is what got us here. A fake global economy built on a reserve currency that was once good as gold (and therefore accepted).

You're asking for more of the same? Doesn't sound very logical to me. Regardless what anybody here says or thinks, apart from the destruction of wealth for all those that don't own any PMs or stock (unsuspecting Joe 6 Pack), the issue at hand is that no one anywhere will want to own dollars. Ergo, end of dollar as reserve currency, enter SDR from behind the curtain.


Thu, 04/14/2011 - 22:15 | 1171118 web bot
web bot's picture


It is not in the interest of the US to see it's currency collapse. Do you think China and a host of other countries would sit by and watch their holdings wash away? Think again.

The US dollar is going to collapse.. but it will take a systemic issue to make the dominoes fall. The US can still continue for the next several years on its current slow-drip euthanasia course... its the black swan events, the items that are on the periphery that we can't predict that have me worried. For example, let Spain or the UK default, or interest rates rise quickly... then you have your scenario for default.

Fri, 04/15/2011 - 11:25 | 1171279 cranky-old-geezer
cranky-old-geezer's picture

I ask anyone, all the elites and powerful, would they rather have a deflatinary collapse or hyperinflation and us dollar collapse.

1) Bernokio knows a dollar collapse is coming.

2) Bernokio wants a dollar collapse.

3) Bernokio is loading up his banker bosses with as many dollars as possible ahead of said collapse.  This is the real reason for bailouts, (worthless) asset purchases, QE, record banker bonuses, etc.

4) Bernoikio knows he must keep the feds happy so they'll allow him to keep loading up his banker bosses with as many dollars as possible ahead of said collapse.  This is the real reason Bernokio keeps buying treasuries and keeps interest rates at zero.

5) Feds don't care if dollar collapses, they can borrow all the dollars they need, a trillion a month, 5 trillion a month, 10 trillion a month, 100 trillion a month, whatever, they don't care, whatever interest they pay is refunded back to them.

6) Bernokio wants to wipe out the middle class.  It's why he wants a dollar collapse.  And he's getting rather impatient about it.  But he knows he has to let the dollar collapse slowly so dumbass middle class sheeple will accept it.  And they will accept it. They won't revolt. They'll lose everything, sink quietly into 3rd-world poverty, no complaints, no revolt, no problem.

Americans have proven they'll accept all manner of government abuse, even being reduced to poverty via taxation and inflation (dollar debasement). 

Fri, 04/15/2011 - 00:31 | 1171424 dalkrin
dalkrin's picture

The Fed may be the dubious custodian of the dollar, but what it can't control is when our government gets itself into debt, especially in the case of international obligations.  Last time I checked the squid was not being welcomed by the Chinese dragon. 

A hyperinflationary event will be terrible for plenty of people, but by this point the dollar clusterfuck has taken on a life of it's own, beyond the hand of its creators.  It will reverberate and erupt much like a natural disaster.  This coming collapse may have been planned, but if so the ruling cabal has trifling regard for the little people, obviously.



Thu, 04/14/2011 - 19:35 | 1170806 pazmaker
pazmaker's picture

Are you really niave enough to believe that any American politician is willing to make the tough decisions and make the cuts needed and commit political suicide?


Sorry I don't see that happening the gall, greed, conceit and power thirst that exist within our system will never change unless something catastrophic happens.

Thu, 04/14/2011 - 20:10 | 1170890 el Gallinazo
el Gallinazo's picture

Last time we approached HI, it wasn't a politician who stopped it but an unelected Tsar who raised the prime to 21%. His name was Paul Volker for those of you under 30. He hit the economy over the head with a sledge hammer. He drove a lot of people out of business, especially in construction. William Greider wrote a great book about it called Secrets of the Temple. Well, he is not 6 foot 6, he's bald, bearded and pudgy, but our current Chairsatan might just choose to do the same thing. And yeah, Carter appointed Volker, and Volker was more responsible for Carter's loss than any other factor. It's the economy, stupid.

Fri, 04/15/2011 - 00:32 | 1171431 dalkrin
dalkrin's picture

Got that book checked out, sitting here on my desk.  Now if only I could tear myself away from ZH to educate myself about the workings of said temple.

Thu, 04/14/2011 - 21:44 | 1171048 YouBetYourLife
YouBetYourLife's picture

Yes, unfortunately only a "reboot" will do the trick. 

Which means a mini-Dark Ages (or second French-style Revolution), I believe, for a period which may be a decade or two.  The good news is  that there's too much info and tech around to allow chaos to last as long as the original Dark Ages.

But this one will be horrific while it lasts.    

Thu, 04/14/2011 - 21:28 | 1171010 Tunga
Tunga's picture

@Deep -707 "Cellulose guar gum! It's paper!" - Charlton Heston. - Soylent Ween. 

Thu, 04/14/2011 - 18:55 | 1170697 cossack55
cossack55's picture

It seems most ZHers are into that "free market" and "liberty" and "rule of law/justice" thing.  The only way those assets will return to this nation is the complete and utter destruction of the US gubmint.   The collapse of the FRN is a means to that end.

My 2 cents.

Thu, 04/14/2011 - 21:10 | 1170981 Tunga
Tunga's picture

Tunga is working the problem cossack55. Please hold. Your call is important to us.

Thu, 04/14/2011 - 19:01 | 1170726 mayhem_korner
mayhem_korner's picture

No one is really cheering.  What you get here, taken in aggregate, is rigorous analysis and insight that lifts the veil on what the mainstream is told to think, and the dangerous, opaque schemes being propagated.   What appears as a random stew of surprise "events" to the sheeple is to this crowd a sequence of predictable outcomes parsed by time and the noise of short-term interests.

The corollary to these posts is a silent whisper of "when is the rest of humanity going to see this as plainly as we do."


Thu, 04/14/2011 - 19:05 | 1170729 NotApplicable
NotApplicable's picture

As I've said here before, what some call cheerleading, others recognize as the 1st Rule of Holes, which of course, is to stop digging.

Like it or not, the dollar has already been murdered, and there will be hell to pay for it. What is occuring now is that the dollar is being kept in a zombie-like state. This does nothing but increase the size and scope of the upcoming hell.

The only ones who wish to avoid this hell, hope to die first (as that is the only escape). The rest of us, are concerned about others who will not be so lucky.

You may think our concern for others is dumb, but compared to putting one's head in the sand, it is the only viable option for the future.

Thu, 04/14/2011 - 19:30 | 1170796 buzzsaw99
buzzsaw99's picture

The fed and the corporate execs are the ones cheering a dollar collapse. They steal with impunity and will not stop ever. ZHers have merely adapted to the reality.

Thu, 04/14/2011 - 21:19 | 1170997 Tunga
Tunga's picture

Deep; please consider these two cents;


"fully redeemable in coin of the realm

as it is defined by the United States Coinage Act of 1792 which equates the

value of One dollar to be Twenty Six point Nine Six grams of standard Silver or

Twenty Four point Zero Six grams pure Silver" - excerpted from the writ of summons

Thu, 04/14/2011 - 18:36 | 1170658 JonTurk
JonTurk's picture

check out the last paragraph: EUR sovereign debt risk is under control, huh?!! WTF :)))

a reminder: ZH was calling for a 1:1 parity in EURUSD less than a year ago... we are living in an epic period how perceptions change 180 degrees in no time.

do you really think that FED will let the "market" crash the dollar and USTbonds and spiking yields nail the coffin of the ponzi?

all it takes is a 25 bps discount rate hike for the USD to rally 10% and bury the commodities alive.

dont bet against the chairsatan!


Thu, 04/14/2011 - 18:37 | 1170661 gwar5
gwar5's picture

Citi can consider unsustainable debt risk already priced in some time ago.... like when we went $1Trillion more in debt to bail out their underpant soilage.

Citi only says this now to support Obamster, and his tax increases, so we can be 'strong' to bail Citi again....because they're special...

Thu, 04/14/2011 - 18:38 | 1170663 virgilcaine
virgilcaine's picture

   Ot      RIP Joe Battipaglia.

Thu, 04/14/2011 - 19:01 | 1170722 Hot Shakedown
Hot Shakedown's picture

I really liked him; bless his soul.

Thu, 04/14/2011 - 20:22 | 1170902 Sisyphus
Sisyphus's picture

+++ A good guy who was not afraid to tell the truth, in my opinion. RIP, my friend. Will definitely miss your calm and composed demenour.

Thu, 04/14/2011 - 18:49 | 1170680 Pseudo Anonym
Pseudo Anonym's picture

perhaps a major step down in the dollar is precisely what the Fed wants...

yep, banksters get what banksters want because banksters run ameerika.  Watch US politicians panting and heeling like good dogs in no less than a week

Thu, 04/14/2011 - 19:38 | 1170807 buzzsaw99
buzzsaw99's picture

Tasteless joke: Barney Frank and Jamie Dimon were sitting in Jamie's office when Lloyd Blankfein's dog walked in, laid down, and began licking its nuts. Frank points at the dog and says to Dimon: "I wish I could do that". Dimon replied: "Go over there and be nice to him, maybe he'll let you".

Thu, 04/14/2011 - 18:52 | 1170694 knukles
knukles's picture


I want my White iPhone

Thu, 04/14/2011 - 18:59 | 1170719 andybev01
andybev01's picture

If you can wait until MSM forgets about Fukushima and the supply chain comes back online, you can have one that glows in the dark.

Thu, 04/14/2011 - 19:01 | 1170724 Archibald Holbroke
Archibald Holbroke's picture

me thinks the Fed must allow a lower USD in order to stop the export of jobs. Japan's manufactering base will erode due to you know what and some of that base will come back to the US, but more of it will return with a lower dollar. A lower euro is not in the cards because a higher gold price in euros spells more trouble for the banksters than a higher gold price in the dollar. We could very well see oil priced in euros before the party ends, which is good news for Iran and bad news for Israel. I really don't think the European Jewish banksters care all that much about Israel when push comes to shove, since all of the Saudi royal family is Jewish. Nevertheless, there is that problem called the "Samson Option" that spells big trouble for all the Middle East. China's military expansion may slow with a weaker dollar, which seems strange at first; but if China is put into a depression/recession with a reduction in exports and oil priced in euros the expansion could be slowed. The situation in Japan is not good for China or North Korea so the dynamics have changed which could allow a lower dollar without much damage to the military position of the US. The US military could be funded by a lower dollar provided the rest of the world continues in a state of near chaos - a thing the TPTB have a lot of experience at. I look for a lower dollar without higher interest rates for now.

Thu, 04/14/2011 - 19:08 | 1170740 NOTW777
NOTW777's picture

no keeding. they just noticed

Thu, 04/14/2011 - 19:11 | 1170741 johnnymustardseed
johnnymustardseed's picture

Really Citi !!! You guys are so smart! Oh wait you are the reason the dollar is a piece of shit. Please leave and don't come back.

Thu, 04/14/2011 - 19:09 | 1170744 AldousHuxley
AldousHuxley's picture

Shitibank has been nationalized. They are now a mouthpiece for US government.

"Significant Downside Risk for C and BAC if market begins to price in unsustainable market to fantasy risk"




Thu, 04/14/2011 - 19:23 | 1170777 Seasmoke
Seasmoke's picture

this is the most toxic of all the toxic banks

Thu, 04/14/2011 - 19:41 | 1170820 Archibald Holbroke
Archibald Holbroke's picture

"The BRICS group of emerging-market powers kept up the pressure on Thursday for a revamped global monetary system that relies less on the dollar and for a louder voice in international financial institutions."


They are gonna drop ol' Buck like a bad habit!

Thu, 04/14/2011 - 19:55 | 1170858 AldousHuxley
AldousHuxley's picture

There is a reason why zionist men allow an outsider take over: Indian as CEO of bank, African as President, and feminazi WASP women as secretary of state.

They need someone to take the blame.

You've got to give it to them....they are good enough to know when to step back.

Thu, 04/14/2011 - 20:04 | 1170870 monopoly
monopoly's picture

The dollar will collapse, that is certain, but it will not be a crash, Bernank could not handle that. It will be controlled, a little at a time but investors see what is transpiring and are already getting a front row seat for the grand finale. This is the only way the debt gets dissolved. So yes, it will happen.

Just wait till the word comes out about no QE3. First, the markets will start lower right away, but the Bernank will keep all funds in the system and just keep rotating them, until it does not work anymore, than QE3 thru 12.

He cannot change the outcome which he does not believe can happen, he can just slow it down,, set, Match!!

Thu, 04/14/2011 - 20:07 | 1170881 monopoly
monopoly's picture

Of course the debt ceiling will be raised. But the children, all of them, will play in the sandbox and throw sticks and stones at each other first. You think they were childish over the budget cutbacks,(what cutbacks), wait till you see the temper tantrums from all the spoiled brats, most of who are multi millionaires, with Issa worth over 1/2 billion dollars. They will pretend they are grown up and every one is potty trained. Then just before we change all their diapers. Voila!, Debt ceiling raised, again, and again, and.....well, you guys got it.

Thu, 04/14/2011 - 20:44 | 1170945 overmedicatedun...
overmedicatedundersexed's picture

crash of FRN, the dollar it ain't..

some here post it is bad to crash the FRN, along the lines of "think of the children "

others say it will be crash and resurrection

others it will be chaos with every man for himself living off the land with gun in hand.

many think I will be king with PM's they have


me , i see a slow degrading of american economy, military power, quality of it is happening right now! just more of it year after year more people out of work, more on the gov

tit. infrastructure rots, roads, utilities become rationed or undependable, cities are abandoned as no jobs are to be had there..the FRN falls each year. America will collapse with a whimper.

some states with people that are independent and mostly conservative will pull out and will try to recover but the liberal states will just fall further into the federal gov wellfare trap. Detroit tells you all you need to know about the future for the liberal states.

Thu, 04/14/2011 - 20:43 | 1170946 buzzsaw99
buzzsaw99's picture

Citi is part of the reason why the dollar is in the toilet so they should know.

Thu, 04/14/2011 - 21:03 | 1170966 Tunga
Tunga's picture

You keep talking about how the dollar is dying and see what happens. Ever heard of the self fulfilling prophecy? Edgar Cayce? Hello?! One more outburst like this and the Tunga will seriously consider going back to posting on the NewsMax forum. Except there is no NewsMax forum anymore. Oh well. 

Does anybody know how much above ground plutonium there is? We hear it's hot right now.

Thu, 04/14/2011 - 21:08 | 1170980 honestann
honestann's picture


Do not raise the debt ceiling.

Thu, 04/14/2011 - 21:08 | 1170982 honestann
honestann's picture


Do not raise the debt ceiling.

Thu, 04/14/2011 - 21:36 | 1171023 Tunga
Tunga's picture

"You put your bet on number one and it comes up every time. The other kids have all backed down and they put you first in line. And so you finally ask yourself just how big you are -- and take your place in a wiser world of bigger motor cars. And you wonder who to call on." Jethro Tull - Thick as a Brick

Thu, 04/14/2011 - 23:14 | 1171290 JonTurk
JonTurk's picture

an introduction of QE3 at this price levels will be the worst strategy for FED because it will make the USD and UST break down and the yields spike (which is the last things they want with the current debt load) so they need a higher USD and lower rate level to resume.

be prepared for a big dollar rally and a selloff in all other assets (including PMs) for the ponzi to roll over.

Fri, 04/15/2011 - 00:06 | 1171387 el Gallinazo
el Gallinazo's picture

Agree. You can't pump without an occasional dump :-)

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