Citi Says QE2 Would Be End-Game For The USD

Tyler Durden's picture

These are not the hyperbolic ramblings of various fringe blogs who have been claiming this for over a year, these are the non-hyperbolic ruminations of Steven Englander, until recently head FX strategist at Barclays, and recently at Citi:"A second round of QE will likely put sharp downward pressure on the USD, to some degree versus the euro and other G10 currencies, with potential for a broader USD sell-off. Foreign investors are likely to view the renewed direct intervention as indicating that the Fed’s balance sheet expansion and implicit monetization of fiscal expenditures are first line approaches to dealing with disappointing recovery prospects, rather than the exceptional measures they were meant to be initially. This could have severe implications for foreign perceptions of the quality of the US assets that they are accumulating in private and official portfolios, and may lead them to draw the conclusion that USD weakness is less a by-product than a desired outcome of these measures...It is difficult to gauge the set of policies that US policymakers will pursue to reduce the risk that the US
slumps into a significant slowdown. In the current environment of extremely disappointing growth and
apparent lack of response to traditional monetary stimulus, policies that are less than orthodox are likely to
be considered seriously. Most of these unorthodox polices are likely to weigh on the USD." Guess what that means for gold...

 

h/t Mike

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Slash's picture

is it bad for gold? mirite?

MarketTruth's picture

Gold has the same buying power.

Pricing against other currencies will mean higher gold if one chooses to make a purchase using the Federal Reserve Debt Note (US dollars).

gringo28's picture

gold: buy the rumor, sell the news. when the dollar turns down, money will go into EM and commodities. goldbugs will be stuck holding the bag.

HelluvaEngineer's picture

you mean the bag full of gold?

Caviar Emptor's picture

Hehe. Yeah the "rumor" has lasted over 10 years. Shhht. Let's keep our little secret quiet. 

What_Me_Worry's picture

I would think after several thousand years it qualifies as no longer being a rumor.

lemonobrien's picture

this is true; we are buying apartments in EMs and renting them to the locals; more money.gold is great cause it give you that high; but when you try to sell, the guy holding the cash wins in the bargain.

 

Oracle of Kypseli's picture

When these days are here, gold and silver will be the only accepted method of payment.

MarketTruth's picture

lemonobrien, gold can be traded for localized currency VERY easily in many parts of the world... or traded for goods and services (and usually you get an additional discount when using gold as payment). TRY IT for a few years before you make such comments as you have, then report back.

Caviar Emptor's picture

When buying power craters, gold skyrockets. Apartments are considered the worst kind of illiquid investments when operating costs skyrocket at the same time that renters' buying power decreases. Gold becomes the go to store of wealth in the blink of an eye.

Treeplanter's picture

Gold has been very good to me, especially mining shares.  Right now, silver is even better.  You might not be so cranky if you had a little hoard.  What is the sound of two silver bars clinking together?  Pure pleasure. 

anvILL's picture

Clinking silver bars together will start to sound like torture once you own two 30kg bars unless you are seriously strong.

lsbumblebee's picture

I prefer the ramblings of the blogs.

From Harvey Organ:

"The USGovt will devaluate the US$ by 50% overnight in the not too distant future. They need 11 days to do this. If they push it, they can do it in 6 days. So look for a long holiday weekend as an opportunity. The best time to do this is the Christmas / New Year time window. They tried to do it in 2005/2006, but the Chinese put a gun to their heads in Washington and they backed down. You can slice and dice it as you like, but the USDollar is dead and so is the Euro. The systemic change will be a cataclysmic and traumatic event for the West, since all it stands for will go into the toilet in a blink of an eye."

http://harveyorgan.blogspot.com/2010/08/august-242010-commentaryextremel...

It is a bargin my friend's picture

Sterling bitchezs......gawd bless her

william the bastard's picture

I saw that quote yesterday on smartmoneytracker.blogspot

Also anonymously attributed. What crap

Jason T's picture

I have been long AOB because they have operations in China, about $100 million worth of RMB and earn all their money in RMB.

 

Also, long CEF for gold and silver. 

 

AOB has been a disaster now at .4x book value and P/E 5.

 

My US shorts, AMZN and TOL and some REITs have defied logic..TOL has been good though.

 

A devalution? Bring it on!! 

 

We'll get it becaue Ben has made a deal with the devil.. decided to print money.

Übermensch's picture

Harvey is quoting from The Golden JackASS, who also said last year hired hit-men would take the comex down in september.

doggings's picture

well he's still got one month to go on that,  so you never know our luck..

i heard its getting a bit tense over there

 

Spitzer's picture

I was thinking about doing that. Get on the floor,walk up behind a trader, poke him with a gun and tell him to bid $2000.

centerline's picture

I actually had this conversation last night with family. Just hypothesizing that one way we could go is waking up one morning to find the banks closed and the system shut down.  A week or two of chaos as everything is revalued... new currency issued... etc.  Would be seriously ugly.  But, I personally haven't ruled this out.  The big question is when the power is turned back on, will the system reboot?  Or will it be end game?

Apostate's picture

I'm sure that they'll issue a new currency. But what will be used for international trade?

Mr Lennon Hendrix's picture

(S)oros' (D)emon (R)eserve.

Bancor.

centerline's picture

Brings to mind all the Red Dollar stuff too.

Treeplanter's picture

The public has a sore ass when it comes to the word "banc." Our overlords will have to do better.  Frank and Mark got money named after them.  What about Gidget?  It will show Sandra Dee carrying a surf board.  

Mr Lennon Hendrix's picture

Gidgets...it has a ring to it.

Betty Bucks? Veronica credits?  These "Lords" may like the Isis reference you know, they dig them girls, $$.

Cathartes Aura's picture

my vote goes to Eris, goddess of strife & discord. . .

there's a "girl" that can represent the truths.

http://en.wikipedia.org/wiki/Eris_%28mythology%29

Traianus Augustus's picture

SDR's, of course. (beaten to the punch).

Mr Lennon Hendrix's picture

I want you to hit me as hard as you can. ;)

Nice double entandre.

Mr Lennon Hendrix's picture

My thoughts exactly.  What about BS shouting, "Turn the machines back on!" on a dimly lit trading floor, with his only company being a homeless couple nearby doing the horizontal limbo under a desk?

Who else is from Prussia's picture

A week or two? really? plan on a whole lot longer than that.

Dismal Scientist's picture

Utter nonsense. Anyone who thinks the US govt will commit suicide in such a fashion, has lost the plot. As long as the rest of the world holds US debt, they will not be allowed to devalue. Organ says it himself re the Chinese in 2005/2006. Why should this be different now ?

lsbumblebee's picture

Organ didn't say it. He's quoting Jim Willie who's quoting an anonymous source.

Chuck Mentzel's picture

As long as the rest of the world holds US debt

That's Achylle's heel. The Chinese are slowly and stealthily getting rid of US debt and buying South American stakes in mining and energy. They cannot afford to get rid of US debt overnight, so they are doing it slowly to minimize losses. They know in the end they will lose some, but there is a lot more to gain by dumping the dollar as reserve currency and replacing it with something else.

Also, Sarkozy has been lately calling again for another Bretton Woods agreement. Guess what that means... It means Europeans can't wait to pay Americans for the friendly fire on the Euro this year.

Caviar Emptor's picture

Yup. The trickle can fast become a stampede as holders of paper become increasingly concerned about loss of value and missing the chance to unload. At the root of it all is the fact that FRNs are really IOUs. If the debt isn't fully honored, that's a form of default that creditors have little tolerance for.

Who else is from Prussia's picture

no one wants to be first or last in this game.

MichaelG's picture

Yep, and the governor of the People's Bank of China has been talking up SDRs since early last year:

http://www.pbc.gov.cn/english/detail.asp?col=6500&id=178

Also not the 'hyperbolic ramblings of various fringe blogs'...  (Mind you, I'd take hyperbolic ramblings over anything from the Too Big to Fail-ers anyday.)

 

 

Djirk's picture

Sinking the dollar and protectionism, good for US jobs? Well will be good headlines for US politicians anyway.

 

http://www.bloomberg.com/news/2010-08-26/obama-seeks-to-tighten-u-s-trad...

 

Chuck Mentzel's picture

OK, so he brings arguments for USD devaluation and then he concludes that the USD is dead and so is the Euro. That makes sense. Why is it that Americans whenever there is talk about a collapse of the dollar, the euro must fall too...? Is it a psychological thing? It seems to me the same reflex was used when the Euro was being attacked by hedge funds earlier this year. "Why should the dollar go down and the euro be among the reserve currencies being considered by China, India, Russia et al? Let's nudge them a little off the pedestal, show the CHinese who's in charge around here."

Cathartes Aura's picture

Why is it that Americans whenever there is talk about a collapse of the dollar, the euro must fall too...?

. . .possibly because the same global bankers are "behind" both "currencies"?

curbyourrisk's picture

And when they do this they will institute a 90%  tax on your gold holdings....not the sales, but the holdings.

 

Redistribution......bitchez!!!!!!!!!

Ripped Chunk's picture

Isn't that the game plan?  Destroy the US dollar once and for all?????

Yesterday JPMC says the US will default on it's debts and today Citi says QE II is the end of the dollar. But we know QE II has begun.

Doesn't this all seem to be a bit scripted?

Here's a better script: All business and personal depositors PULL ALL DEPOSITS OUT OF Citi, JP Morgan Chase, Bank of America and Wells Fargo.

There is a script that will reveal who really runs this country. DO IT TODAY

Hephasteus's picture

The OP forgot to add.

And scrub yourself with steel wool for at least 6 hours after pulling out.

mynhair's picture

Have to pull the funds out slowly.  If you move too fast, you will be charged with market manipulation or inciting a bank run.  Scapegoats are always gratefully accepted.

Moneygrove's picture

Yep !! bush wanted the amero !!!!!!!!!!!!! and kenny Mehlman all nlght ??? lol