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Citi's Englander On The Dollar's Fate After QE2: "Further Drop" Coming
Citi's Steven Englander has updated his view on what QE2 will mean for the dollar. In a nutshell: "Net, net we see this as allowing for further USD drop, but drift rather than precipitous." Basically this is precisely the stuff that will make the upcoming Ron Paul-Ben Bernanke hearings must watch TV. With the EURUSD now approaching the mid 1.41's, so far Bernanke is succeeding. The only question is whether the Fed's control over the ECB via currency swaps and asset guarantees will be sufficient leverage to allow it to destroy the dollar with impunity and send the EURUSD to a level of 1.6, as a helpless Europe sits and does absolutely nothing. Elsewhere, the USDCHF is back to a 0.96 handle. There is no question: if Europe allows the dollar to plunge here without any response it is signing off it entire export segment. And lastly, for the time being, the USDJPY has somehow not dropped below 80. It will shortly. One thing is certain: foreign banks will retaliate. Maybe not the gutless, toothless, and very much broke ECB, but everyone else, yes.
From Steven Englander:
FOMC meets expectations as ‘mandated’
For FX, there is little to suggest that the FOMC was out to derail the expectation of a significant purchase program despite the recent improvement in data. We continue to think that QE2, combined with other USD negatives related to external funding and central bank selling, will lead to a USD fall on trend. Implied volatility should drop, but we caution that payrolls surprises could heavily color how investors see the actual implementation. Net, net we see this as allowing for further USD drop, but drift rather than precipitous.
Overall the Fed carefully sounded out market expectations on QE2 and largely met them. The "intends to purchase a further $600bn of longer-term Treasury securities" met market expectations on amount. The fact that the word "longer-term" was used may stir fixed income surprise, but shouldn't matter much for FX. The long-end of the Treasury curve is taking a beating, but the five-year tenor is rallying. The FX market was more focused on whether there would be a long-horizon program. The FOMC did in fact talk about a program extending until the end of Q211 at a pace of $75bn/month, which would by itself make the FX market want to dump the dollar.
However, it is not a firm commitment or a rules-based approach tied to core inflation, nominal GDP or anything else. The FOMC said it will "regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability." With lone hawk Hoenig slated to be replaced by a trio of hawkish regional Fed presidents in January, there is a very real chance that the Fed never gets to the $600bn. So in that sense, some would-be USD sellers have to come away disappointed.
However the other side is that the Fed will be buying a lot of treasuries and seems very insistent that this is required by its ‘mandate’ and that these conditions will be in place for some time. So there is no absence of support for the Treasury market overall, even if it is concentrated at shorter tenors than thought.
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Converting d0llars into toilet paper is a smart move... more square feet to the buck and far softer on the ass.
Dollar makes pretty good fuel, however! Use billion-dollar bundles!
...if Europe allows the dollar to plunge here without any response it is signing off it entire export segment.
except for the autos purchased by nyc gangsters.
And for our next act:
THE DOLLAR DIVE BEGINS!
Following the brief flash crash after the FOMC announcemnt, the Dollar has now begun its nosedive! We have seen a Bollinger Band breakout below the lower Bollinger Band, a very reliable signal of a new downward trend.
Second !
Silver @ 24.88 on the verge of going parabolic.
Ron Paul has the power to subpoena Bernanke in hearings, but not to change Bernanke's policies.
Only Congress can revoke the FED's authority to make us all friggin serfs.
Tyler-
"The Fed would have to manufacture about 7 times more dollars than exist today for the Treasury to be able to meet its obligations. That’s an obvious problem both fundamentally and for the global perception of dollar hegemony, which of course we see playing out today in FX markets.
The seventy trillion dollar figure in the fourth row is an estimate of total dollar-denominated claims. This includes Treasury debt and unfunded federal obligations, as well as mortgage, auto, consumer, corporate, state and municipal debt. Think about this: 70 trillion in dollar denominated claims on top of 2 trillion in currency and bank reserves with which to repay it! The US economy is levered roughly 35 to 1 today.
Certainly the gap doesn’t need to close completely – there will likely always be credit balances larger than the base money stock. But given the sheer size and maturity of the US economy, it seems obvious this gap is biased to widen."
http://www.ritholtz.com/blog/2010/11/brodsky-on-gold/
Aussie passed parity, now worth MORE than USD. Loonie (Can $) very close to parity today.
look at dxy tank and gold reverse losses after marking up equity close
and she sinks
freakyfuckingdeaky.
Fiat to fiat, Ben is succeding. Fiat to PM's not so much. Ben will never be limited in what he does by a fiat to fiat comparison. SHTF when people begin to reject FRN's all together.
No seriously...when does the revolution begin?
I just watched Ben Bernanke kill my currency and my Tbills. He did this two years after he killed my home value and subsequently my portfolio of stocks. Part of the cabal also went after my gold today, the very day that I voted out those in DC who were spending money they did not have.
When does the revolution being and who is bringing what?
RPG's.
Tuesday, November 2 La Revolution!
Wednesday, November 3 Business As Usual
Viva La Revolution!
It is better to die on your feet than to live on your knees.
Emiliano Zapata
Don't let it end like this. Tell them I said something.
Pancho Villa
My biggest fear in life is to be forgotten.
Evita Peron
The truth is that men are tired of liberty.
Benito Mussolini
I am not a communist and neither is the revolutionary movement.
Fidel Castro
Yeah, whatever....but what are you bringing?
We've got beer and RPGs...
i can bring potato chips
How exactly did Ben kill your home value and stock portfolio? The damage was done by years of artificially inflated valuations, followed by an inevitable correction (ongoing). I am certainly no fan of Zimbabwe Ben, but it seems to me that he is doing everything he can to prop up the illusory value of your home and stocks. Just sayin' ..
Sorry...I was speaking of the institution of the Fed, more broadly.
Housing bubble burst x stock market reaction = f'n destruction of value.
But you said it yourself. "Illusory value." It wasn't illusory when I signed the paper.
Tyler's statement: "if Europe allows the dollar to plunge here without any response it is signing off it entire export segment." carries little certainty. Most nations of the world, with the sole exception of the United States, know how to play the trade games. Europe will not buy anything more from the U.S. It will subsidize exports and control imports. The U.S. needs a protective trade policy or it will disappear from the earth.
Protective trade policies to not work that way!
What people need are unhampered opportunites to engage in production and trade, which will instantly allow markets to adjust, and thus clear themselves of excess malinvestment. While unhampered opportunities will reset all standards of living worldwide, it is necessary, as there is no avoiding the reckoning day caused by a crack-up credit boom.
Any effort undertaken to do so merely delays it slightly while increasing its destructive power (because the rich get richer and the poor get poorer via this political method).
Basically, this is Bernanke's message to the American middle class:
http://www.youtube.com/watch?v=IJGPLjm-fjo
Aussie now worth MORE than the USD. Loonie very close to parity!
The DXY closed above the Oct 14th close of 76.64 so isnt that a positive?
This guy is just another analyst with a keyboard and a distribution list. That doesn't make his view better or worse, or right. What's that line? Opinions being like assholes....
I believe someone poinnted out quite awhile ago that the "revolution will not be televised". Are some of you really not cogizant that it came in on cat's feet
and now is all around us?
As the dollar drops, the price of gasoline in the USA is about to double.
Ditto the cost of food -- that's already locked in, it just has to trickle down
from the CME to the grocery store. Not to mention coffee, cotton and rubber.
We all should be aware of the scintillating wit of the average tea partier.
And we all should be aware of his armament.
For the time being, they are content to halting payments,
halting mortgage payments, halting real estate tax payments,
halting credit card payments, halting car payments,
halting filing their 1040's.
By the millions, they are defaulting, and the banks cannot stop their hemmorhaging,
it grows more extreme every day.
They don't even have to break out the lead accelerator devices.
But they will ....
The Tea Partiers are cool. They are the tax payers and well to do little old ladies.
The socialists, communists and unionists are the ones rioting and causing mayhem in Europe and it will be the same here when the IOUs and food stamps start bouncing.
Get yourself a lead accelerator device to protect your yellow metal medium of exchange.
They don't call them peace makers for nothing.
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I don't understand something and maybe there is somebody to explain that to me. Why all those countries don't let dollar fall as fast as possible? Who cares what ratios are, they trade between themselves and the only loser is USA whose GDP is depending on resale of somebody's else product with markup? The brunt of the FED policies will be felt by US population and probably lead to some kind of revolution because standard of living would fall very fast. Are they afraid that US would rebuild its manufacturing capacity very fast (we know it will take some years) and they don't want it or they think revolution in US is not good for their interests? For now it looks like idiots took the power in all those countries and they masturbate looking at their trade surplus going into 1000000000000000000 of something when US is paying them with toilette paper, printed daily by the Fed.
What the fuck is going on?
If the dollar falls 20% to the Euro, then a BMW from Germany will cost 20% more here ---> $50k to $60K
People will stop buying them here. We're a big market. They're worried they'll have to start laying off BMW workers back in Germany and don't want to start a downward cycle there.
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