Is The G-7 Going To Prevent Bernanke's "Kill The Dollar" Doctrine?
If it were only up to the US, our currency would by now have been completely Mugabe'd, with the opportunity cost of quintillionaire bankers (with pristine, debt free balance sheets courtesy of the brand new $100 trillion bill) being the four remaining members of the US middle class having to lug a metric ton of dollar bills to the nearest Starbucks to buy a latte. However, it may not be so simple in the end, courtesy precisely of the other 6 complicit nations which make up the G-7 and which have as much a vested interest in killing the dollar as Bernanke, subsequent to which they can proceed to hyperinflate their own currencies.
As the chart below indicates, the JPM G-7 Vol index has been quite sticky and is refusing to revert to the old normal. This particular index is instrumental in determining appetite for carry trades: the lower the reading, the greater the propensity to short the lowest yielding currency (yen or dollar, soon cable?). The peak in the chart at the end of 2008 coincides, not incidentally, with the emergency explosion in over half a trillion in foreign FX swaps initiated by the Federal Reserve. Observing the trendlines, it appears that it is not so much the US, as the balance of the G-7 countries that seem to be preventing the dollar from making lower lows on its way to a "Bernanke wet dream" zero. A sustained upswing in this index (and consequently, in the US specific VIX comparable) would likely result in an end in the ongoing carry trade de jour.
(3 votes)
on Thu, 11/12/2009 - 15:11
#128876
the wall street journal told me this morning that thailand is buying dollars, so the dollar must be in for a reversal
on Thu, 11/12/2009 - 22:58
#129360
Thailand likes pegging, I toured the factory district of Bangkok. Its crazy how many 24 hour factories they have going on there.
on Thu, 11/12/2009 - 15:14
#128881
triple top on SPX? anybody?
tyler u should have tagged this post with "bernanke wet dream"
on Thu, 11/12/2009 - 15:21
#128894
BKX and TRAN look similar, but a bit early to tell for sure.
on Thu, 11/12/2009 - 23:34
#129381
Don't forget XLF, KRE, Advance/Decline Lines.
thelastcanary.blogspot.com
on Thu, 11/12/2009 - 15:22
#128896
i prefer quintuple since we passed spx 1000 lizzy!
this top here is probably just the start of a new left shoulder lol!
on Thu, 11/12/2009 - 15:45
#128929
dh, this is for you:
http://ftalphaville.ft.com/blog/2009/11/12/83026/fdic-saves-securitisation/
on Thu, 11/12/2009 - 16:42
#129005
Lizzy...thank you very much! I had not come across that during today's reading and I appreciate you thinking of me to share this. of course, unless it is a mom and pop bank with some of this grand cayman detritus, we know those insolvent big boys are never going to be on the TGIF failure party invite list!
I still look forward to the spin from the fdic on how they will address the additional capital matter due to the qspe, siv invasion starting q1 2010.....i'm wondering what new term they can come up with instead of using the old "capital forebearance" of the S&L crisis days. then again, if one is creative enough with FASB 157 mark to menagerie......
on Thu, 11/12/2009 - 15:29
#128907
"our currency would by now have been completely Mugabe'd"
LOL - well worded in all respects. loves it.
on Thu, 11/12/2009 - 15:15
#128884
The refaltion view has been expressed uninterupted for months now. Its only a matter of time for the outside force to disrupt the dollar decline (like you mention above). Short GC long USD/JPY and AUD looks at risk.
Fixed Income looks relatively safe for now.
on Thu, 11/12/2009 - 17:43
#129097
"Fixed Income looks relatively safe for now."
LOL you must be a comedian
on Thu, 11/12/2009 - 15:15
#128886
Nothing like an empty city to provide a quick bump to GDP.
http://chinadigitaltimes.net/2009/11/chinas-empty-city/
check this out
on Thu, 11/12/2009 - 17:08
#129052
Holy Cow Batman! That's ridiculous. Thanks for the link. I found the blog for the westerner who was interviewed for the article.
http://chovanec.wordpress.com/
on Thu, 11/12/2009 - 17:30
#129080
I just blogged about this. Thanks for the tip.
http://merrillovermatter.blogspot.com/2009/11/hey-buddy-can-you-spare-city.html
I found empty ordos on google maps so you can see satellite photos of the empty city. Very surreal. Many thanks!
Greg
on Thu, 11/12/2009 - 15:18
#128888
I'm fairly confident that the remaining members of the American middle class would never use something as European as a "metric ton" to weigh their worthless dollars. As I am sure you are aware, the standard in the US is the (highly ironic) "short ton", or for the particularly Anglophilic, the "long ton." I suppose if the carry trade continues unfavorably long enough, one Populist reaction might wind up being the use of megatons. Let us all hope we don't go there.
on Fri, 11/13/2009 - 08:21
#129566
megatons ... only heard that in connection with nuclear warheads until now ... some chillying convergence going on out there ... just cant see it clearly yet
on Thu, 11/12/2009 - 15:20
#128892
"Mugabe'd"
awesome, that's one for the books!
on Thu, 11/12/2009 - 16:45
#129010
oh yes! I do believe we will see that one again.
on Thu, 11/12/2009 - 15:34
#128915
We're all strapped to the merri-go-round of competitive devaluation, where each nation gets their turn to ride the lead hobby horse of currency debasement. Who's the next singing cowboy to hop in the saddle? Don't forget to use your spurs! This is a five ticket ride, five tickets please!
on Thu, 11/12/2009 - 15:34
#128916
"Bernanke wet dream" zero
classic.
on Thu, 11/12/2009 - 15:37
#128920
ZH official rename "Ben Bernabe"
Now all he has to do is throw lavish birthday bashes while the american public starves.....
on Thu, 11/12/2009 - 15:44
#128928
So if I read that right, you're saying the carry trade is not currently as large as might otherwise be expected? If so, how does this affect the idea of a dollar carry trade bubble reversal short squeeze, that Roubini has been arguing?
on Thu, 11/12/2009 - 23:01
#129363
hey, its not 2008
on Thu, 11/12/2009 - 15:46
#128933
The EU is about to give the US a carte blanche to look into every EU citizen's bank account. Many EU citizens are pissed and rightly so. While the 'terror' argument still held some water, this newly crafted legislation is an outright attack on EU sovereignty. Why the EUrocrats are willing to comply is a mistery.
Make no mistake, when bank accounts are becoming transparent to any idiot from the US government to look at then the run on gold will get nuts.
After all, storing physical gold is easier than storing money in accounts that have as many access points as swiss cheese has holes.
on Thu, 11/12/2009 - 16:18
#128976
It's no mystery:
1. NWO
2. CFR
3. Bohemian Grove
4. Molech the Owl
Bow down.
on Thu, 11/12/2009 - 20:14
#129233
any evidence of this ?
sounds a little bit foil hat to me
on Thu, 11/12/2009 - 15:49
#128940
it looks like the dollar won't be getting much more help from the Chinese, if this report is accurate:
http://www.reuters.com/article/globalMarketsNews/idUSTRE5AA10S20091111
on Thu, 11/12/2009 - 15:51
#128944
What does it matter what the world wants? America is bankrupt because of supporting a global economy. Now the Welfare world can't exist without the dirty American consumer. Let the dollar fall .. it's the only way Americans will be free of a liberals day dream. Globalization.
on Thu, 11/12/2009 - 16:10
#128967
The USD rally that began today coincides with Obama's Asia - more importantly China - trip. How conveniently coincidental!
on Thu, 11/12/2009 - 16:35
#129001
It would be interesting to be a fly on the wall when Obama goes in to talk to China. What do you say to a gorilla who is holding your balls? "Please don't hurt me"? I'm guessing he'll lead with a quick apology about the whole tire tariff thing.
on Thu, 11/12/2009 - 16:18
#128977
The carry trade is crowded. Have a look at any JPY weekly chart or oil to see how speculation, with little regard for fundamentals ends.
Speculative contracts are at a record in oil and gold. The market is also very nervous of a top here, so any extended pullback will ignite a huge domino effect of stop runs and margin calls.
on Thu, 11/12/2009 - 16:18
#128978
The carry trade is crowded. Have a look at any JPY weekly chart or oil to see how speculation, with little regard for fundamentals ends.
Speculative contracts are at a record in oil and gold. The market is also very nervous of a top here, so any extended pullback will ignite a huge domino effect of stop runs and margin calls.
on Thu, 11/12/2009 - 16:34
#128997
I'm digging your new editor/proofreader's humor and prose. Keep up the good work.
on Thu, 11/12/2009 - 16:34
#128998
The reverse vasectomy operation is scheduled and the patient is flat on his back in the operating room.
Prepare the checklist verification,
Patient’s name is Ulysses S. Investor, check
Organ to be operated on has been marked, check
China going to let the Yuan float, check
US Treasurer stands by importance of strong US dollar, check
Short dollar positions have all been taken, check
Equities are grossly over priced, check
Gold is over priced, check
Obama is in China, check
Prep the patient, check
Knock patient out, check
Remove brains from the surgical area, check
Surgeon has entered the room and has verified the check list, check
Nurse, hand the surgeon the chainsaw, check
on Thu, 11/12/2009 - 17:03
#129045
Who do we suppose was behind this?
"There was a huge volume surge in UUP call options, the ETF that tracks the US Dollars index value, ahead of the FOMC statement. 155,000 November call options were bought at the $23 strike level and another 155,000 were purchased at the December $23 strikes. The November calls came in at around .15 and are now .25 (up 66% in one day on UUP) and the December calls were executed around .25 and are now .40 (UUP up 60%) - this is not bad for a day’s work but was it just a day’s work or are we betting on a trend?
As you can see from David Fry’s chart, it’s not just the 300,000+ options (controlling 30M shares) that have been trading bullishly around the dollar - there has been a stunning surge of volume buying that has built up since mid-October as the dollar index skates along our own target low of 75.
So strong was the demand for shares of UUP that we noted in Member Chat that the PowerShares DB US Dollar Index Bullish Fund (UUP) was halted pending clearance of their request to register another 100M shares "in order to meet investment demand".
Court.:
Phil Davis blog
on Thu, 11/12/2009 - 19:04
#129163
I don't usually respond to anons, but:
We are now on a cash basis in this country, not enough capital to go around so they will take down equities and strengthen dollar when they need to sell treasuries - very predictable and tradeable.
on Thu, 11/12/2009 - 18:46
#129150
We saw this in 2008 and I think we see it again. Unfortunately for the Fed if we see a major surge in the USDX then they have a major problem as the equities they are pumping up will boomerang downward and destroy a ton of Tier 1 capital the banksters have been reporting.
QE or die baby....
on Thu, 11/12/2009 - 20:01
#129214
Just like the insiders, the bankers have already sold. The only group of investors that are going to win this thing are the institutional investors. When they say XYZ is worth $85 per share it is. If they want to move $ 80 million tomorrow, it will not require Goldman Sacks' approval.
Institutional investers own the world. They do not need games to make money.
on Thu, 11/12/2009 - 20:01
#129215
BTW... That UFC guy in the .gif who got suplexed into what seemed like it had to be oblivion... He came back and kicked the other guys ass.
Don't fark with him, man!
on Fri, 11/13/2009 - 09:17
#129607
The world needs the USD, for now:
http://newsusa.myfeedportal.com/viewarticle.php?articleid=474
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