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A Game Theory Look At QE - Time For Fed Retaliation?
Faros Trading looks at an imminent QE episode less from a monetary stimulus, and more from a game theory perspective, in which the firm sees the interference by other central banks and governments as long overdue for retaliation by the Fed. "At some point the Fed’s gloves have to come off; and given the recent Employment data, Durable Goods data, Housing data and Manufacturing data, we feel that the US has come to a point where diplomacy must end. The rules have changed and the US must change with them. The Fed should announce further quantitative easing measures on a grander scale, and the government should voice concern over the strong dollar, currently made so by many of our intervening trading partners." After all in the global race to the bottom, it's every man for himself. Alas, we are pretty confident that Faros is missing one key thing - once everyone switches from an even make believe cooperate stance to one of guaranteed defection, it is pretty much game over, as the CBs begin to actively lock each othe out. But since things are headed that way anyway, might as well go out guns blazing...
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Going down guns blazing, thats awesome
every man for himself ...thats right...no government , no friends nothing....when there is PANIC.....we are on our own
and that's when religion becomes its strongest.. for better or worse.. the churches know how to organize and that destroys the lone wolves
Please explain this. The Fed's gloves haven't come off already? Seriously? Ben is already gobbling up treasuries and other garbage to keep the interest rates at 0. Are there still that many people that think the problem is not enough Fed meddling? Hasn't the Fed f*cked things up enough already?
" Ben is already gobbling up treasuries and other garbage to keep the interest rates at 0."
NBLB: No Bankster Left Behind
Perfect term for it!
An interesting analysis presented, however. "Us" going first (when we must inevitably "go" at some point) seems an interesting move to make . . . at least while we still have "Reserve Currency" to play. Seems that is fast disappearing, however. Fed--and, hell, let's pretend Treasury has a substantive role here--Government will need to act hard and fast.
Interesting tangent that I've heard little of previously. You wonder about this kinda shit, but nobody seems to be talking about it.
And, sure, our Fedsters and their organization are sociopathic Ivy League thugs, but maybe they still feel it's important to be American thugs. Retaining some bizarrely sentimental attachment to the Homeland, like mafioso's feel about Sicily, Jews do about Israel, dog sledders to Alaska, Christians to the Cross, Canadians to the hockey puck, etc. What if they decided that, in this environment, "World War" can neither be avoided (since we just refuse to make our banksters. and their consorts, pay for their crimes) nor otherwise won, we should just launch the first strike
It would force everybody to put their cards on the table.
Jeezus, why do I suddenly have the urge to watch Dr. Strangelove?
This is not difficult to understand: the debasement will be sequential, not simultaneous. It is one of the few methods of obfuscation they have left. It is meant to keep eyes on the USDX, and not on actual prices in fiat. "Look, the USDX is strong! Core CPI is low!" while bread costs $7.50 a loaf. Everyone else debases, USDX rises, then we debase and USDX falls back to the starting point. Rinse, repeat. CNBC talking boobs focus our attention on USDX. Easy.
sounds like your calling for sequential waves of stock market impulse waves higher as they take turns debasing their currencies ?
I'm not calling for it, it's what they're doing and want to continue doing. Sequentiual waves of deflation will be met with sequential waves of debasement, concealed as I've described above. If they are able to continue this, DOW will stay above 10,000 but its buying power will continue to rapidly fall. So, yes, the stock market waves "higher" will really only be to maintain the illusion, and "higher" will really only be staying on the price plateau but with ever-lower real value.
Welcome to "Zimbabwe-Lite"
The FED is a guy who just found out that he has AIDS. And he has about 6 months time left. So he thinks 'What the hell, if I'm going down then I'll be fucking without condoms. I ain't got nothing to lose".
America, you are about to be fucked by an AIDS-infected entity without a condom. You have been warned!
LOL
Nice analogy... sodomy as Central Bankster policy...
Ron Paul Has the Cure for AIDS
End the FED...
The Fed mandate?
Moderate Long Term Interest Rates: OK, good work guys.
Stable Prices: Maybe slowing down panic driven price moves is helpful. Supporting inflated assets from a debt bubble, not so much.
Maximum Employment: Get the fjuck out! Fed is a private bank. We know what happens when banks stimulate growth via easy money.
And are you thinking of destroying the value of the dollar to increase trade and inflate away debts.
Who is going to be buying American goods if the Fed rips off and pisses off the two next biggest economies in the world? Not to mention the inflation it will drive for US consumers.
Stick to banking guys, make sure my checks clear and I can get cash out of the ATM...OK, thanks.
It is amazing that this passes for analysis.
The manipulation of money as a strategy to improve the economy. Does anyone think anymore? Exactly how is value added by manipulating the price of money, it's volume or velocity?
The dollar's value is based on the need of people to buy products priced in dollars. The more products, the greater the need for dollars to purchase those goods. This implies the production of goods and services that will be desired by consumers creating greater demand for dollars.
Anything else is a pile of steaming, stinking crap. Like this analysis.
The dollar is already very weak against the Yen, Franc, Euro and canadian and australian dollars. To try to claim the strong dollar has prevented the "recovery summer" is absurd.
Europe already stepped out from under American military dictat before Iraq. Now it appears they are stepping out from underneath CB diktat. Meanwhile, Germany is nuzzling up to Russia. The only weapon the US still has is the IMF, but if the US threatens to use the IMF to force monetary easing in Europe, the Europeans could well say "take your dollar and shove it".
Yet ANOTHER financial entity "jonesing" for more free money as they are all in the shitter...like a crack whore who needs more and could care less about all the "normal" people around them.
Let the financials burn while the rest of us remain solvent...
This is it... the crackhead sees the other dealers pushing product, so he goes to Uncle Ben to ask for another hit...
Does he care that it'll be fatal? Hell naw. He just wants to get high. One more time.
The great keynesian experiment is going to end.
There is a global glut of capacity beneath all the preoccupation about dancing electrons. The US can no longer afford to be the world's consumer of first resort when it is sitting on most of that capacity. See: P. Krugman, "Crisis" Jan 2010. The resolution of global trade imbalances under the existing rules calls for the US to be deindustrialized completely in order to support global demand. To remain the world's designated importer of global over-production is to lose all means to be the world sole hyper-power.
You cannot be the world's designated importer and have a strong currency unless this happens.
so how about a 100 year US bond @ 4.05%. everybody's welcome. no limit. perhaps a $13 Trillion offering. a zero to boot. djia up 2900 points in a day.
Do we really want to win the race to come out of our bottom? Its just shit there. Oh well.
Farros is way out of line. Switzerland did not sell US$, because US-CHF is almost at an all time low by doing of the FED themselves. Switzerland did buy EURO - this happend weeks ago and was stopped by intervention of the Kantons (States). The last few weeks SNB was ordered to reverse course and start selling EURO because the Kantons were not ready to share more into the losses.
Also the YEN is almost at an all time high against US$ - stop blaming the others - start to bring your own house in order first.
USA is in the same situation as Switzerland in the late 70s/80s there is a fundamental transfer from a production based economy to a service based economy under way.
as was the case with the UK too in the 1980's. this is not a good omen for the US economy...
People seem to dramatically misunderstand the role of the the Military Superpower, Global Reserve Bid in the USD/DXY and where it would be RIGHT NOW, without it, which is what a dramatic new QE2 would cause, not just the immediate direct consequent weaknening.
Burn baby burn or print baby print !!
Zak...they are synonymous...
What an irresponsible mentality! As if we're all just playing games of footsie here?
As others have responded, it's not true that most of the world's central banks are accumulating dollars. It's only the commodity exporter and Asian manufacturer countries' central banks that are buying on any scale. The Euro went weak for other well-known reasons.
Is Faros suggesting that Fed monetization of the deficit would replace those central banks' purchases of Treasuries and scare them out of accumulating any dollar assets, thus removing the US financial account surplus that's driving the US current account deficit? Seems like a crazy risky way of going about things. We'd get currency devaluation and inflation, high interest rates for the private sector, negative real rates for the public sector, all kinds of misallocation of resources, all kinds of havoc. But you never know, those Fed board members are pretty desperate and very ivory tower.
This is what happens when the difference between right and wrong is forgotten.
Cheat the savers, wealth creating workers and reward cheats, deadbeats and non producers like ivory tower intellectuals. Let the government grow like a cancer.
Pretty soon, here we are. Enemies salivating at getting in a few licks. The monster is waiting at the front door.
Idiots ranting from soap boxes might just start the fires of collapse. Who knows. Just wish I was a little more ready, but ready for what calamity? Wish I could see into the future.
As first suggested on Thurs 26th, further upside for DOW/SP500 is expected.
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