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The Weak Dollar and the Too Big to Fails
Former chief IMF economist Simon Johnson points out that the U.S. is intentionally weakening the dollar in order to bail out the too big to fails:
To
bail out our banks, we need cheap money, and this implies some
inflation. To finance our current account deficit, investors need to
think they are buying inexpensive assets from us. Everything points to
a cheaper dollar...Short-term rates (controlled by the Fed)
will stay low, while long-term rates (market-determined and affected by
trust in our Treasury and Fed to keep the value of dollar strong) will
rise as people fear their dollar investments will be debased. There is
no doubt that both the Fed and the Bank of England know what is
happening. The spread between short- and long-term rates (known as the
“yield curve”) will rise, and banks will benefit; would-be home buyers
and people with overdrafts or outstanding credit card balances pay
more, while savers get little.
This is how the public pays for the past losses of our financial system.
We
don’t have to do this again and again. We could start by changing our
financial system from the roots. We need to credibly remove the promise
to bail out our large banks each time they fail. This means forcing
them to hold more capital, dividing them up so they are smaller, and
then letting them fail when they make poor gambles.
The
Treasury’s past and current close connections to Goldman Sachs,
Citigroup and other major investment banks illustrate how our own doom
machine functions. We need to break up these “banks” so they are small
enough to fail, and also ensure that no bank, regardless of its
connections, is able to demand that the Fed and the Treasury support
its solvency in the future to prevent financial collapse.
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I'm still expecting a significant USD rally when the bear market rally in equities finishes.
And the DOW bearish rising wedge lines on the daily chart are converging ...
http://www.zerohedge.com/forum/market-outlook-0
These people need to be slaughtered wholesale...
Every day I become more seperated from being calm... I'm really pissed off reading this type of behavior by our .GOV and To Big to Fail Banks...
These people have destroyed so much of what I worked hard for...
It won't come back for me as the damage has already been done beyond repair...
I'm waiting for the right time...
More talk, more good ideas, more wasted breath.
Two years into the mess and we are further away from cleaning up the system that created it than ever.
Even if---and this is the best case scenario if we "work within the system"---all of the elected officials who condone this madness are ousted from office, it will be too late. Imagine how much additional and irreparable damage Bernanke, Geithner and Obama can do before November 2010 and mid-terms.
The only viable solution, indeed, the only chance we have of surviving, rests in acts of which we dare not speak.
We have to move these 1,000 pound men and ourselves to health or we will all suffer massive heart attacks. The cycle of codependency must be broken.
I have noticed increased pressure on the Chinese to revalue. I think I can almost smell fear out of Soros. I think there is a sense that we will double dip if they cannot ride the dollar down and the Chinese peg is putting a bottom on it.
Correct me if I am wrong, if they unpeg, inflation will eat up all the rest of the dollars they have stockpiled. If they hold tough, market crashes 2.0 and they now can roll in and buy on the cheap. I hope they have the stones I think they do.
"There is no doubt that both the Fed and the Bank of England know what is happening."
That's because the real intent of Bernanke, and Al, is to save the Great British Pound Sterling. They are, after all, loyal to the core.
Remember Rep. Alan Grayson "grilling" Unca Ben about where all that money went?
Grayson: "A half-trilion dollars to foreign banks? Are you for real, dude."
Unca Ben: "Totally. In FX swaps, yeah."
Grayson: "Well, who got the money?"
Unca Ben: "I don't know: European central banks, I guess. Can't really say who. Some European banks."
Grayson: "A half-trillion dollars and you don't know who got the money?"
Of course he knows who got the money! Bernanke traded US Dollars on the cheap so that the Bank of England and several giant European banks (cough-UBS-cough...) wouldn't deleverage from their dollar holdings because there were no dollars available. To keep them from selling every dollar-denominated asset in the world, thus plunging the global stock exchanges, Unca Ben made dollars available to them. (ZeroHedge had a great article on this about a month ago...)
The British now own a shit-load of USD and are trading in USD in high-risk assets because they know the game is not done; trying to recoup their losses. The irony is, The Fed and Unca Ben could dump Euros and Cables on the market for a stunning profit if they really wanted to reverse that trade. Plus, they could easily crush Merkel and King with a mouse-click if they really wanted to. Man, talk about power.
When the USD carry trade begins to unwind, look out below. There is at least a half-trillion dollars of USD held by foreign central banks (that we know of...) and when the Brit and Euro banksters see the USD reversing because of a natural top in unnatural equity and bullion markets, the reversal will come so fast and furious that it will be difficult for even those who follow these things every day to comprehend.
It will be beyond vicious!
Time horizon: 14 February 2010. Something sweet for St. Valentine's Day. :D
WHy 2/14/2010?
I have the USD making incremental moves higher from here on out. Perhaps the "meat" of the move happens then or by then.
Example
a 10 point move in the USD index causes the SPX to fall 200-375 points in 4-8 weeks. (Based on prior results)
see 2008
bankers have no nationalistic feelings or urgings. they could care less about countries. their main goal is profit, control and then destruction of the human race as we know it today.
Orly:
"14 February 2010."
That's very specific . . . Elliot Wave??
No. Don't believe in Elliot Waves. Their ideas can be manipulated any which way they want, what with the third wave of C in the fourth wave of (ii)...
Like any really honest person, I'm all like, "What??? That's not what you said last week."
Actually, GW, it has more to do with mechanical resonance than anything else. Remember last year when the entire kit and kaboodle began to unravel? Well, it actually began in the second week of February, 2008, when there was a minor dip in the emerging markets. That dip, had it not been for PPT activity, could have (and probably should have...) resulted in a cascade of lower equity markets globally.
(As an aside, and being quite the conspiracy theorist, I believe that the onset of the true market downfall was being closely monitored and reversed because the plan was not to the end of the tunnel just yet. That is the reason you see clear evidence, granted retrospectively, of PPT guidance throughout all of 2008 and 2009. Please don't get me started about 2007!)
Mechanical resonance would dictate that there should be an "echo" bust at about the same time of the year this coming year. With the market at the highest reaches it can realistically attain due to government stimulus, and quite a stretching of that reach thanks to way-behind mutual find managers, Johnny Daytrader, and the Vampire Squid.
The dollar can't realistically get much lower, either. In fact, the low dollar is killing many export economies. So, there is one forecast I share with Robert Prechter: the USD is going to skyrocket and when it does, it is going to take the equity markets into the bouncing abyss. I am just telling you that the apparent time for lift-off is Valentine's Day 2010.
Besides, it's my anniversary.
P.S. I appreciate your articles, thoughts and hard work. Thanks so much.
http://therealnews.com/t/index.php?option=com_content&task=view&id=31&It...
the global market is literally “stuffed full of 400 oz salted bars”.
http://www.marketoracle.co.uk/Article14996.html
and this from last year....
http://news.bbc.co.uk/2/hi/africa/7294665.stm
5 will get you 10, that all of the gold bars in the city of london that are owned by the rothschilds are pure gold, you can be sure of that.....
but the question is now, just how many of these fakes are roaming around inside the world central bank vaults these days? a slight scintilla of a problem , wouldn't you say?
You debase the dollar, you inflate away the value of the debt on toxic assets and you domesticate/balance your economy (horizontal drilling in shale might help ease the energy cost pain since it has magicked up the supply stats in about a scant 18 months) and the Chinese etc take the pain.
Its actually a pretty good idea, unfortunately it comes at the cost of the US being the pre-eminent superpower in the world. The UK lost its mojo way before the actual end of the Empire after all. There comes a point where every Emperor doesn't have any clothes and you are going to have to choose between being the big dog in the yard and actually having a functioning economy with half a chance that the citizens can feed and clothe themselves decently.
it's actually a pretty stupid idea and asswipes
like you are smug arrogant punks who i would love
to see torched in an old fashioned heretic
burning.....
who the fuck are you to decide that someone's
dollar holdings should be vaporized so that
financial terrorists can limp to another day
of mayhem....
it's creep cia-bankster terrorists like you who
are the bane of civilization....die creep....
and fuck you and your usa super power bullshit...
Too late; the banks own the Congress, the President, & the intellectual communities. Alternatives are to leave the USA or buy gold to preserve wealth. Gold rebounding today even after the dollar made another comeback attempt this afternoon. Accept the situation and make plans for the new world order.
Not on my Bloomberg screen, gold is moving lock-step with Eur, unless of course you insist that Bloomberg is also own by the banks :)
When the dollar carry trade implodes under its own weight next year, don't forget to let us know your returns.
Why shouldn't we simply let the overseas lenders hold onto our worthless paper?
B9K9 says "No shit, Sherlock".
The iconic B-17 was designed in 1935. It was succeeded by the B-29, and then subsequently the B-52 in 1946. The B-52 reached such a degree of optimal combat load capacity that, 60 years later, the design is still in current service.
The point? Bernanke's little forays into QE to fund MBS, fuel a market rally, bail out some banks, etc is tantamount to the B-17: it's only the initial design. He/we haven't seen nuttin' yet.
Wait until all niceties are tossed aside, much like when central bomber command incorporated inflicting massive civilian casualties as part of its core doctrine.
They're gonna step it up to the next level, and the next level after that until it's just a foregone decision that the $USD is torched.
Simon is right, which is why no one in power will listen to him. He would be a great FED Chairman, but we know that job's always going to held by some Ivy academic with no working knowledge of banking, no common sense and unrequited love for Alissa Rosenbaum.
The OTC market dwarfs exchange trading. Estimating its size, however, demands caution. In figures published this week the Bank for International Settlements, the central bankers’ central bank, puts its “notional” value at $604.6 trillion.
http://www.economist.com/displayStory.cfm?story_id=14843667
In the process they are wrecking the "To Big To Save" banks in the EU. It will come back, everyting is connected at that level.