Swiss Franc

"Time is now rapidly running out," warns The Telegraph's John Ficenec as the British paper takes a deep dive into the dark realities behind the mainstream media headlines continued faith in central planning. Sounding very "Zero Hedge", Ficenec warns that from China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

A look at next week's data in the somewhat larger context, and a look at interest rate differentials

All of this raises an interesting question about the future of the US dollar. Because if an economy as large and powerful as China’s has had to concede defeat, does this mean that “King Dollar” will rule forever? No chance.

Imagine running a rink company at the end of the roller skating fad in the 1980's. You know it is not going to survive for long. How do you operate your business? You milk it. Well, that's now happening across the entire economy.

To help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.

Almost exactly seven months ago, on January 15, the Swiss National Bank shocked the world when it admitted defeat in a long-standing war to keep the Swiss Franc artificially weak, and after a desperate 3 year-long gamble, which included loading up the SNB's balance sheet with enough EUR-denominated garbage to almost equal the Swiss GDP, it finally gave up and on one cold, shocking January morning the EURCHF imploded, crushing countless carry-trade surfers. Fast forward to the morning of August 11 when in a virtually identical stunner, the PBOC itself admitted defeat in the currency battle, only unlike the SNB, the Chinese central bank had struggled to keep the Yuan propped up, at the cost of nearly $1 billion in daily foreign reserve outflows, which as this website noted first months ago, also included the dumping of a record amount of US government treasurys. 

"It is our natural right to reflect our interest in the libor fixing process."

"Yes, ok mate, I am heading out for a run, enjoy, talk tom, get those fixings down."

In 2012 we asked whether the fact that stigmatized LIBOR traders were accepted with open arms at various hedge funds after being "fired" from the bulge bracket meant that there may, just may have been, some quid pro quo in the past. Now we know the answer.

The demise of the dollar has been greatly exaggerated.  Here is how I see the near-term outlook. 

• Trump at center stage as Republicans square off in first debate (Reuters)
• Cleveland Debate Offers GOP Hopefuls a Chance to Break Away from the Pack (WSJ)
• Bank of England Keeps Key Interest Rate at 0.5% in 8-1 Vote (BBG)
• Emerging stocks submerged, UK gears up for 'Super Thursday' (Reuters)
• No IMF decision on Greek bailout until autumn, Swedish rep tells paper (Reuters)
• Japan Heads Toward Nuclear Unknown With Post-Fukushima Restarts (BBG)
• Activist Ackman Takes $5.5 Billion Stake in Snacks Giant Mondelez (WSJ)

It's time to challenge the notion that the decline of a currency can be measured simply by the rate of price increases. This price-centric view misses the ongoing hyperinflation.

Regardless of where one thinks the dollar is going in the long-term, here is a discussion of where it will likely go in the short-term.  

Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions - a whopping 7% of Swiss GDP - meaning that in Q2 the SNB lost another €20 billion. This happened despite the SNB having invested 17%, or $94 billion, in foreign - mostly US -stocks.

Greece has no future, so long as it clings to the euro. The dollar won't servce you much better. A drachma will only harm the Greek people. That leaves one other option.

The action in gold in 2013 was a warning about the “dollar”, a warning that went completely unheeded yet has been largely fulfilled. Again, 2013 provides a guide as to why gold prices may be declining in sharp moves, especially right at the open or in weaker trading hours, and it has very little to do with interest rates apart from fixed income suggesting the same factors about the “dollar.” Whether it is growing unease about the global economic picture or the “sudden” recurrence of financial irregularity almost wherever you wish to gaze, the “dollar” is once more wreaking havoc. This isn’t controversial at all, but somehow economists can miss that gold is global and universal collateral and when the eurodollar system is stressed it becomes activated in that manner.