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Too Little Too Late? Will the Fed's Taper Be Able to Stop the US Dollar Going Off a Cliff?

Phoenix Capital Research's picture




 

Janet Yellen has a BIG problem on her hands.

 

The Fed has been tapering its QE programs to the tune of $10 billion per month or so. The problem with this is that the Fed is once again behind the curve and the markets are already smelling inflation.

 

Indeed, the US Dollar just took out key support yesterday.

 

 

This is a HUGE problem for the Yellen Fed. They are already tapering QE but the markets continue to display inflationary tendencies. What is the Fed to do? Raise rates? It’s already said that won’t happen for another year. And tapering QE more aggressively could tank stocks.

 

Meanwhile, food prices are roaring higher. Wholesale beef prices are up 21% from this period last year. Pork prices are up 56%. Agricultural commodities in general have moved sharply since the beginning of the year.

 

 

The problem with inflation is that it is a lot easier to create than contain. The Fed continues with its dubious claims that inflation is too low, but the markets and prices are saying otherwise.

 

Buckle up, much higher prices are coming. The Fed is behind the curve again, just as it was in 2007. We all know what happened next.

 

This concludes this article, swing by www.gainspainscapital.com for a FREE investment reports Protect Your Portfolio, which outlines how to protect your portfolio from bear market collapses.

 

Best Regards

 

Phoenix Capital Research

 

 

 

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Thu, 05/08/2014 - 18:20 | 4741366 Whatchamacallit
Whatchamacallit's picture

Hey Ghordius, could you stop peppering your comments with bold fonts, it feels like a blowhard shouting spit at me. And anyway, I'm big enough now to recognize which are the important words.

Thu, 05/08/2014 - 12:33 | 4740118 joego1
joego1's picture

I'm sure that Vlad won't mind stepping in and giving the almighty buck that last heave ho into oblivion. All he has to do is throw a monkey wrench into the global energy markets and the worlds financial jesus pin will have been removed as icarus falls into the sea.

Thu, 05/08/2014 - 10:33 | 4739678 elwind45
elwind45's picture

Selling puts and the market for downside protection is AMPING? Snow or Belguim or vix EVERYTHING IS POINTING UP? All it takes is another trader to buy the fear! BUY TWO PUTS THEY ARE CHEAP CHEAP CHEAP!

Thu, 05/08/2014 - 09:11 | 4739352 10mm
10mm's picture

A long hot summer ahead. Perfect for the TPTB too see it all crash and burn.

Wed, 05/07/2014 - 19:31 | 4737772 AdvancingTime
AdvancingTime's picture

Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/02/contagion-may-lead-to-new-world-c...

Wed, 05/07/2014 - 19:27 | 4737739 AdvancingTime
AdvancingTime's picture

I think the yen will be the first to go then the Euro followed by the pound. Don't worry we will get our turn, and when we do watch out. Never before has mankind diverted such a large percentage of wealth into intangible products or goods.  I contend this is the primary reason that inflation has not become a major economic issue. 

The modern economy is loaded with interwoven contracts reeking of contagion. If faith drops in these intangible "promises" and  money suddenly flows into tangible goods seeking a safe haven inflation could soar even as debts go unpaid and promises are left unfilled. This could really shake up the world, more on this subject in the article below.

http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos.htm

Wed, 05/07/2014 - 18:02 | 4737471 kurt
kurt's picture

Richy Rich is drinking near the FED fountain. He uses the carry trade on the free money and buys tangible assets getting full value for his money. When he pisses it dribbles down the gutter and all of us Rubes and Marks get 50 cents on the dollar, and we lap it up because its wet.

Richy Rich wants inflation. Its his gift to you, Stooge, Loser, Dope, Punk, Wussie, Dummy, Pushover!

Go Fed!

 

PS You better shut up or we're gonna take your social security, Junior.

Wed, 05/07/2014 - 14:16 | 4736809 orangegeek
orangegeek's picture

USD weekly bounced off channel resistance and moved down sharply last week.

 

http://bullandbearmash.com/chart/dollar-weekly-pulls-channel-resistance-...

 

Very surprising - we could be heading to 74.00

Wed, 05/07/2014 - 14:02 | 4736756 lasvegaspersona
lasvegaspersona's picture

key support? bah!! The Fed will just buy more support.

As long as it is just money the Fed is fine. When STUFF gets hard to come by it will get real.

Wed, 05/07/2014 - 13:52 | 4736705 dizzyfingers
dizzyfingers's picture

Cat food or dog food?

Wed, 05/07/2014 - 13:29 | 4736591 I Write Code
I Write Code's picture

What are you babbling about?

Cutting QE should (eventually) raise rates, cut inflation, and strengthen the dollar.

That's if the whole economy wasn't already rotted near to death like a meth addict's teeth.

Wed, 05/07/2014 - 21:26 | 4738208 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

I have one small problem with this whole discussion.  It assumes that the Fed is telling the truth about what it has done and will do!

 

Show me the audit!!!!!!!

 

Tuco

Wed, 05/07/2014 - 13:29 | 4736589 SmittyinLA
SmittyinLA's picture

printing hunderds of billions of unbacked dollars a year doesn't necessarily have to cause inflation 

I wont cum in your mouth 

the check is in the mail 

just lie 

lie 

Say anything 

http://www.youtube.com/watch?v=JFvujknrBuE

 

 

 

Wed, 05/07/2014 - 18:19 | 4737519 Monty Burns
Monty Burns's picture

printing hunderds of billions of unbacked dollars a year doesn't necessarily have to cause inflation.

 

Technically this is possible.  If the money is used to shore up the balance sheets of dodgy banks and is withdrawn back to the Fed as and when they become undodgy then the impact would not be inflationary. 

Wed, 05/07/2014 - 18:20 | 4737518 Monty Burns
Monty Burns's picture

.

Wed, 05/07/2014 - 13:24 | 4736569 kellycriterion
kellycriterion's picture

Inflation, financial repression, currency manipulation, and yes taxes are at bottom capital controls. The half truth specialists of MMT are quite right to point out the conventional nature of money and all it's various derivatives.

I've been predicting moderate inflation, lower living standards, increasing underground economic activity for the US and Europe for several years. Maybe I should be a blogger.

I can't tell if he's predicting an imminent currency crisis or market crash. Which nominal prices are going higher and which lower? Will it be 08 or Venezuela?

Wed, 05/07/2014 - 13:15 | 4736539 gdpetti
gdpetti's picture

True, but why are pork and beef prices up? Inflation is a result of supply and demand, and the supply is way down due to disease for pork and drought for beef. Call it the type of 'global warming' that always shows up to kick off the next ice age. The 'signs' are present, just not seen and understood. Blaming Yellen is like blaming any politician for what they do. They are merely puppets and aren't in control of their actions, though they are allowed usually to think they are.

Wed, 05/07/2014 - 13:09 | 4736529 Bemused Observer
Bemused Observer's picture

The problem is that these people always seem to think there is some "formula" for fixing things. Like a checklist of 'stuff' they merely have to do, and viola!...all is well.

Wouldn't it be nice if real life worked that way?

Trouble is, there is a little thing called human nature. And they NEVER consider that part of the equation. Inflation is not just a function of money supply chasing goods, money doesn't spend itself. It is SPENT, by human beings. And human beings make their decision to spend based on their own personal assessments of whether it's a good idea or not. Someone thinking about buying a TV looks at the price, compares that to what he can afford. Add in future prospects, (does he feel secure about future income?)and need. (Do I have to buy today?)

At no time does that consumer look at things like 'money supply', long-term price trends, and all the other statistics that mean nothing to him in his real world. The fact that his behavior may or may not fit with the current 'stats' used by those-who-make-the-decisions is irrelevant. He simply doesn't care that his decision doesn't go along with the prevailing wisdom. He's making that decision according to other factors that are just not part of the equation.

It's time to put all the 'shiny toys' away, and get back to fundamentals. No amount of data-gathering or statistic-collecting can ever replace a well-rounded assessment of a situation. Which involves looking a bit deeper at what is going on, and considering ALL factors, not just those that can be neatly organized into a checklist. Facts and figures are all well and good, but they are meaningless without putting them into context. And to get context, you HAVE to know human nature, and be able to see how THAT may affect how the consumer ACTS on those facts.

 

Wed, 05/07/2014 - 17:14 | 4737352 No Quarter
No Quarter's picture

Someone thinking about buying a TV looks at the price, compares that to what he can afford. Add in future prospects, (does he feel secure about future income?)and need. (Do I have to buy today?)

 

 Dude, you're giving people way too much credit. I doubt most people think along those lines at all. More like looking at that tv and wondering not if they can buy it, but how much per month its gonna cost them. Friggin' Retards. 

Wed, 05/07/2014 - 12:34 | 4736409 Zirpedge
Zirpedge's picture

In case you forgot, the markets are rigged. I'm bullish on the dollar.

Thu, 05/08/2014 - 08:24 | 4739202 quasimodo
quasimodo's picture

Now there is an oxymoron if I ever saw one. 

Wed, 05/07/2014 - 11:53 | 4736251 Fuh Querada
Fuh Querada's picture

Technical analysis for 2-digit IQs. That blue line does not touch the chart anywhere.

Wed, 05/07/2014 - 12:29 | 4736389 Marco
Marco's picture

"Technical analysis for 2-digit IQs."

Bit redundant.

Wed, 05/07/2014 - 11:32 | 4736162 Conax
Conax's picture

"They are already tapering QE but the markets continue to display inflationary tendencies. What is the Fed to do?"

They are saying they are tapering QE, yet the equities ramps, PM hammerings and treasuries buying indicate otherwise.

The silver and gold beatings are virtually continuous now.

It's all coming apart like a cheap suit.  From China.

Wed, 05/07/2014 - 11:00 | 4735995 unplugged
unplugged's picture

Yo Graham - wake up dude!   Please come out of your stupor and explain to me why Belgium's purchases of US treasuries are basically offsetting the Fed's taper.   Or are you really that incompetent to not see that the Fed is now using proxies to purchase treasuries?   Or are you just a part of the 'system of control', a machine world program?   I wish I could get a cut of your salary for helping you do your job.  Please let me know if you'd like to cut me in on your pay....

Wed, 05/07/2014 - 20:52 | 4738082 rainingFrogs
rainingFrogs's picture

yes, Belgium [link] more than makes up for any US taper.  Clearly, a sleight of hand fake taper.

But, back to the topic of a weak dollar, I don't understand is why the US$ index is sagging (79.28 today), now sitting below the $0.80 threshhold.

The yield on 10-year UST is 2.623, which signals high demand for treasuries, which should mean high demand for US$, which should push the price of dollars up.

So, how there be a weak dollar and high demand for treasuries?  I must be missing something. 

Wed, 05/07/2014 - 11:16 | 4736075 ghostzapper
ghostzapper's picture

I'm with ya bro.  These geniuses can't see that there is no LITERAL taper there is merely a JAWBONE taper.  Belgium, Kenya, east fuckin nowhere, and maybe even Mickey Mouse next will suddenly appear to soak up billions of worthless UST. 

Very interesting though that USD is in fact on the verge of a substantial breakdown.  Not saying it's a guarantee but it hasn't been this vulnerable in a while. 

Wed, 05/07/2014 - 11:17 | 4736083 ghostzapper
ghostzapper's picture

Actually - they should create an account under Bieber's name to reflect how absurd this fiasco is.  Half the sheep would fall for it.

Wed, 05/07/2014 - 10:54 | 4735963 Ghordius
Ghordius's picture

"The problem with inflation is that it is a lot easier to create than contain."

Though the bigger problem with inflation is that it takes quite a time to surface as increase in prices, and unevenly

Wed, 05/07/2014 - 20:43 | 4738042 Lord Koos
Lord Koos's picture

Which is why it's so important to keep whacking gold and silver. 

Wed, 05/07/2014 - 12:01 | 4736296 LawsofPhysics
LawsofPhysics's picture

Bullshit.  These are not linear equations you are dealing with asshat.

Wed, 05/07/2014 - 17:12 | 4737345 tarsubil
tarsubil's picture

With a log scale, sure it can be linear.

Wed, 05/07/2014 - 11:04 | 4736017 unplugged
unplugged's picture

FALSE!!!!   under the new normal

And the new normal includes ignoring the old law and making up the new law as you go along to suit the current situation.  Anything is possible in a world in which the law can be broken and changed every minute, anything including "containing inflation".

Wed, 05/07/2014 - 11:10 | 4736039 Manthong
Manthong's picture

Maybe the fact that the IMF loaned SDR's to Ukraine provides a clue.

Wed, 05/07/2014 - 14:27 | 4736836 zaphod
zaphod's picture

Tapper is the worse of all of the government's "newspeak" terms.

Tapper implies some level of fiscal restraint, but if you are printing absurd amounts of false wealth every year (and by absurd I mean artificially creating enough wealth to buy several US states every year), printing slightly less money is not in any way fiscal restraint.

It's all just newspeak so that your average voter says "well we tried being fiscally conservative but that didn't work"

It's time to admit that the republic has fallen and we are just watching the slow motion crash. Next stop is a populist empire ruled by the Obamas/Bushes/Clintons and after that feudalism.

Wed, 05/07/2014 - 17:10 | 4737337 tarsubil
tarsubil's picture

Tapper? I hardly knew her!

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