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IceCap Asset Management: The Return Of The Dollar

Tyler Durden's picture




 

From IceCap Asset Management:

Before we go any further, we feel it is important to share our long-term view of the USD. In short, it’s going to stink. Just as Europe is facing an enormous debt problem, the US is also facing a difficult fiscal squeeze with no easy way out. However, unlike the Europeans the Americans do have a plan to get out of their debt crisis – after all, they didn’t develop into the World’s sole superpower without one. Forget about trying to be like the Europeans and creating some sort of confusing bailout fund – the Americans already have their bailout fund in the form of the US Federal Reserve. Plain and simple. While others often say the US will default on its debt at some point, we have a somewhat different view. Yes we believe a default will occur, however it won’t be the typical default whereby the US simply stops making interest & principal payments. The US Federal Reserve has the capacity to print unlimited amounts of USDs and they will use this capability to eventually make the USD considerably less than it is today. After all, a cheaper USD means America’s products are cheaper for foreigners to purchase, and these cheaper goods means more jobs in the long run – and who doesn’t want to work? The alternative is to watch (in horror) as long-term interest rates rise which is a sure economy killer if there ever was one. You can bet a box of Krispy Kremes that the Federal Reserve will do everything possible to prevent that from happening. In the end, the Federal Reserve has been very clear with their strategy – expect plenty more USD weakening policy moves. When you consider the American’s debt crisis (above Chart 1) and the condition of their banks (above Chart 2) the outlook for financial stability and economic growth is low. At the end of the day, we see the US Federal Reserve continuing with USD devaluing policies – in their eyes, it’s their only way out of this mess.

Full report:

 

 

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Wed, 11/23/2011 - 01:38 | 1905742 CrockettAlmanac.com
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and who doesn’t want to work?

 

Me. I want to be able to live off my hard earned savings without it being inflated or taxed away.

Wed, 11/23/2011 - 01:58 | 1905778 I think I need ...
I think I need to buy a gun's picture

There will be pllleeennntttty of jobs after the poverty lock!

Wed, 11/23/2011 - 06:20 | 1905940 Popo
Popo's picture

> " After all, a cheaper USD means America’s products are cheaper for foreigners to purchase, and these cheaper goods means more jobs in the long run – and who doesn’t want to work? "

 

This is the #1 propaganda talking-point of the Chicago School.    

There is absolutely no amount of feasible currency depreciation that will make American labor competitive with offshore labor.  The tipping point of a declining USD and rising oil, ultimately blows up the currency-depreciation game long before east-west labor competition heats up.  

The ONLY point of depreciating the currency is saving the banks.  All other justifications are to make you shut up and not revolt.   Of course -- you will.  Because the necessary devaluations are about 10 clicks beyond max-pain.

The whole theory of decreasing-USD / increasing exports doesn't even pass the logic test:  Chinese labor is less than 10% the cost of US labor.   So is a 90% dollar devaluation in the cards?   Go ahead and try it Ben.  It won't work.  The whole system implodes long before you get close.   Not only will oil ruin your day -- but so will food, water -- and blood in the streets.   Or wait,  perhaps Bernanke still believes in the old canard:  "The US will make high-tech products, and China will make socks".   Amazingly,  economists still spout this rubbish.   Too bad the Chinese are now building planes, aircraft carriers,  UAV's and supercomputers.  Oh, and stealing technology is part of their business model.  So on what grounds exactly are we suppose to compete again?

Inflation is simply a justification for an invisible tax ("tithe") on the American serfdom.  It will impoverish Americans, and if anyone thinks that the upside is that Americans will have an economically viable, competitive workforce thereafter -- they are being sold a bridge.

Wealth formation is at the crux of American competitiveness -- and Bernanke is aggressively destroying America's ability to save...  

Wed, 11/23/2011 - 08:51 | 1906169 Sean7k
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Nicely said.

Wed, 11/23/2011 - 02:21 | 1905814 DoChenRollingBearing
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@ Crockett,

+ 1 even if it does not work with italics at the beginning of your reply.

I am in a similar position, I have savings accumulated and am not looking for work (too old and not interested in work).  Just leave me alone already!  The US$ may have a good short-term future, but longer term, I WAY prefer gold.

Wed, 11/23/2011 - 02:46 | 1905837 CrockettAlmanac.com
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You said it, DoChen. And thanks for explaining why the up arrows don't work sometimes. I've been wondering about that.

Wed, 11/23/2011 - 02:50 | 1905841 Richard Chesler
Richard Chesler's picture

Hopey changey sucks goldman sacks!

 

Wed, 11/23/2011 - 03:36 | 1905860 Michael
Michael's picture

Here's one of the creatures responsible for the demise of our once great nation.

The Real Newt Gingrich

http://www.youtube.com/watch?v=jWPz1Qdq1uI&feature=player_embedded#!

Wed, 11/23/2011 - 04:59 | 1905913 Michael
Michael's picture

A deflationary depression is going to require a re-education on the significance of using lower denominations of money and its related value thereof.

Wed, 11/23/2011 - 07:37 | 1906021 BidnessMan
BidnessMan's picture

Re-education might be needed, but it will more likely involve explaining how many zeros were lopped off the currency.  As in 1994 in Yugoslavia where 1 New Dinar was exchanged for 1,000,000,000 old Dinars. Accounting software was running out of spaces for all the zeros.

http://en.wikipedia.org/wiki/Hyperinflation

Wed, 11/23/2011 - 09:25 | 1906265 Miss Expectations
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For those without the time to watch this entire video, just to to the 28:00 mark to listen to what Newt did to stop Ron Paul.

Wed, 11/23/2011 - 12:55 | 1907147 BigJim
BigJim's picture

Gingrich is indeed a nasty piece of work.

Wed, 11/23/2011 - 20:44 | 1908978 mkkby
mkkby's picture

-1 Michael, for the off topic political attack.  Fuck off already, troll.  We all hate you.

Wed, 11/23/2011 - 02:27 | 1905818 Libertarian777
Libertarian777's picture

fkn right. people don't get it.

you can debase the dollar to make US exports cheaper, in the short term.

In the longer run, the inputs we need to manufacture those exports will increase in price, via inflation, faster than we can raise the price of the exports, until eventually we end up worse off than before the inflation.

 

Wed, 11/23/2011 - 02:43 | 1905834 The Big Ching-aso
The Big Ching-aso's picture

 

 

I think these guys are simplistic idiots.    They're pulling things out of their ass faster than they can imagine them.

Wed, 11/23/2011 - 02:44 | 1905835 Spitzer
Spitzer's picture

Nobody gets it, certanly not Icecap

German exports went up as the Dm/ Euro went up. US exports went down as the dollar went down.(last 10 years 120 to 74)Japan has trade surpluses with China, yet they have higher wages then the US. Germany has a stronger currency then the US yet they have trade surpluses with China. The US had the highest wages in the world when it was the biggest exporter in the world.

Wed, 11/23/2011 - 05:31 | 1905935 fockewulf190
fockewulf190's picture

So we can look foward to earning 100K working at McDonalds. Of course, the fucking Big Mac is going to cost $25,99 and freedom fries are going to set you back another $15. Oh, and a Coke is $10 bucks, but don't be a fool, just buy the combo meal for $45,99. It's a great deal!

Wed, 11/23/2011 - 06:46 | 1905978 dark pools of soros
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so everyone will work a part time job at a food joint around lunchtime so they can eat for free??

Wed, 11/23/2011 - 07:25 | 1906006 BidnessMan
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Only a year ago a Whopper Junior at Burger King was one of the $1 items.  Yesterday it was $1.69.  The days of a $9.99 Whopper and Big Mac are coming. 

Wed, 11/23/2011 - 08:59 | 1906185 Freewheelin Franklin
Freewheelin Franklin's picture

Entenmann's cakes are now $6. Last year they were about $5.50, maybe a little less. However, that may not be a good gauge since Entenmann's is now owned a Mexican conglomerate. 

Wed, 11/23/2011 - 20:53 | 1908996 mkkby
mkkby's picture

Years ago they had decent products.  Now it's just a mix of high fructose corn syrup (liver damaging) and saturated oils (heart damaging).  Each cake should come with a free doctor visit.

Wed, 11/23/2011 - 20:50 | 1908991 mkkby
mkkby's picture

Even for free they are to be avoided.  I used a free whopper coupon the other week.  It didn't taste bad to me, but a few pieces of the soy/sawdust/mystery? meat substitute made my healthy cat vomit.  IMHO, It's not food, it's chemicals.

Wed, 11/23/2011 - 01:45 | 1905751 eurusdog
eurusdog's picture

Yes, the USD gets the benefit of the doubt until the Eurozone goes kaput, then all eyes turn to the US. Who couldn't have figured that one out? Oh wait, I guess 99% all traders buying into hopium can't see it coming.

Wed, 11/23/2011 - 01:48 | 1905755 gwar5
gwar5's picture

Watch the EURO. When the EURO tanks it's the signal for USD QE3. The US and Chinese cannot tolerate a cheaper EURO in the currency wars. I wouldn't be surprised to see Bernanke print USD to prop up the EURO and kill two birds with one stone.

 

Wed, 11/23/2011 - 01:49 | 1905756 traderjoe
traderjoe's picture

Are you friggin' kidding me? Do they understand nothing about our monetary system?

The Fed is a private institution. They may or may not be looking for a way out this mess, but they are looking out for their owners and not for the 'country'. As per the Fed, the commercial banks create most of the money in our system. The Fed is merely the enabler. Finally, yes the Fed can print money out of thin air, but FRNs must be BORROWED into existence. More money means more debt. We have a debt-money system.

Sorry, but fail.

Wed, 11/23/2011 - 02:04 | 1905789 CrockettAlmanac.com
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but FRNs must be BORROWED into existence.

 

That's the current method but as electrons are cheap the Fed could just give them away to the Treasury for free in order to "save" the system and ensure their monopoly. Think of it as a greenback jubilee.

Wed, 11/23/2011 - 04:22 | 1905892 merizobeach
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I was trying to think how bernank would phrase it--then I realized, he's already got the terminology: asset purchases; next up, US Congress (well, immediately next after some crippled version of an ECB anyway).

Wed, 11/23/2011 - 08:27 | 1906102 Snidley Whipsnae
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"I was trying to think how bernank would phrase it--then I realized, he's already got the terminology: asset purchases"

.......................................

Benny has already phrased it... 'We have the printing press, we can throw money from helicopters'...

Wed, 11/23/2011 - 02:15 | 1905806 SheepDog-One
SheepDog-One's picture

Theyre not looking for a way out of this mess, they planned it and have an endgame planned as well, and we're there now.

Wed, 11/23/2011 - 01:52 | 1905764 Caviar Emptor
Caviar Emptor's picture

The US Federal Reserve has the capacity to print unlimited amounts of USDs – expect plenty more USD weakening policy moves

Unfortunatley, gradually through the 2000s and especially since 08, the simple minded cure for all that ails us...a weak $....has reached it's endgame. It is now past the point of "diminishing returns" and actually into "incremental punishments". 

Each move to weaken the dollar now carries the ultimate economy killer: serious inflationary pressures, with very anemic growth in demand for US exports. It's just a byproduct of the new economic reality. You get rising costs of basic materials and no discernible impact on exports. In fact the rising costs preclude cheap manufacturing in the US. Capital, jobs and management has flown overseas at a dramatic rate during the 2000s and 1990s. Very hard to compete with what has been built overseas by our own US multinationals. 

Wed, 11/23/2011 - 01:58 | 1905777 qussl3
qussl3's picture

Competitive debasement is a bitch.

Even if it doesnt want to the FED will be forced into it by the ROW.

Wed, 11/23/2011 - 02:10 | 1905798 SheepDog-One
SheepDog-One's picture

I dont believe this 'endless printing' story at all, thats not the plan, at all. Their printing is done, now they just need the collapse and the new currency and it will be sudden, this writer is missing the bigger picture.

Wed, 11/23/2011 - 01:55 | 1905770 eurusdog
eurusdog's picture

Anyone else find the name "IceCap" a little inaccurate for the logo shown?

Wed, 11/23/2011 - 02:07 | 1905794 CrockettAlmanac.com
CrockettAlmanac.com's picture

IceCap sounds like a euphemism for a fatality caused by a gansta's bullet fired in cold blood.

Wed, 11/23/2011 - 05:20 | 1905925 UP Forester
UP Forester's picture

And here I thought it described the "heat" of the economy rather well.

As opposed to China's "BoilingOcean" and Europes "RogueWave"....

Wed, 11/23/2011 - 02:06 | 1905792 lolmao500
lolmao500's picture

America! FUCK YEAH!

http://www.rawstory.com/rs/2011/11/22/pregnant-seattle-protester-miscarr...

Pregnant Seattle protester miscarries after being kicked, pepper sprayed
Wed, 11/23/2011 - 04:04 | 1905882 gwar5
gwar5's picture

Now possible to begin and end a pregnancy at an OWS. Who needs the trouble of an inconvenient and expensive abortion when you can just have all the casual sex you want in those colorful tents and then confront police until you get pepper sprayed. But how does she know it wasn't the drugs and alcohol?

 

 

Wed, 11/23/2011 - 13:27 | 1907282 TheJokingJollyRoger
TheJokingJollyRoger's picture

Here in Seattle I know that pregnant protester very well.  She is the best friend of my fiance.

 

She really was pregnant and the critics be damned.

Wed, 11/23/2011 - 02:11 | 1905796 SheepDog-One
SheepDog-One's picture

What american products, newly printed dollars?

Wed, 11/23/2011 - 02:16 | 1905807 jomama
jomama's picture

chart on page 11 of the presentation pretty much sums everything up.

Wed, 11/23/2011 - 02:16 | 1905808 Snidley Whipsnae
Snidley Whipsnae's picture

Devalued dollar = the 2/3rds of oil imported and consumed in the US increases in dollar terms = everything that requires oil (manufacturing, ag, transportation, etc) increases in dollar terms.

So tell me again how devaluing the dollar will make exports cheaper?

Is Saudia Arabia going to peg the price of oil to a devaluing dollar? Will any other major oil producer/exporter?

How much more inflation do the commodities exporting countries want to import due to a devaluing dollar?

Trading colored pieces of paper (dollars, Euros, Yuan) for actual, useful, commodities is always a bit of a sticky wicket.

 

Wed, 11/23/2011 - 02:20 | 1905809 CrockettAlmanac.com
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Good point. The dollar is being devalued and it won't be sunshine and roses.

Wed, 11/23/2011 - 03:47 | 1905872 MoneyScraper
MoneyScraper's picture

But in the "race to debase" the U.S. usually wins (safest port in rising seas).  China's totalitarianism could have worked -- 50 years ago.  Now (1.5B people) it's hopeless.  I'm afraid that leaves US odd man in?

Wed, 11/23/2011 - 06:56 | 1905982 dark pools of soros
dark pools of soros's picture

no you peg bombs to oil  -  money is worthless 

 

 

just like how middle america takes years to see new music and fashion, the reality of how worthless money is will trickle down in a few years and people will go back to barter and slaughter

 

 

Wed, 11/23/2011 - 09:59 | 1906399 JoBob
JoBob's picture

No other country has to do anythign at all other than sit back and watch the USA implode. Why should they help us out of the endless pit? This is their chance to eliminate the USA from the world power equation and they can do it by just watching.

 

Wed, 11/23/2011 - 02:20 | 1905810 Aquarius
Aquarius's picture

I believe that the right question is, does anybody in control of decisions at the top end, know what the hell they are doing with any certainty? Does Bernanke really have the cognitive experience and knowledge to produce a soft landing?

In my opinion, the answer is simply "No". And this is exacerbated as all these greats appear to be working against each other. Certainly the Bureaucrats in Europe and the Congress in the US are not working in concert, each lot hoping to remaion in power for another day and not to lose theirs heads in the event of total failure.

I have a question though, if I may? As the FedRes and its memeber banks are all Private corporations, then to debt they buy in the QE I, II, and currently III, cannot all this be ring fenced and written off through a controlled bankruptcy re-organization proceedure to protect the ordinary peoples of the USA?

Sounds to me if the US leadership ever got the balls to do something like this - across the TBTF board, it could solve a large part of your unemployment situation for more than a decade.

http://verbewarp.blogspot.com/2006/08/global-economic-collapse-part-ii-why.html

Wed, 11/23/2011 - 02:23 | 1905811 zebrasquid
zebrasquid's picture

Doesn't printing dollars cause monetary inflation fears/actuality, resulting in interest rates rising?

Since rising rates defeats the Fed's main goal(at least according to the writer) of trying not to kill the economy, the premises of this long winded piece makes no sense.

Wed, 11/23/2011 - 02:21 | 1905813 SHEEPFUKKER
SHEEPFUKKER's picture

15 trillion US Dolla make you holla. 

Wed, 11/23/2011 - 02:34 | 1905823 lolmao500
lolmao500's picture

Screw the economy. We all know it's going down at some point.

So instead of waiting for the same BS ``bailout`` news again and again, I'm playing Skyrim.

Wed, 11/23/2011 - 02:44 | 1905824 The Big Ching-aso
The Big Ching-aso's picture

 

 

The only difference between all this and a Monopoly game is that its bank can't print more funny-money and it isn't rigged.

 

 

 

Wed, 11/23/2011 - 03:35 | 1905859 OldPhart
OldPhart's picture

But bankers can cheat in both games.

Wed, 11/23/2011 - 05:22 | 1905928 UP Forester
UP Forester's picture

Especially the new one with credit cards and the calculator....

Wed, 11/23/2011 - 03:23 | 1905852 Caviar Emptor
Caviar Emptor's picture

Flash: Sensex and Nifty both at 2011 lows. The vibrant BRICS

Wed, 11/23/2011 - 03:39 | 1905865 LookingWithAmazement
LookingWithAmazement's picture

Weakening the dollar makes that currency more attractive.

Wed, 11/23/2011 - 05:23 | 1905929 UP Forester
UP Forester's picture

I thought adding colors made it more attractive.

Wed, 11/23/2011 - 04:00 | 1905878 manodedios
manodedios's picture

these people are brilliant, i want to open an account with them.

Wed, 11/23/2011 - 07:16 | 1905998 CitizenPete
Wed, 11/23/2011 - 08:34 | 1906123 oldmanofthesee
oldmanofthesee's picture

Before I even watch the link,CP, my problem is, I've been looking to buy silver (bars) for months. A little gold, as well. I have never seen any industry as populated with frauds ands charlatans, as these silver/gold sellers. Oh well.....

Wed, 11/23/2011 - 09:02 | 1906195 Sean7k
Sean7k's picture

APMEX is running a 24 hour special: one ounce silver bars for 99 cents over spot. Their shipping costs are high and they are owned by JPM. Still, silver is being hit as we speak and it could be an opportunity.

Wed, 11/23/2011 - 07:20 | 1906003 ns_solanki
ns_solanki's picture

But what about "Triffin Dilemma"

which is,  that when a national currency also serves as an international reserve currency and that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfil world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit.

 

So, if US starts exporting to the world who dont have dollars. then how gonna they pay for it?

Wed, 11/23/2011 - 09:04 | 1906203 Sean7k
Sean7k's picture

It is estimated that the "world" holds 20 trillion in US currency/credits. (why don't we factor that debt in?) That will buy a lot of exports.

Wed, 11/23/2011 - 07:47 | 1906043 SanOvaBeach
SanOvaBeach's picture

I've got some USD super-bullish friends.  I personally think they are way off track.  They say things like, "if the USD is so bad, why does everybody want them".  "Don't buy gold, it could go down!"  "Don't invest in anything, just keep everything in dollars".  I consider them super risk-adverse folks.  One is retired with all wealth in USD.  "The USD is backed by the guarantee of the US gov".  I tell them to stay in bed all day and read comic books!  Hence, they get up and make a mistake on something.  God forbid!!!!

Wed, 11/23/2011 - 08:47 | 1906157 arkady
arkady's picture

All Fiat money is a debt instrument, it is not really money in the traditional sense, just a debt bearing instrument with no interest.  

 

However...not all FRNs come into existence equally.  

 

For example when QE1 was operational consisting of 1.25 Trillion in MBS purchases all that money was printed and borrowed by nobody.  It was just a quiet transfer between the Fed and the member banks swapping freshly minted FRNs for MBS crap.  Made banks happy, but virtually nobody was affected.

However QE2 satisifed your example, although it is a bit muddy here since it was the same money that the banks received during QE1, but even looking at that scenario we can see that of the original 1.25 Trillion about 600 Billion (qe2 money) was borrowed while the rest was not.

I like the paper, but it just another dragged out inflation/deflation debate.  I am puzzled how they can look at massive credit contraction, first time in 80 years and claim it is bad for the dollar?  Defaults by their very definition are good for the denominated currency as it implies a shortage of that very currency.

Wed, 11/23/2011 - 09:07 | 1906210 Sean7k
Sean7k's picture

Defaults are good in the long run because malinvestment is cleared, in the short run however, it can be a killer.

Wed, 11/23/2011 - 09:21 | 1906257 spanish inquisition
spanish inquisition's picture

"She's the prettiest leper at the bar and I am drunk on liquidity"

Wed, 11/23/2011 - 09:53 | 1906360 SheepDog-One
SheepDog-One's picture

More like 'DUNCE-Cap'

Wed, 11/23/2011 - 10:56 | 1906625 whatswhat1@yahoo.com
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"The U.S. dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others. The main U.S. export for many years has been paper dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee—and about everything you see on Walmart shelves. It has been a one-way street for several decades, a free ride—but the party's over.  Catastrophe will come when everybody realizes that the dollar is an "IOU nothing.""

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