Jerome Powell is Playing “Chicken” With $10 Trillion in $USD Shorts


Thus far in his tenure as Fed Chair, Jerome Powell has emphasized that he is more concerned with the real economy than the financial markets.


Put another way, the Powell Fed, unlike the Bernanke or Yellen Feds before it, is willing to sacrifice stocks in the name of normalizing monetary policy provided the economy can withstand it.


As a result of this, the Powell Fed intends to continue with its rate hikes as well as the increase in QT (we go to $50 billion per month in July), despite the clear evidence that these policies is putting the financial markets under duress.


Indeed, already we’re seeing something of a meltdown in the Emerging Market space with Brazil, Turkey and other Emerging Stock Markets crashing.



Here’s where it gets interesting.


Globally there is over $10 trillion in $USD shorts floating around the system. And with both rate hikes and QT strengthening the $USD, Powell is effectively playing “chicken” with this massive issue (at $10 trillion, this is roughly the size of the GDP of China).


So while he claims he is willing to stomach market volatility, this might prove to be a bluff if the $USD short issue becomes systemic. Most Emerging Markets are already 20% off their recent peaks. If US stocks were to experience a similar drop, the S&P 500 would be at 2,300.



On that note, for the first time in 18 months, there is a significant risk that the markets might actually enter a free fall. Powell is playing a dangerous game. And if the Fed doesn’t walk back its policy there is a very real chance that the US markets could experience carnage similar to that which has already hit the Emerging Market Space.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE by one week. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research



Son of Captain Nemo Jus7tme Sun, 06/24/2018 - 10:56 Permalink

"Where are these $10T USD short positions, and in what form? That's a pretty big claim to make, and I think some background information is required."...

When Jerome Powell, Stevie "Mndouche-in" and "Satoshi Scrotumoto" hit the bar for a "drink" and talk alchemy with money... The possibilities are always "endless"!... QEoo since 2008... And why the looting operations for energy successful or otherwise OCONUS won't STOP until it is "STOPPED"!!!...

Cause when it it's forced to "STOP"?... Marriner Eccles will be an open air museum that will serve as an empty "parking lot"!!!


In reply to by Jus7tme

shortonoil Son of Captain Nemo Sun, 06/24/2018 - 12:49 Permalink

Oil at $70? No one can afford that without subsidies. The breakeven point is now at about $45. So the developed economies are paying for it by extracting capital out of the emerging markets. The same goes for the cost of servicing the existing debt; the banking system can't afford it without being subsidized. So they will continue to extract capital from the emerging markets to cover the cost. Mr. Powell may have some interest in the Main Street economy, but the most likely reason that he is reducing liquidity, and raising rates is to support the banks. His concern about the common man is most likely the same as we have seen from all FED chiefs; close to or approaching zero!

In reply to by Son of Captain Nemo

Scipio Africanuz Son of Captain Nemo Sun, 06/24/2018 - 12:46 Permalink

The markets need to go to hell to sober up, and the real economy needs a boost to lever up. Most Americans, don't have a stake in the financial markets save for pensioners, and reasonable rates are good for them.

All those trying to escape recalibration, and pressuring the FED to please be gentle with the financial markets, are not kind to the American people.

Financialization, is no way to manage an economy. Farms, Manufacturing, Industry, Transportation, Construction are the bedrock of a properly functioning economy, and rates, market rates, are what ensures efficient utilization of capital.

So much inebriating punch has been drunk, folks have become addicted to ever flowing spiced punch, which is causing real damage, to the real economy.

So yeah, Powell is playing chicken, in fact, I think he's too gentle, if the complaints continue without readjustments on the part of complainants, he should ratchet up two notches or three, and send the message "I mean business!"

It's time to allow American workers in productive fields, work. Money ain't flowing to them anyways, so what's the complaint.

Take the hit once and for all, and HEAL!...

In reply to by Son of Captain Nemo

ElTerco Sun, 06/24/2018 - 12:22 Permalink

Go, Powell!! It's about time someone stood up and replaced the fake economy with a real economy. I'm glad someone finally has the balls to do it. This is a first step towards healing all the market distortions for the good of the people rather than only the rich.

Money_for_Nothing Sun, 06/24/2018 - 12:55 Permalink

Remember when everyone wanted a strong $USD?
Remember when everyone wanted interest rates raised?
Remember when everyone wanted the Euro/Yuan/Ruble/Rupee/SDR/gold to replace $USD?
Remember when everyone wanted commodity backed money?
Remember when BitCoin ... ?

To everyone's surprise what everyone really wanted was $USD backed by ever rising debt with no-strings-attached.
... Don't it always seem to go ... With a Trump hotel, a boutique And a swinging hot spot ...

Midnight Rider Sun, 06/24/2018 - 14:03 Permalink

The Fed reported this week that the banking system could survive a 65% market drop. This should scare the shit out of any market long who blindly thinks the Fed has their back.

MrSteve Sun, 06/24/2018 - 16:32 Permalink

EM dropped because their prices were too high. Ipso Facto.

A surprise drop in rates (Euro / EM / Asian Contagion) would boost the price of outstanding bonds (good for Uncle Sam, pensions and insurance companies) and make UST payments and repayment of old bonds easier (good for Uncle Sam). Maybe this time around, the FED is doing what is good for Uncle Sam, now that the banks have been bailed out and recapitalized. That time of the cycle has come around now.

JLM Sun, 06/24/2018 - 21:30 Permalink

Or the rip your face off rise in the US$ continues as predicted by Ice Cap and everyone piles into US equities to protect themselves.  Don't see the S&P cratering as some of you irresponsible types are pining for.  Go ahead and short the US dollar and equities and feel the burn.... .