October 25 is the date to watch.
Silver is the metal to own.
Guns are the tools with which to practice.
Prayers are the words to say.
Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.
Posted on 10/09/2009 10:50:59 AM PDT by FromLori
The dollar staged a modest rebound on Friday after comments from Federal Chairman Bernanke led to speculation that the US might make an early exit from unconventional monetary policy.
Bernanke said on Thursday that the Fed had the apparatus and the ability to recover the cash and loans to the financial system over the past year, signalling that it had its exit strategy worked out. BUT the Fed balance sheet and money supply hasn't grown since the first quarter of '09.
So, Bernanke is likely blowing smoke here for the financially clueless who have never read the M2 data repoted weekly in the Fed's H.6 report. Take a look for yourself, right here. I am not making this up. Although I prefer to look at M2 not seasonally adjusted, M2 seasonally adjusted pretty much givies the same picture--and that's what Bernanke would be looking at right now. M2 seasonally adjusted over the last three months (through September 28) has declined(!!!) by 0.4%. Over the last six months it has grown at only 1.1%.
In other words, Bernanke is not printing any money. The money he pumped in at annualized rate of roughly 15% between September '08 and February '09 is slowly working its way through the system and is becoming simply a part of the overall money supply, to drain this money would shrink the money supply and plunge the economy into a deflationary depression not seen since, well, never seen.
Now, Bernanke may withdraw funds from some of the specific programs he has pumped money into, but, if he does that, he will most assuredly sterilize the withdrawal by buying Treasury securities. It will be money supply neutral.
Those who are looking simply at the current near-zero Fed interest rate simply do not get that Bernanke's new "tool," which allows him to pay interest on balances banks keep on deposit at the Federal Reserve, has pretty much neutralized the Fed funds rate as a money creation tool. Keep you eyes on what the Fed is paying on the excess reserves and any significant decline in excess reserves, that will signal that the Fed is money expansionary again. But they are not now. Very few get this, even WSJ.
In an editorial, this morning WSJ writes: The Fed has been flooding the world with dollars in the name of preventing a U.S. deflation after last year's panic, and it shows no sign of tightening any time soon. Which is certainly an indication that they are not following H.6. But, it also signals they don't understand what they are putting on their front page. Since the front page is running this chart, which shows that Fed credit has not grown since early '09.
Bottom line, the Fed is helpless, and the media is clueless. When it comes to battling the falling dollar, there's just not much the Fed can do right now. It would require a huge increase in rates, to battle a declining dollar, and an increase in rates would drain money from the system and crash the economy. That drain is not going to happen.
As Hans Palmstierna wrote to me in an email, yesterday:
Your dollar destruction post got me thinking, and I realized something I haven't seen anyone make comments on. Those who have understood what is happening seem to agree that the dollar is doomed, because the Federal Reserve is going to kill it - and it is indeed extremely troubling that it is falling when the money supply is contracting. Obviously there are lots of dollar sellers at the other side of the world right now. But more importantly, and this is my point, imagine what will happen if the US Federal Reserve does NOT sit idly by. What would happen if Bernanke & Co. did the right thing, and tomorrow the US wakes up with a Federal Funds rate at 5%? Wouldn't what is left of the US economy simply topple over and die instantly (total monetary and banking collapse within a week)?
Isn't the most scary fact - that no one is acknowledging - that the game has already been over for quite a while - because it's "damned if you do, damned if you don't" for the US Federal Reserve? Indeed. The fate of the dollar, thus, is in the hands of foreigners. They hold tons of the green stuff, which may be a slight saving grace, since they have no reason to see the dollar crushed before they are out of it. But, in a panic situation, they will sell. Some small country with relatively small dollar holdings may even try and sneak out of the dollar in advance of dollar heavy selling from country's like China and Japan. If one small country does it and other small countries get a sense of what is going on, they may also bail.
It won't be China and Japan that lead a dollar panic. It will be small countries and non-U.S. based multi-national corporations, who think they can get out before the collapse. Their selling pressure, at that point, will cause China and Japan to step up their steady shifting of assets out of the dollar.
It's wouldn't be a pretty picture. In the U.S. it would mean dramatic price inflation, since the days of cheap goods from China would be over. And who, just who, will buy U.S. dollar denominated Treasury securities?
It's all about international view and opinions about the dollar, right now. It's about the psychology of the markets. If panic intensifies, the dollar is doomed. Gold could trade at $2,000, $3,000, even higher. Who really knows how high? On the other hand, if international fears calm down, and because Bernanke is not printing money right now, a collapse in gold back to the $500 level could occur. It's a very tricky time and the only thing Bernanke can do, outside of jawbonig, is what you and I can do, and that's just watch it all unfold via the quotes on our computer screens. But, there is one other thing we can do that the Fed can't, and that's bet on volatility. Becasue the volatility is here, and that is not going to stop anytime soon.
Ugh.
It isn’t as if people have not been saying this would happen. They have been saying much the same thing over at ZeroHedge for a while.
The dollar is out of our hands.
Joy. Thanks big government wonk class.
What I wonder is: what is their endgame? I can see how the politicians seek the power but how will big financials profit from a collapse of the dollar?
If the new reserve currency comes online in 10 years like they are planning then the dollar will crash.
It`s only a matter of when and how hard.
I’m sorry. All Berenke and everyone else can talk about today is the huge honor that our leader has brought home to these shores. God’s in his heaven, all’s right with the world, and Favre is uninjured to play another day.
Oil prices to go up soon along with other imported goods.
What I wonder is: what is their endgame?
Grab what they can for themselves, then pass the buck before it backfires.
It's a variant of Russian Roulette.
Shouldn’t commodity prices (grain) go up too?
Recently, I know of some businesses who have gone strictly to cash. Also, what is the effect of lots and I mean lots of cash on hand (not in banks)?
But what’s the plan when the rabble shows up with pitch forks?
I see that well I moved on and to me it looks kind of childish to keep posting all that about his nothingness the world thinks it is a joke and so do I but enough already the uproar on the page looks ridiculous. Just my opinion.
But what’s the plan when the rabble shows up with pitch forks?
It is hoped that a Community Organizer will help placate civil unrest where it is most likely to ignite.
How nice for them. They make (steal) money coming and going and the poor saps saving for their retirement or that dream property get F#$Ked.
We’re going to have to build a bigger HELL. Not room for all these pukes in the original.
October 25 is the date to watch.
Silver is the metal to own.
Guns are the tools with which to practice.
Prayers are the words to say.
The Market Ticker
Friday, October 9. 2009
Posted by Karl Denninger in Federal Reserve at 08:26
Kudos to Zerohedge and Jim Bianco on this one.
The Fed has repeatedly claimed they would not monetize the debt, as has Tim Geithner. Two videos:
[snip]
lol that is hilarious thank you
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