Some quotes from Global Exodus from the US Dollar in Motion and my remaks on the foundations of the policiy making.
By Gary Dorsch, Editor, Global Money Trends newsletter
By Gary Dorsch, Editor, Global Money Trends newsletter
US Treasury chief Henry Paulson, and former chairman of Goldman Sachs, GS.N, “monitors the financial markets closely,” and has reinvigorated the infamous “Plunge Protection Team,” which comes to the rescue of the US stock market whenever nasty revelations come to the surface. At the moment, Paulson’s grand strategy is to offset losses in the US housing sector with big gains in the stock market, to prevent the US economy from sliding into recession
On July 2nd, Paulson sent a discreet signal to Wall Street power-brokers to avoid dumping the home builders. “In terms of housing, it’s had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn in housing is going to come, other than it’s at or near the bottom.
If Beijing understood the full extent of the Fed’s money printing operations, it might think twice about putting its hard earned dollars into Treasury IOU’s. Beijing is almost guaranteed to take further losses on its massive $900 billion US bond portfolio, with its secret agreement with Paulson, limiting the dollar’s annual devaluation against the Chinese yuan to 5%, to avoid the US Treasury’s label of a currency manipulator.
Judging from the chart above, the BoE is still far behind the monetary inflation curve, and would have to hike its base rate by 100 basis points to 6.50% or higher, to rein-in M4 growth into single digits. Ultimately though, the pressure on the BoE to hike interest rates further will come from the gilt market, which is in danger of a nasty meltdown, unless the central bank lives up to expectations of future rate hikes.
One central bank that cannot contemplate higher interest rates however, is the Bernanke Fed, which is hamstrung by a sliding market for the weakest sector of the sub-prime mortgage loan market. The benchmark ABX 07 – 1 BBB index, which is tied to sub-prime mortgage loans, fell to 53.16 cents on the dollar, and has tumbled 43% since January. ABX’s are sub-prime loan mortgages which are bundled in securities.
It is clear that techinical analysis is wothless except when the central banks, in coöperation with other financial institutes like Morgan, are operating according that patterns. It is also the first time in history that policy makers are using very high advanced software and hardware to ‘manipulate’ the DJI not to get into a recession. When the DJI is up, politicians can still hold that they took care of the elderly. Finally: loosing big money for the second time within ten years, would be a social disaster for the political stability in western hemisphere. That is what counts, not live for earth. Life for earth is a poltical issue now,so people’s attention now can be directed in another way different from the Iraqi’s war in order to recover the political situation. Only polticians and their supporters do beleive the slogan ‘taking care of the climate’.