 What annoys me is that people stampede when there is no fire. The Fed has had a policy of debasing the USD through the "leadership" Greenspan and Bernanke (soulmates). They are easy money guys, afraid of deflation. The Fed's job had been to protect the dollar and often intervened as mandated though agent banks to support the dollar as world reserve in several markets. Then they became worried about trade, because it was the last option left in which the US has even the faintest hope of competing globally.
People say there is no Q-3...there is; it just hasn't been announced. The Fed never stopped printing, and whether the money went to the EU/ECB via the central bank consortium and/or via the IMF, same difference. The brakes have been slammed on depreciation/debasement temporarily to again protect the Wall Street Investment Banks from the derivative blow-back of troubled EU Banks.
Germany doesn't care - Merkel et al think they can handle whatever comes - as soon as they through France in among the PIIGS - even though their number two bank is staggering. They may let it fall. They will certainly not print.
They will clean house at some point - and Goldman's Cadets will be sent packing. BOA and a few other investment banks can only be saved by the American taxpayer. Like BOA, the derivatives risk has been transferred by Wall Street to their banking side and socialized - this would not have been possible had Bernanke, Geitner and friends not allowed them to convert from investment banks to reserve banks in the first place, so they could qualify for TARP and all the other goodies.
That middle-of-the-night decision should have been reversed long ago. The Fed is in the business of protecting the banking industry and never does anything to help anyone else - including the EU. They are printing to prop up EU Banks now to protect Wall Street. I can't imagine anyone with a brain rushing to the USD for safe haven - it's more likely a quid pro quo of some sort, from London or Fankfurt - you can't bailout anyone with completely worthless dollars afterall.
To de-value the buck in the first place, they had to set gold free, within limits....thus the long run up as the dollar ran down. Now the USD is artificially inflated and gold of course has fallen, but this last roll of the dice is a huge gamble. It shouldn't take long to play out...just as long as it takes to try to stamp out the fire in France and the PIIGS - set by Goldman.
What a quandry for "poor Ben". He wants world reserve status and the only way to compete in the race to the bottom in the "big four" currency war is to let it down and let gold ascend. This is what we have seen for a decade. Now the buck has to look like it's worth something (so gold descends). If he isn't successful in helping the EU Banks, really Wall Street, his balancing act could end with a BOOM! And off the high wire he goes in a shower of USD and OTC derivatives, junk bonds, Treasuries and other "creative" instruments.
He's on a razor's edge. He either puts the fuse out on the potential EU blowback (10 times global GDP, give or take), not to mention sovereign debt, or he has to abandon debasement and any hope of reviving trade (the economy)...he is hoping short-term.
Merkel et al are totally blaze...the core countries are sufficiently insulated to work through this long- term. If re-elected, she might even let the chips fall for banks at the core, and soldier on...it is not a short-term problem she has said, and easy money is no solution - they tried it, and she told them it didn't work.
The EU has been working on their own solutions and letting the "Anglo-Saxons", as she calls NY and London, twist in the wind. Once the fate of the USD, and possibly a new Nordic Euro, is decided, gold will again find it's place....and it's price.
There were no such problems under the old gold standard, which righted itself without intervention over time for a century or more. It is only since central banks first incorrectly pegged gold and then defaulted on a modified gold standard and moved to fiat, (Nixon defaulted) and went to printing currency out of thin air that all this nonsense has burned us again and again.
Open banking, FreeGold or the old gold standard, with gold revaluated, is the simple solution. But that is logical, and we are clearly creatures of emotion.  Commented 4510 days ago |
