Are you shocked?

And it will work for a while (lift the markets) until the next bout of deflation sets in (bank balance sheets imploding thus money being destroyed)

Then more CB intervention (more liquidity through easing and accommodation) to try to plug the hole

Then another bout of deflation

Then more money printing

Then....




Until one day the fireball called hyperinflation burns it all to the ground.

Their desire to rescue the elites and super rich is relentless.  This move smacks of desperation. The crisis is even worse than I thought it was.

Randle Joined: 10 Sep 10
Replies: 4086 30 Nov 11 15:25 
Their desire to rescue the elites and super rich is relentless.  This move smacks of desperation. The crisis is even worse than I thought it was.



It's posts like this that make me hang around this forum. Only problem is, I wish there were more of them.

YOU.SIR.ARE.AWARE......and you have earned my respect.

what is the period between more printing and the next round of deflation? Are we talking months, years? I assume every time you print more, it negates the effect. A bit like a heroin addict. So I guess in 6 months we will be back at the same place?

Great question and great comment. I totally agree these constant interventions do have diminishing returns. Nonetheless they are a b1tch if you get caught short.

The short answer to your question: It's complicated.

The long answer to your question is I'm trying to figure it out. An almost identical coordinated CB policy response occurred in Sept. 2008 when liquidity dried up because of the Lehman collapse. If you read the two press releases they are almost identical. I'm trying to recreate what happened and how it played out in 2008 and overlay that with a number of scenarios that deal with today's pressure points. Work in progress.

In my opinion in order for them to pull the trigger now with food price inflation the way it is, Oil stubbornly at well over $100, and gold waiting to break through trend lines, SOMEONE BIG SOMEWHERE WAS READY TO BLOW UP, that's why they stepped in. I would have normally said this move has legs but despite the massive DOW spike, the EUR should have moved and stayed over 1.36 (it didn't), and oil despite worsening geopolitical risk didn't follow. This is not too bullish.

My best guess at this point without having completed my analysis, the FED will continue to pump this market right up through the end of the holiday season. When 70pc of your economy is based on consumer spending, letting the markets take a hit before the seasons biggest retail month is not what you want to do. It's the good old CONfidence game. The situation in europe complicates that but the FED has clearly demonstrated they are everyone's lender of last resort and quite prepared to step in forcefully.

So I wouldn't want to be short over the next 4-6 weeks, at least not for a long time. I think after that (we could be around 1320 on the S&P by then) reality will return (too many entities looking to roll over massive amounts of debt next year, growth is contracting everywhere and the EZ insolvency problem hasn't gone away) and down we go again until the FED formally announces another round of QE. My guess again, that will come near the end of Q1 2012.

Just my opinion.

Great. Cheaper money for the commercial banks. All it needs is Gordon Brown to be in charge of their risk departments and everything would be okay (for a bit). Unfortunately what they have is the complete opposite.

its an ever decreasing spiral. eventually it will go pop - and it wont be pretty.

1 thing that menelaus has put intrigues me -

And it will work for a while (lift the markets) until the next bout of deflation sets in (bank balance sheets imploding thus money being destroyed)

Then more CB intervention (more liquidity through easing and accommodation) to try to plug the hole

Then another bout of deflation

Then more money printing

Then....




Until one day the fireball called hyperinflation burns it all to the ground.

------------

why will there be deflation (bank balance sheets imploding thus money being destroyed)?

can u please explain the reason for deflation?

thanks

ps the prophecy of the fed flying helicopters full of many over the streets and hoying it out the side door to the punters below, looks to be coming true.

pps for u day traders out there.... lovely gap on the dec dax future. from 5532-5567. thats 500 tix away!

good luck

pps for u day traders out there.... lovely gap on the dec dax future. from 5532-5567. thats 500 tix away!

--------------

so a sell here at 6075 will do nicely.
stop 6166 (theres a double top of 6135, so im leaving a really wide stop because its quite thin out there, punters)

oco

5535.

should take about a week. and then its bermuda!!!

oh and again, to u all...

good luck

How are these measures exactly  rescuing the "elite and super rich"?
Aren't the ones doing best out of this those with debt, which is being inflated away?.
Inflation is diminishing most people's wealth and the elite and super rich's are I presume losing more.

can u please explain the reason for deflation?

The reason for deflation will be what it has always been...the destruction of money through defaulting paper on bank balance sheets. Debt that can not be repaid that's still marked at par on bank balance sheets. It needs to be defaulted to clear the system. It means a great deal of banks will be exposed as insolvent and they would need to be resolved. Bernanke refuses to allow that as he damn well knows with today's financial system interconnectedness, in a circle jerk of derivative financial engineering paper, the whole enchilada collapses. So first they change the accounting rules so that this cr@p can be marked to fantasy instead of market and then he takes all this sh1ty paper on his own balance sheet and swaps it with newly printed fiat in order to prevent the toxic paper from defaulting, thus preventing......wait for it.....deflation.

That's why it will be print, print, print, there's no Plan B.

The ONLY questions at large are, can the immense black hole exposed in the financial system through deflating assets be covered up by the FED without destroying their own balance sheet and credibility (and the USD) in the process, and how long will this take? The right answer to those questions begins and ends with understanding who the losers/winners will be if we descend into a deflationary spiral collapse and who the losers/winners will be if the USD brakes in the process of trying to prevent it?

(HINT: THERE HAS NEVER BEEN A CASE OF AN ECONOMY COLLAPSING BECAUSE OF A DEFLATIONARY SPIRAL - ANYWHERE - EVER)

so a sell here at 6075 will do nicely.
stop 6166 (theres a double top of 6135, so im leaving a really wide stop because its quite thin out there, punters)

oco

5535.

------------

wow - i said it was thin, didnt i?

just traded 6167, from 6120, im stopped out by 1 tick, and gone 30 offered straight away!

hmmmm

mene - thanks for that explanation. but im a bit confused (it doesnt take much, to be fair).

if the bank of bull5hit takes its garbage to bernanke, eg, and he swaps it for good, then bernanke is left with the dreck.
so when it comes due for payment, doesnt he just pay for it by going to his fed cash machine and drawing the cash out to pay for it?

similarly, if the bank says to bernanke 'i need 10 bill to pay off this rubbish', doesnt bernanke just give them the money from the fund, aka fed charidee box for poor banks, and the cash is then placed into the world economy causing inflation, even hyper inflation, rather than deflation.

dec dax - 15 trades... jaysus....

mene - thanks for that explanation. but im a bit confused (it doesnt take much, to be fair).

I'm not convinced you are as confused as you claim you are but I'll play along anyways...


if the bank of bull5hit takes its garbage to bernanke, eg, and he swaps it for good, then bernanke is left with the dreck.
so when it comes due for payment, doesnt he just pay for it by going to his fed cash machine and drawing the cash out to pay for it?


A provision (an amendment actually) in the Federal Reserve Act allows the FED to flip any losses on their balance sheet back to the US Treasury. So as this "dreck" matures and has to be marked to market and recognized for the worthless garbage it really is, the FED will issue a bill for Treasury to pay. After all let's not lose sight that the banking cartel's biggest coup in owning the $US printing presses is that they are backed by the full faith of the USG (aka the US tax payers). Including their powerful war machine but I digress....

Treasury of course doesn't have the money to pay the FED for these losses so the choice is to raise taxes (totally unpalatable in the US political system) or borrow it by issuing new US debt. If buyers continue to show up for the ever growing mountain of US debt, the money will be borrowed from third parties and send back to the FED. The US will just add it to their total massive bill.

This is where it gets interesting. If buyers eventually catch on that running to US treasuries at a negative real interest rate, and an ever growing recognition that the enormous mountain of debt will not be paid back, is not the safe haven everyone thought, then they go on strike. Then the new debt issued to pay back the FED, is bought by.....wait for it.....the FED itself.....with freshly printed greenbacks (it's all digital actually), the money goes to the Treasury account and immediately debited back to the FED's balance sheet. Just like magic everyone is square again.



similarly, if the bank says to bernanke 'i need 10 bill to pay off this rubbish', doesnt bernanke just give them the money from the fund, aka fed charidee box for poor banks, and the cash is then placed into the world economy causing inflation, even hyper inflation, rather than deflation.



The real inflation is still sitting in "excess bank reserves" (and other places but my post is already too long to explain) on the FED's balance sheet. The FED accepted this "dreck" at par as collateral to borrow money from the FED at zero interest rate, but pays the banks 0.25pc interest to keep it at the FED (free, no risk profit for the banks). The inflation we've see so far is only "leakage" through commodity speculation and government spending. Which is really scary considering in my opinion it's running close to 10pc despite what the lying, manipulated government numbers say. The real inflation won't hit until velocity picks up. It will. The only way to put the genie back in the bottle is by raising interest rates to withdraw all the excess liquidity they pumped into the markets. They can't. The USG can't afford a rate increase without a formal recognition that they are bankrupt.

Good luck on your DAX trades.

@ Whippet

Like I said, I wouldn't want to be short the next 4-6 weeks. The FED's agenda is clear, taking a short position right now is essentially betting against the FED. And there's more coming in my opinion. I can't see the FED not dropping the US bank discount rate by 25 bips to match the swap line rate. If they do, the markets will rejoice yet again.


The battle with reality will be fought at the S&P 1320 level in my opinion.

I can't see them letting things collapse in an election year? (Although I guess that would depend on what the puppetmaster has planned for obama?)I guess what the EU does could make it all irrelevant, but we know they are reading from the same hymn sheet as well.

My thoughts are we will trade between 1350 and 1100 for a while depending on whether we are in more money printing mode, or realism mode. That will last until the point in time where they can no longer keep all the plates spinning.

Yeah, who knows. The key is to be nibble. Quick moves in and out. I don't want to be long and when I'm looking away for a few minutes, have my face shred to pieces by some collapse in europe, or bombing Iran, or Fukushima corium hitting groundwater and the whole mess goes up in a mushroom cloud. Or conversely be short and have the FED empty my pockets with yet another easing announcement (Janet Yellen is already screaming her lungs out they'll do more).

The only thing for sure is that we are sailing through an unprecedented storm in uncharted waters.

Good luck.