There was NO pullback in the US dollar last week as equities attempted their ramps. This is a very interesting omen. While the Yen looks very extended, how low can it go? I think to answer that we need to figure out how to price the unwind of a ponzi scheme. Japanese central bankers tried and failed to get the Nikkei to 13,000 but they did make a big mess…and the UK and Europe are waiting in the wings.
Let me say it clearly, Ben BURNanke took a problem of malinvestment and incentivised fools making silly gambles and reserved no trick or no ante to prevent any of these amatures from accounting for their failures with losses, bankruptcy and/or justice. In the process, he expanded his (and by osmosis most other central bank balance sheets) to untenable positions in order to protect the malinvestments of these fools. In the process, he has converted a relatively small (in comparison) mortgage problem into a full scale sovereign and now a central bank solvency issue. As everyone must be aware at this time, central banks have been buying literally ton’s of gold at the highest prices ever. While it sounds bullish its NOT. They will be forces to sell it at the lows, most likely hundreds and hundreds of dollars lower if the below chart of the dollar has anything to do with it.
The unwinding of the BURNanke put will be painful indeed...and to think people think 2008 was bad...when it was really just the prelude to a much more significant crisis.
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