The Fed's Hyperliquidity Endgame

[Dover]

Interesting article:

excerpt


.....Events of the last two months have convinced me that a substantive rise in the USDollar can kill the US Economy. More importantly, it means a certain smother to the financial sector, bound to the great bond speculation game. The financial markets are a bubble, but so is the entire US Economy a bubble. Fundamentally, a USDollar rise would choke off the rise in export commerce which is vital to reduce the burgeoning trade gap. We face a herculean challenge to reduce imports without having to cut off the arms & legs of the US Economy, which is structured toward retail sales. I doubt it can be done. The only true solution requires huge bankruptcies, the return of the mfg base to the USA, a 50% decline in the USDollar, harsh govt program cutbacks (e.g. Social Security, Medicare), and the dismantlement of the US Military machine. The only likely piece to that recipe to come to reality might be the 50% US$ corrective adjustment. However, it will not be done constructively, but rather as part of a desperate hidden policy to fight a crisis whose grip will grow more powerful.

It is my contention that the USDollar will be fully sacrificed in order to keep a cap on long-term interest rates. As evidence continues to arrive on multiple fronts of price inflation, we are sure to see greater bond market volatility, but perhaps not sharply higher long-term yields. The Fed will be doing brisk business of printing phony money to purchase 10-yr Trez Notes in open market actions, along with mortgage debt from the Fanny Mae failure. Vigilantes will be relentless, as always, to force up the 10-yr TNote yield in lockstep with the erosion to capital which price inflation entails. However, real economy deterioration will keep the vigilantes at bay, as rates periodically react downward. The Fed can and will monetize the TENS, keep a lid on mortgage rates, and prevent leakage of damage from the financial sector to the tangible reality of households, to housing prices. Their strategy to protect from rising interest rates will force the USDollar below critical support, again and again, starting with the important DXY=85 line, which corresponds to the Japanese yen at 95-96, and the euro at 128-129.
http://www.gold-eagle.com/editorials_04/willie062204.html

[Jesse_W]

1. Some (probably obvious) questions

What is this gold-eagle.com site? What sort of position do they hold on issues?
and
Pardon my ignorance, but, what is the "TENS"? I assume "Trez Notes" are US Treasury Bonds, but what does "Vigilantes will ... force up the 10-yr TNote yield in lockstep with the erosion to capital". Who are "vigilantes" and why do they care about the ratio of Treasury Note yield to capital erosion?

[leftyandproud]

2. gold eagle

honest money...transparent markets...anti intervention

in short, the anti-keynes..

and I'm afraid they are right about the fed.

[TrogL]

3. They're a bunch of gold bugs

There's more to the economy than gold.

[54anickel]

4. True...there's more to the economy than gold.

Just because they're "a bunch of gold bugs" does not mean they do not have valid points on the "economy".

I personally enjoy reading their analysis and just try to look beyond the "gold-buggy" claims of $X.xx per ounce that some of them tend to go into.

You perhaps prefer the analysis of the supply-side media whores?

Many of those "gold-bugs" are economists, statisticians, etc. They do offer many valuable insights.

[Jesse_W]

5. supply-side media whores?

Huh? I can guess - supporters of Reganomics and "If we build it, - well, just build it anyway." sort of people. But I'm probably way off base.

Thanks for the answers to my question, above, BTW.