2 nice reminders there:
1) CPI vs FF -- money may be too cheap on a number of bases, but what has that got to do with the tea in China?? CI's conclusion was that inflation was not far behind and a rate rise ...I take the other view -- yeah, it it ominous, but not because we have incipient "price inflation" or a FF rise coming, but because they are deliberately doing this --they realize that the danger of a deflation in financial assets is near an all-time high. JWB will say this is a load of carp -- we already have "price inflation" -- just look at CRB, just buy something from Europe and not Japan -- or pay attention to your grocery or healthcare bill -- no problem. It's there, it's just another problem alongside to the greater problem of the potential for financial asset deflation -- that's not a minor annoyance of cutting back one lifestyle -- it is a risk of the loss of confidence in the system.
2) That's a nice observation about the negative feedback we have there for a lower dollar -- higher dollar == higher interest rates because there would be less need for foreign buyers. I believe that is actually correct ...
Gold and dollar correlation is nice for the intermediate term for now -- but I'm not sure that gold would get smacked down on a "short-covering" rally for the dollar. At some pt -- given the global nature of the problem of money and debt growth -- gold will break out in other currencies as well ... if global fiat is really the problem.
>>Speaking of CI, there is a chart in the 11-25 issue, p. 11 of the Fed funds and core CPI going back to 1958. Out of those 540 months, only 78 had a Fed fund rate below the CPI, with now 26 (and counting) of them on this run. So even for those who believe the bogus 1.8% CPI number, money is still far too cheap.
* If this (or a token rate increase) actually knocked the crap out of foreign currencies, and gold, I'd be all over it, especially after the specs got washed out.
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What a gift that would be, they wouldn't do that just for me would they? Naw, that would be too easy <vbg>. The problem for the Treasury that the Kudlows don't get, is that if the USD rallies against the Yen, the BOJ would disappear from the auctions, and rates would spike just because of that. So a USD rally of any cause will spike rates IMO.
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