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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: maxncompany who wrote (80833)	6/29/2008 8:45:22 PM
From: Chispas	Read Replies (1) of 116555

Fed's Lack of Credibility Certain to Impact Dollar . jsmineset.com How can you hold dollars in excess of what you need for expenses over the next six months? The recent “Hawk Talk” followed by “No Action” has discredited the Federal Reserve which is already deemed a tool of the OTC derivative market. Greenspan's statement that the derivative market needs no regulation and that it spreads risk from the few to the many will haunt that organization (and him personally) for a very long time. The distance is growing between the Fed and other central banks as there is a building consensus that the OTC derivative market supported by the Fed has permanently changed the financial world - and not for the better. The Fed has assumed the onerous position of counter party on all the crap paper the banks have tendered against the "Begging Bowl" loans. What happens when the Fed is called upon to perform and the OTC derivative migrates from nominal value to total value? A central bank can never go broke because they can print their own capital. What a central bank can do as its balance sheet softens is to break the currency of that central bank. That dollar’s final breaking is near. It might be closer than anyone anticipates. I feel that proposition is not impossible by any means. The question simply is can the Balance Sheet of the Fed stand one more major rescue? I feel the answer is no because the entire fractional reserve system sits atop perception and belief in fiscal management and economic strength. Already the Fed has deeply injured that. The Fed cannot continue issuing US treasuries in exchange for something worse than junk and becoming the last counter-party to the world. But they will. The Fed is headed to being counter-party to the entire mountain of OTC derivatives that are still being created daily by the many YOUNG HORSEMEN OF THE FINANCIAL APOCALYPSE. I don’t believe it matters a damn what to pay for gold on Monday if you are under weighted. I do not care what the exchange rate is for any un-dollar of choice. The system based on perception is like the Indian flat bread Papadam. Breath on it and it crumbles. How can you possibly continue to hold dollars? Gold, Swiss Franc, the Euro, the Cando are all un-dollars and as such are preferable to the extreme. ...................................................................... Barclays warns of a financial storm as Federal Reserve's credibility crumbles Last Updated: 12:01am BST 28/06/2008 US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero". "We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth." Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. ...............................................................................

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