Hambone@Japan -- trotsky, 14:38:15 09/08/06 Fri
at the same time as Japan's government debt exploded and the BoJ monetized a lot of it, a lot of Yen were destroyed via debt defaults. at times the money supply growth slowed to less than 2% p.a., despite the BoJ's best efforts.
dan@DTCC -- trotsky, 14:24:05 09/08/06 Fri
" The Depository Trust & Clearing Corporation (DTCC) through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities and over-the-counter credit derivatives.
DTCC's depository also provides custody and asset servicing for more than two million securities issues from the United States and 100 other countries and territories. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks. DTCC has operating facilities in multiple locations in the United States and overseas. "
it has NOTHING to do with the palladium futures market. am i getting through?
what the DTCC does
dtcc.com
AU_NB@new wave count -- trotsky, 14:18:44 09/08/06 Fri
that latest wave count possibility you cite strikes me as a bit tortured, however, i note that money flows have looked good both in yesterday's and today's selling squalls, and there is some anecdotal evidence that sentiment has received a sizeable damper (naturally, yesterday saw a big outflow - over $12m. - from the Rydex pm fund as well).
siempre@oil -- trotsky, 14:03:12 09/08/06 Fri
i'm well aware of crude oil's seasonal trends - i just thought this was funny. besides, since big oil is certainly in bed with the Republican party it is not completely out of the question that they 'help things along' a little, is it?
Hambone@deflationist arguments -- trotsky, 13:40:05 09/08/06 Fri
first of all, let's be clear about one thing: a 'deflationary era' in a fiat money system looks different from what i would term 'genuine deflation'. genuine deflation involves an actual decline in the money supply, something the central bank in a fiat money system can almost always forestall, by monetizing a large amount of government debt securities.
however, a reasonable facsimile of a genuine deflation is still possible. this would involve a long period of decline in outstanding bank credit, large amounts of debt defaults, money velocity slowing to a crawl, and prices and wages falling.
as to 'the Fed would pull out all the stops' - yes, it certainly would, but it remains to be seen what that actually MEANS. the Fed is a bureaucracy, with bureaucratic rules and a certain modus operandi. it will be reluctant and slow to change its m.o., even if the situation becomes dire. the reason is that it A) risks losing its power if it completely devalues the currency it issues and B) as a bureaucratic monolith not subject to market discipline, it will simply be very slow to resort to 'extreme measures'.
the manner in which the BoJ reacted to Japan's deflationary era of the 90's is probably a good template for what to expect. it flooded the money markets with free money, lowered bank reserve requirements to a bare minimum, and monetized government debt on a grand scale. not one of these measures could entice borrowers to borrow and lenders to lend - obviously Japan's pool of real funding had ceased to expand, so the CB found itself unable to re-ignite the artificial credit-induced boom.
only at the tail end of the bust did it decide to resort to even more extreme interventionism, such as outright buying of stocks (not from the exchange, but from the stock portfolios of banks, in order to liquefy them and avert a widely feared complete collapse of stock prices). not surprisingly, this decision coincided more or less with the bust period's nadir - iow, by the time they decided to do this, it really was an empty gesture, as things were about to take a turn for the better of their own accord. since Japanese land prices had fallen for 15 years running, the point where supply and demand in Japanese RE came finally back into balance had been reached for instance.
demand for dollars could conceivably become surprisingly strong if debt repayment becomes de rigeur, iow, if a credit bust increases the need for liquidity. note that a lot of debt is denominated in dollars, including a lot of debt by non-US based issuers.
Dan@palladium -- trotsky, 11:24:28 09/08/06 Fri
"Trotsky, instead of saying "funds" selling, why don't you pin the tail on the Dtcc donkey and say privately owned central banks and partners?"
i believe i can offer a satisfactory answer to that question. the DTCC is a depository for shares - it has nothing to do with metals. the central banks meanwhile don't do palladium. the only metal they're trading is gold (apart from two or three CBs that still have some silver, India and the Philippines if i'm not mistaken). so obviously, those entities wouldn't spring to mind first thing when commenting on palladium. however the funds (hedge funds , commodity funds, collectively identified as 'non-commercial traders' in the CoT report), do trade palladium, and they recently held a sizeable net long position - which explains why palladium is hit especially hard in this metals sell-off.
as to the rest, well, i don't necessarily agree with the IMF. their projected lower commodity prices won't come if global economic growth and monetary inflation continue unabated. however, there is a considerable danger that a global economic bust is in the works - certainly the US yield curve inversion and the sudden popping of the housing balloon point in that direction. commoditiy prices WILL decline if a bust takes shape. it's not enough that everybody in India and China wants a car - they need to be able to pay for one as well.
@the dollar -- trotsky, 10:52:47 09/08/06 Fri
with everybody and his auntie short the dollar (look at the CoT reports on the currencies and you'll see), anecdotal as well as positioning sentiment on the dollar almost uniformly bearish, it is little wonder that the dollar is suddenly coming to life.
there is an additional, historic reason to expect dollar strength: the lag between Fed policy and its effect on the dollar. traditionally, rate hiking campaigns are dollar positive with a 6 - 9 month lag. iow, the dollar tends to be strong up to 6-9 months AFTER a rate hike campaign ends. the same goes for rate cutting campaigns in the other direction.
note though that dollar strength against other fiat currencies does NOT necessarily imply gold weakness, beyond the usual short term kneejerk reaction.
on CNBC, Rick Santelli just pronounced that 'it's difficult to imagine strength in gold when the dollar rallies'. however, this is precisely what happened in late '05 for instance. according to Bob Hoye, in a deflationary era one SHOULD expect strength in the dollar to eventually coincide with strength in gold. i originally rejected this idea, but i'm not so sure anymore since the late '05 episode. |
