Die Dim Sum Die!
As much as I wish, as hard as I try...won't stop beating on currency...until I do die!
Today, I'm recoiling from a night of a thousand beers, six table dancers and seventeen pounds of roasted lamb and pork. So, dim sum is just about the last thing I need to be thinking about.
That having been said, as time goes by the more I am looking at QE2 as an act of war than as any sort of monetary policy maneuver. Whoever still buys into the wives' tale of the Federal Reserve being an independent agency, must like old spy movies and the notion of rogue patriots out there doing good on behalf of the meek and the week.
Remember gents, much as we may enjoy our suit and tie lifestyles and power lunches. We are country built on blood. I for one, am not the least bit ashamed. Darwinism isn't a theory, it's practice.
Analyzing the issue of so-called "dim-sum debt" it is not hard to extrapolate this as a Chinese bunker defense tactic. You can read the article for your daily dose of market Kool-Aid if you wish. For those who want to look at the larger implications, however, any attempt to cool off hot money can only fan the flames further.
All of my experienced nature monkeys will attest that you do not grow a fire by adding more wood, you grow it...by adding more air.
In this case, the ramifications and (more importantly) objective of QE2 are becoming clearer by the day. Force China and the rest of the developing world into manipulating their currencies to the will of American policy.
Now, that does not necessarily mean a trickle-down effect for most of the American public. It does mean, however, that we are all a bit presumptuous (myself included) to dismiss the Federal Reserve's recent plays as amateurish and bumbling.
If anything, this concentrated currency attack by the American machinery is showing China in a loud and clear fashion that manipulating markets to your advantage can have a gross recoil effect.
Most Keynesians like to sanctify FDR for "ending the Depression". The truth of the matter is that World War 2 and the resulting industrial production spike ended the Depression in the U.S. Not any individual policy.
The admirers of Keynes have not shown great understanding of practical economics.
But they sure know how to start a fight.
The war is on boys and girls...then again...I've been saying it for a while.
I still don't see why so many people are against QE2. I mean, isn't QE2 just another form of interest rate cut? They can't cut the rate anymore, so they are using QE2 to lower the cost of capital, but the end goals are the same, so are their impacts.
A low interest rate will also cause asset bubbles among the emerging markets, but I didn't see that many people against a lower interest rate......
MMM,
Thank you for introducing us all to this interpretation of QE2 over the past few weeks. This is a really interesting concept that you are putting forth (did you come up with it yourself? or you have some sources to share?).
Number one rule of bond trading... Don't fight The Fed. Perhaps emerging market government's will learn this soon enough.
Of course, all of this could backfire. I don't see any reason why the US, Japan, or European economies should have GDP growth on their own in the next few years (at least, substantial growth in line with a typical recovery). As a result, the world will need to look to emerging markets for growth. This growth abroad could be derailed if some of the effects of QE2 that you are proposing actually take place.
LIBOR,
Don't mention it, my resource is history. Economics and militarism have walked hand-in-hand throughout. Check out the Ascent of Money Documentary (the "Bonds of War" episode, I posted it a few weeks back) for a nice example which includes both an early form of asset backed securitization (attempted/failed) and how war/finance interplay.
Midas amen to that brother. In all fairness though, at times personal paranoia, delusions of grandeur, narcissism get in the way. Something I personally am working towards overcoming. I shall find my alpha. Yes, I will follow & be inconspicuous, just a timing issue.
Or as you put in your Jim Rogers, old school gentleman style article ¨Give me bread or give me death¨.
War is surely to come. But where and when are more crucial.
What's your bet?
Interesting angle there 3M, if that's the case then that's pretty good economic aikido from the Fed. Wonder how this will play out.
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