8/4/2011 Portland, Oregon – Pop in your mints…
Today the Dow fell some 500 points. Looking further, everything seemed to fall today. We hope you have a good umbrella, fellow taxpayer, it could be quite a storm.
Three noteworthy things seemed to have taken place in no particular order and for no apparent reason other than to unite to tank financial asset prices all over the globe, which is no small feat. We will take them one by one.
First, overnight, the Japanese Central Bank intervened to prop up the dollar (or weaken the Yen, however you prefer to look at it).
Second, the world gave a collective thumbs down to the Eurozone’s “effort” to stabilize its bond markets. The Euro Feds appear over matched in their currency union’s first true fidelity test.
This uncoordinated action led to the third event which we will call the “mother of all calls” on the US Dollar. With short and long interest rates skipping around a zero as far as the eye can see, speculators have taken swings at the dollar like Dave Kingman at the 2-0 fastball. The dollar is already sold short on an almost unimaginable scale.
Today, those speculators, ala Dave Kingman, whiffed and nearly fell over. The only way this “mother of all calls” could be satisfied was for those short the dollar to quickly and injudiciously exit other positions.
This exiting injudiciously of other positions is colloquially called a crash.
This crash, along with the foul smelling economic datacoming out of the US will give the Fed and Congress all the ammunition they need to launch both QE3 and any and every fiscal stimulus program they can dream up.
QE3 and fiscal stimulus on steroids will soon prove those speculators short the dollar right and the final, sordid chapter of the US Dollar’s history is about to begin!
Dave Kingman may have whiffed at the 2-0 fastball, but he has two more swings…
Stay tuned and Trust Jesus.
Key Indicators for August 4, 2011
Copper Price per Lb: $4.19
Oil Price per Barrel: $85.60
Corn Price per Bushel: $6.93
10 Yr US Treasury Bond: 2.46%
FED Target Rate: 0.12% TIGHTENING? NOT!
Gold Price Per Ounce: $1,649 PERMANENT UNCERTAINTY
MINT Perceived Target Rate*: 2.00%
Unemployment Rate: 9.2%
Inflation Rate (CPI): -0.2%!!! PULL OUT THE HELICOPTERS!!!
Dow Jones Industrial Average: 11,384 TO THE MOON!!!
M1 Monetary Base: $2,012,200,000,000 RED ALERT!!!
M2 Monetary Base: $9,226,100,000,000 YIKES!!!!!!!
*See the MINT Perceived target Rate Chart. This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy. This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.