Wednesday, July 16, 2014

"Fed kicks off global dollar squeeze as Janet Yellen turns hawkish"


"Monetary tightening is coming sooner than the world expected, with sober implications for overheated bourses, and for those in Asia, eastern Europe and Latin America that drank deepest from the draught of dollar liquidity.

We can expect a blistering dollar rally, perhaps akin to the early 1980s or the mid-1990s. It is fortuitous that the BRICS quintet of Brazil, Russia, India, China and South Africa have just launched their $100bn monetary fund to defend each other's currencies. Some of them may need it."
This confirms what Prechter says about the Fed. Inflation is really very modest - a couple percent - and yet Yellen has political pressure from Fed board members to clamp down on inflation already! (Of course, their "Fed put" has caused other problems besides inflation, like egregious misallocation of capital.)

Anyway, just because the Fed could "drop money out of helicopters" doesn't mean they would or will.
"The BRICS, the mini-BRICS and much of global finance have taken out a colossal short position on the US dollar. Mrs Yellen has just issued the first margin call."
Margin, call gentlemen. Hint: if you borrowed dollars to buy assets, you are short the dollar.

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