Commodity Trade Mantra

Posts Tagged ‘ZIRP’

The SDR Is Designed As A Rescue Operation For The US Dollar

The IMF created the SDR Substitution Account in 1969. T he core idea is that the SDR Substitution Account Central Banks allows to diversify their existing US dollar reserves in a one-time conversion away from the dollar into IMF’s SDR, comprised of the US dollar, European euro, Japanese yen and British pound, in an off-market transaction, so as not to depress the dollar’s exchange rate.

Giant Financial Bubbles created by Central Banks are Fracturing

Nearly everywhere on the planet the giant financial bubbles created by the central banks during the last two decades are fracturing. The latest examples are the crashing bank stocks in Italy & elsewhere in Europe & the sudden trading suspensions by three UK commercial property funds. It’s beginning to feel like August 2007 all over again. Of course, central banks have nothing to do with it at all!

We’re Near a Major Turning Point in the Currency Wars

In the currency wars, it looks like a recent quiet period is over and war is entering a new major battle. The US dollar went from an all-time low in August 2011 to a 10-year high in mid-2015. But the strong dollar finally caught up with the US economy, which has been slowing down precipitously. There are critical turning points where a long-term directional trend is set to reverse.

Negative Interest Rates: Causes, Consequences and Ramifications

Negative interest rates are unprecedented and show how far we have gone off course in terms of policy related to money and credit markets. They are already having a tremendous effect in several European countries and Japan, and they may eventually be coming to the US. Negative rates hold significant future implications for gold as well.

The Mindless Stupidity Of Negative Interest Rates

Can anyone show a clear example connecting the dots to show where negative interest rates have stimulated an economy? Can anyone clearly explain how charging an institution or business to hold deposits is in any way stimulative… not net stimulative, but stimulative AT ALL? It defies common sense.

Goldman Calls It: No Rate Hike Until Mid-2016

There you have it: no rate hike until mid-2016, which as we said previously, means no rate hike at all since the “apolitical” Fed will never hike just before a presidential election, and more importantly, by then the epic inventory liquidation-driven recession will have already started, making the only question that matters in the summer of 2016: NIRP or QE4.

Gold Price Correlation With Federal Funds Rates Since 1971

Everyone assumes higher interest rates will devastate zero-yielding gold, leaving it far less attractive. This premise led investors to avoid gold like the plague, and speculators to short sell it at wild record extremes. But provocatively, history proves gold price thrives in Fed-rate-hike cycles. Higher rates are actually bullish for gold.

The Bull Market in Stocks May Have Ended Already

With the Fed now running out of ammo, we MAY no longer be in a bull market. Instead, we MAY be entering a bear market. If so, you can forget about a recovery in four months. Instead, it may take four years… or 40 years… to reclaim the bull market high set this past May. Corrections in a bull market are one thing. Bear markets are something very different.

Crashing Inflation Expectations Suggest Imminent Launch Of QE4

Summarizing it all: The last three times inflation expectations tumbled this low, the Fed was about to launch QE1, QE2, Operation Twist and QE3. And the Fed is now expected to hike rates in less than a month even as inflation expectations are the lowest since Lehman? The Fed is damned if it hikes rates & its credibility is damned if it launches QE4. Good luck.

Watch As All the Bond Rats Jump Ship before FOMC Meeting

The FOMC Meeting this week is not just any FOMC Meeting, but the one where the Fed gives its quarterly outlook, forecasts & Yellen is asked a bunch of difficult questions by economists regarding FOMC Policy. The week is all about positioning or the De-Positioning taking place right up until the last minute of this important Fed Meeting.

The Real Reason the Fed Has To Raise Rates in June

If we assume the same continuous trends regarding employment, GDP, retail spending etc. that US has been producing for the last 12 months, then things are going to get real uncomfortable for the Fed and markets come the Sept FOMC Meeting. Markets should actually be begging the Fed for a June rate hike.

Why It Matters If the Dollar Is the Reserve Currency

The causes of threat to the US dollar as a reserve currency are the policies of the Fed itself. There is no conspiracy to attack the dollar by other countries. A loss of demand for holding the US dollar as a reserve currency would mean that trillions of dollars held overseas could flow back into the US, causing either inflation, recession, or both.

The Fed Waited Too Long: Here Comes Inflation

This inflation surge is going to be led by wage inflation. By the time the Fed realize that the labor market is so tight that employers are voluntarily raising wages across the board it is far too late, you are officially behind the curve as the surge in wage inflation is signaling loud and clear. The Fed will have no choice but to raise rates fast.

12 Reasons Why Ritholtz & Many Experts Are Mistaken On Gold

There is an incredible lack of understanding of the function of gold, its importance as a diversification & a safe haven asset. They have no knowledge of the role gold plays in macro-economics, geopolitics, monetarily & also that gold has protected people throughout history from financial & economic crashes & currency devaluations.

Fracking — A New Bubble for a New Year

Oil and natural gas exploration and extraction via fracking or hydraulic fracturing is a highly capital-intensive venture. Given the tentative strategy of the Federal Reserve in raising the benchmark interest rate, a sudden and unexpected increase in borrowing costs for businesses in the high-yield debt space is a serious cause for concern.

How Do You Unmanipulate a Manipulated Economy?

Regardless of what slippery words are deployed to mask manipulation, it doesn’t change the reality that the US economy remains a manipulated mess that is dependent on monetary & statistical manipulation. Left unmanipulated, the statistics would no longer be rosy & both the economy & our perception of the economy would tank.

Will the Fed Intervene in the Oil Market?

The question isn’t, why would the Fed intervene in the oil market? The question is, why wouldn’t the Fed intervene in the oil market? In a larger sense, the Fed is already intervening in the oil sector. Should the Fed turn the dial of intervention up by buying futures and oil-based bonds, it is not a new policy–it is simply a matter of degree.

Central Banks Create Deflation, Not Inflation

The Federal Reserve and other central banks desperately want inflation, even though it destroys the purchasing power of paychecks and savings, for one reason:in a system based on phantom collateral supporting ever-increasing mountains of debt, the Prime Directive of central banks is to make it ever easier to service yesterday’s debt.

US Dollar Super-Overbought

The bottom line is the US dollar is super-overbought & will soon crumble. The US dollar falls as fast and far as it rose, reversing all the peripheral trades that suffered during the dollar’s rally. So sell the US dollar high when everyone loves it, and buy euros, yen, oil, and gold while they are still low before they rebound.

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