This is getting more interesting. Actions (and words) not seen since Sept 12, 2001 are coming from all corners of the globe. Governments and Central Bankers are the people entrusted with the publics well being. As I ponder the current situation facing the financial markets, I ask a question - Where’s the smoke? Where is the Fire? As of this writing Friday afternoon - Could someone tell me what bank or institution has crumbled in the past few days to warrant the central bankers around the globe to cause such a panic? What do they know?
Governments Have a Gun to Their Head?
There is no apparent crisis, no terrorist attack, no one going to jail. Yet the governments are acting like they have a gun being put to their head. While most people are assuming it is all tied to the US and world wide ( it’s not just the US Real Estate market) speculation bubble deflating, I suspect it is something else….
It’s Not the Sub Prime - Lending Mess!
I broadcast live coverage of this past Tuesday’s FOMC announcement here on FX Street, and I talked about this very situation. Ben Bernanke and team stated almost zero concern regarding fallout from the sub-prime. Inflation remained their primary risk concern and hope for a rate decrease were dashed - temporarily. The next day (Wednesday) President Bush paid a visit to the US Treasury and declared there is no reason to worry about liquidity - and now there’s all this!
China and the US Getting Ready to go at a Trade War
Dollar to Crumble?
What could cause this world wide need for liquidity, as a flood of cash is unleashed from the damns of the central bankers….? Are the Chinese ready to grant the US their wish and float the Yuan - sell all their Bonds??? To crush the US economy? This trader believes this is a real possibility.
I know that this is an awful big limb to step out on….. But on August 1st US Treasury Secretary Paulson warned of a looming Trade War with China. Paulson had recently met with the Chinese president Hu Jintao and had no take away. US Senators led by Harry Reid have had long running concerns of currency manipulation.
This comes after the Senate banking committee voted 17-4 in favor of advancing a bill labeling the Chinese as Currency manipulators.
What are they Not Telling Us?
Today, as the US Fed injects $38 Billion dollars to provide more liquidity into the markets - they had to do it in three separate operations.
Add to this that the ECB and the Bank Of Canada and the Bank of Japan all are providing liquidity not seen since September 12th, 2001 - and everyone is looking around trying to figure out which streets the blood is flowing down! Blame it on the Sub Prime - Paris Hilton - or the Computers - but ignore what might be hiding in plain sight - the US Trade deficit with China.
Look at the date and time below for this posting of this blog post - and tell me who else is currently saying that this has nothing to do with the US Housing Market Sub-Prime problem…… Nope I don’t see anyone - yet. The problem is apparent to me. And it’s all about the worthless paper that China may no longer want and is threatening to dump.
Of course this is just my opinion - I could be wrong - I have no inside knowledge of what Ben Bernanke and Trichet know and say - but maybe it’s time to get some real people closer to the ground to tell us what’s happening. Coming from academia may have it’s limitations. Getting the real deal on US exports and what the true rate of inflation is - well that would be a nice start. But can we handle the truth?
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As Sr. Analyst, and Trader Jerry Furst - Founder of Investors Education Network (IEN), is also a mentor and trading coach to select clients.
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