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Dollar Slashed as Fed Goes Shopping
Fed's latest bond buybacks triggers fresh dollar damage, while VIX downside does not spell out the end of equity selling.
Peter
Dubai
Ashraf
Rob, what's that saying about "peter & paul"? the Fed is an independent organization accountable to Congress and in this situation aims at preventing long term rates from shooting up as the folks at the US Treasury are going wild with the nation's credit card. but as Treasury withdraws cash from the CC and drives up its interest charges, the central banks rushes to stabilize by buying some of that debt. and so the money goes back and forth between the two..the only problem is that the Fed is buying a 1/3 of what treasury borrows. http://www.federalreserve.gov/pubs/frseries/frseri.htm
apache, because the Fed has ran the biggest bond purchasing scheme in the world (more than BoE or anyone). yes other currencies are also falling against gold but USD suffers from a severely swelling Fed balance sheet and escalating alternatives to put your money i.e commodity, EM currencies. etcc
Ashraf
One thing that confuses me is that most of the central banks of the major currencies are doing some kind of qualitative easing which would reduce the value of the currency.
Given this, then, I am confused on why there is rally on the majors (egs: EUR, GBP, CAD) to rally against USD. Would you be able to comment?
Is the rally largely driven by risk appetite? thanks again for your valuable input
Interesting comments.
I am looking at the Long / Short positions for futures at the CFTC, and the positioning has turned short the USD for the last few weeks. Also, for the last year there is an evident correlation between the trend in long /short positions and the direction of the eruo dollar.
At the same time, I have turned, only recently, quite bearish on the Eurozone fundamentals. However, do you think that a longer recession but tighter fiscal policies (relative to US) in eurozone should mean a strenthening euro?
Overall, I think the only way Fed gets the US out of prolonged recession is by printing money and devaluing the dollar. I think China will slowly be decreasing its purchase of the US debt and move into commodities etc. The Fed will have to increase its Tresury purchases by maybe another 300-700b this year pushing the euro dollar towards 1.5 by year end of much before.
I did read your book & picked up many useful insights like your commentory on gold oil ratio, inverting yield curves and their useful to predict a slowing economy.
One thing lacking in the book and more so in this website is a critical reivew from your side on your developed ideas and how do they pan out.
good luck and hope you run your own curreny fund,
jamshed