Carry Trade Crack-up

[machinehead]

However, "the dominant influence is the carry trade,'' which involves some variation of borrowing short and lending long, [Tim] Bond says. "There's an army of people positioned in strange conditional structures'' using options. "The hedging (by the option sellers) is so large, it's a case of the tail wagging the dog.''? ? ? ?

 

To the extent that interest rates are divorced from economic reality, "you now can truly say the bond market is a bubble,'' Bond says.

 

"The Fed has created a monster,'' says Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets.

 

Sorcerer's apprentice

 

For better or worse, the Federal Reserve "has tied its policy to payrolls, in an attempt to prevent a preemptive rise in long-term rates,'' says Tim Bond, global strategist at Barclays Capital Group in London. "The Fed has succeeded too well.''

 

Yes. There's a monstrous positive feedback loop here:

 

1. The Fed creates credit (dollars) to buy Asian manufactured goods.

2. Asian central banks acquire large dollar reserves, gunning their economies and stoking a vast manufacturing capacity expansion, and a flood of cheap exports.

3. Cheap exports undermine U.S. labor markets, provoking more Fed credit creation.

4. [Repeat ad infinitum.]

 

Because it isn't perceived for what it is, the self-reinforcing credit spiral has grown to civilization-threatening proportions.

 

The Federal Reserve has hitched its policy settings to a weak labor market hollowed out by its own credit expansion, and a broken CPI gauge which is also depressed by the wave of cheap imports. Asset inflation, which IS visible, isn't counted.

 

It's as if the Fed has smeared Vaseline over its rearview mirror glasses. It's clumsily thrashing about, bellowing "we're the fukawi" as it blunders into lamps and furniture, and overturns flower pots.

 

We can't know the timing of when this reckless, fatal spiral will viciously shank back into leveraged reverse. But we do know the consequences: U.S. paper assets -- stocks, bonds, derivatives, and currency -- will be sodomized. And you can take that to the bank ... if it's still open.

[Metamucil]

Nice commentary.

 

The taxpayer will hold the bag, by design.

 

Isn't perpetual credit creation the key way in which 'cartelians' (The Fed hub) confiscate our wealth?

 

I somehow see the inner circle high-fiving each other...........as another planned bust unfolds.

 

This 'perpetual war' thing is part of the very original 'Rothschild Formula', imo.

 

 

Maybe nothing is going wrong.....from their perspective.

[threadbare]

Do you think it's a planned bust, or are they just very delusional people who have a kind of "masters of the universe" mentality?

[Guest sigmoidoscope]

In 1913 just over one third of the British people were in 'domestic service,' and the 'middle class' were largely renters, working in trades and in shoppes, and paying their due to the ruling elite.

 

Maybe the ruling elite just yearns for 'the good old days.'

 

This seems to have been Jefferson's prediction.

[The brown one]

Do you think it's a planned bust, or are they just very delusional people who have a kind of "masters of the universe" mentality?

I think it's just their natural survival instinct and they(the elite) have acquired sufficient power and wealth to be able to create the perpetual motion machine--for themselves.Ever more power ever more wealth and totalitarianism which eventually is the only method by which their machine can be fed.

 

As they make the laws,control the army,police and the media, then the only way to throw a spanner in the works of their machine would be for every person on the planet to say that they would rather starve to death than exchange their "labour" for the elite--and that ain't gonna happen.

 

Their very existence depends on their sucking from the bottom to maintain the top.

When the bottom is sucked dry,then the middle layer is next and so on.

[machinehead]

Do you think it's a planned bust, or are they just very delusional people who have a kind of "masters of the universe" mentality?

I attribute it to democracy, which when unrestrained by a metallic currency, runs wild and malfunctions.

 

It's like an engine without a governor. The voters direct their leaders to mash the gas pedal to the floor. The engine screams faster and faster until it throws a connecting rod and explodes in a hail of smoking twisted metal.

 

Although the design of the democratic/fiat currency economy is patently defective, perverse incentives ensure that it will not be fixed. It will be abused till it breaks.

 

As old Dostoyevski used to say, "So things are bad? Well then, let them get even worse!"

 

[Soros]

As James Puplava says "don't fool yourself" that the government will not grow larger. Whatever George Bush is saying. The government is now 55% of GDP in parts of Europe.

 

http://www.washtimes.com/commentary/200308...81839-6182r.htm

"This convention of counting government spending as an asset rather than a liability creates the illusion that bigger government means more prosperity. Where on Earth has that ever been the case?"

 

http://mwhodges.home.att.net/intl-spend.htm

 

http://jimrogers.com/content/stories/artic...easypieces.html

"In fact, a study by the International Monetary Fund estimated the amount of money in offshore havens worldwide was $4.8 trillion in 1997, up from $3.5 trillion in 1992. Others estimate that number is closer to $8 trillion."

 

It seems like a lot of people doesn't want to finance a lot of these people.

[Hypertiger]

Do you think it's a planned bust, or are they just very delusional people who have a kind of "masters of the universe" mentality?

I attribute it to democracy, which when unrestrained by a metallic currency, runs wild and malfunctions.

 

It's like an engine without a governor. The voters direct their leaders to mash the gas pedal to the floor. The engine screams faster and faster until it throws a connecting rod and explodes in a hail of smoking twisted metal.

 

Although the design of the democratic/fiat currency economy is patently defective, perverse incentives ensure that it will not be fixed. It will be abused till it breaks.

 

As old Dostoyevski used to say, "So things are bad? Well then, let them get even worse!"

 

Fractional reserve banking has been working it's magic for 300+ years...

 

That is how long it has been since an actual real money system has been in operation...

 

Since then debt inflation has ruled the roost...

 

Planed bust?

 

The system is built to bust...that is all it can do...

 

Inflate debt to it's maximum potential then implode...that is all a fractional reserve system is able to do...

 

Any planning involved is inflationary...

 

The plan is inflate or die until maximum potential is reached then the plan becomes die...

[SevenOfEleven]

Inflate debt to it's maximum potential then implode...that is all a fractional reserve system is able to do...

That seems to be the case and the reality. I normally don't get into these discussions (except the ocassional SevenCents over on Stool's Gold) but it seems to work like a giant vacume that fills it's bag with air (wealth) via suction (exploitation) until that bag is full. Then toss the bag (bust) , reset, and start over.

 

Over simplified but I don't think I'm far off base.

 

-Seven