--Captain Frank Ramsey (Crimson Tide)
The most important chart in my world right now is the USD, which has been leaking oil at an increasing rate over the past couple of weeks.
A couple months back, bureaucrats and pundits were citing dollar strength as a sign that the basic fundamentals of the US economy were strong. This was and is a delusion. The dollar was rallying as folks delevered. They needed to buy dollars to cover USD denominated debt.
To the extent that this debt covering deflationary phase is over for now, we should expect the artificial bid underneath the dollar to dissipate.
Add to that increasing unease among our foreign creditors about holding dollar denominated assets as we print trillion$ to paper our way out of our problem. Ten year yields are now heading higher, indicative of supply over demand.
Importantly, higher yields are occuring despite Fed efforts to buy bonds to artificially suppress interest rates.
This may or may not be the beginnings of 'The Big One.' Perhaps it's just markets taking a respite from a secular deflationary grind. But the current situation exemplifies the ultimate consequences of trying to print your way out of a debt problem.
In such a case, a collapsing currency and higher interest rates are inevitable.
position in USD
2 comments:
Bad time to be holding an ARM, no?
I should think so.
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