General Stock Ideas

[gfp927z]

Bigworld, >> In light of all this foreign selling how can the US Dollar be rising? <<


As outlined by Jim Rickards, the big dollar surge started when the Fed ended QE in the US around mid-2014, just as the EU was going the opposite way and initiating their own QE program. So the dollar took off big time and the Europeans also adopted a NIRP/negative interest rate policy while the Fed started talking about tightening, then actually tightened (Dec 2015), and now are aggressively tightening. So it was up up and away for the dollar, and the US also became a haven for 'hot money'.

Rickards says the main motivation for the Fed raising rates ('normalizing', ideally by 3%) is so they will then have the ability to lower them again in order to deal with the next financial crisis which they know is coming at some point.

But I wonder if part of the reason for the Fed's aggressive tightening plans is to also attract investors to the US Treasury auctions, since otherwise the usual buyers (China, Japan, Arabs) have all been selling off their treasuries to deal with their own domestic problems. The Fed may see higher US rates as essential to attract buyers for US Treasuries.

But as Rickards says, the strong dollar will eventually trigger a debt crisis in the emerging markets since many of those countries have their debt denominated in dollars. The Fed tightening may also drag the US economy into recession. Also, a large percentage of the Derivatives out there are interest rate sensitive, and as we know from 2008, these Derivatives are ticking time bombs. So a fine mess we're in. Meanwhile our heroes, the NWO lords of finance, are busy on their yachts trekking off to Lolita Island in search of kids to molest.


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