Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20
Silver's Massive Undervaluation Relative to Gold Makes It Irresistible - 14th May 20
Bitcoin Halving Passes with no Fanfare, but Smart Money is Accumulating - 14th May 20
Will Job Market from Hell Support Gold? - 14th May 20
The Tragedy Of Missed Covid-19 Opportunities - 14th May 20
Worst Jobs Report In US Economic History - And The Stock Market Continues To Rally - 14th May 20
NASDAQ Sets Up A Massive Head and Shoulders Pattern - 14th May 20
Perceiving Coronavirus as a Disruptive Technology - 13th May 20
Why Financial Trouble Brews on the "Home" Front - 13th May 20
Stock Market ‘Sentiment Event’ Rally Grinds On - 13th May 20
The Fed Now Owns All Markets - 13th May 20
Fruit Trees Gardening to Beat Coronavirus Blues - , Apple, Cherry, Kiwi, Pears, Plums, Grapes, Bananas May 2020 - 13th May 20
Gold Investors Shouldn’t Be Losing Focus - 12th May 20
S&P 500 Bulls Again At Resistance – Now What - 12th May 20
US Fourth Turning Accelerating Towards Debt Climax - 12th May 20
Gold in the year of the Coronavirus Pandemic - 12th May 20
Hi Ho Silver : Away! - 11th May 20
The Great Stock Market Disconnect - 11th May 20
The Big Move In Silver May Be Right Now - 11th May 20
Finding Winners in the Wreckage of the Coronavirus Economic Downturn - 11th May 20
Brave New Corona World – A heated Debate between Steven Pinker and Aldous Huxley - 11th May 20
Coronavirus Catastrophe Stock Market Implications - 10th May 20
US Stock Prices are Ignoring the Economic Meltdown, Wait for it… - 10th May 20
Forecasting Crude Oil: This Method Has Been the Undefeated Champion Since 1998 - 10th May 20
Coronapocalypse and Gold - How High Is Too High for the Yellow Metal? - 10th May 20
The Illusion of Owning Gold - 10th May 20 - Nick_Barisheff
The Financial Crisis Will Continue To Lurk Even If the Lockdown Gets Eased - 10th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Bernanke Upside Down and Backwards: Is Central Banking at Death’s Door?

Politics / Central Banks Jul 27, 2009 - 05:28 PM GMT

By: Rob_Kirby

Politics

Diamond Rated - Best Financial Markets Analysis ArticleIn a rare lucid moment, British Prime Minister Gordon Brown recently quipped,

              “Technology means that foreign policy will never be the same again”


Elaborating before a group of leading thinkers at the TED global conference in Oxford, England, Brown further explained,

The power of technology - such as blogs - meant that the world could no longer be run by "elites"

While Mr. Brown didn’t exactly enunciate it, he might as well have said, “the advances in technology [read: the internet] also mean that our system of fractional irredeemable fiat currency [read:  backed by NOTHING] practiced by Central Banks like the Federal Reserve may also soon be passé too.”  This is largely due to the masses becoming informed about the world’s biggest ponzi scheme, namely, irredeemable fiat currency – forget about the warm-up acts like Madeoff and sub-prime.

Earlier this week, Federal Reserve Chairman, Benedict Benjamin ǝʞuɐuɹǝq appeared before lawmakers to give sworn testimony about the state of the nation’s monetary policy.  In one of his most telling pieces of testimony, Sir Benedict attempted to explain to Congressman Alan Grayson [D- Fla.] the significance of ½ TRILLION in currency swaps which recently appeared on the Fed’s balance sheet:

In his concluding remarks, Grayson asks Mr. ǝʞuɐuɹǝq if he felt the creation of these “currency swaps” had anything to do with the $U.S. Dollar’s strengthening immediately after or whether this temporary strengthening in the Dollar was coincidental?

ǝʞuɐuɹǝq responded that it was his opinion that the Dollar strengthening [at the time] was just a coincidence.

The questioning concludes with Congressman Grayson laughing in s,ǝʞuɐuɹǝq face.

Under oath, you can listen to Benedict Benjamin ǝʞuɐuɹǝq make the claim that these currency swaps were made for the benefit of ‘customers’ of foreign Central Banks. 

Last Thursday, Yves Smith at naked capitalism published a piece where an ‘anonymous economist’ opined,

“I do not think the currency swaps in question -- half a trillion dollars to foreign central banks -- was what caused the US nominal dollar exchange rate to "appreciate". In the past year, dollar appreciations have been perfectly correlated with declines in the Dow, the seizing up of financial markets, and a diminishing in investor appetite for risk. The Fed's actions were almost certainly in response to this. What happened was, banks all over the world suddenly want to hold either T-bills or dollars, taking as little risk as possible, and not wanting to hold riskier assets such as the Pound or Euro. Everyone wants this at the same time, so to alleviate the demand, the Fed gives other countries half a trill [sic] in dollars in return for half a trillion their currencies... This, if anything, should slow the appreciation of the dollar, which is a good thing.

I cannot fathom why ǝʞuɐuɹǝq could not just elucidate this, except to say that perhaps ǝʞuɐuɹǝq is taking his marching orders from someone else and doesn't himself quite understand the rationale.....”

Well, let’s take a look at this.

To begin with, Dollar appreciations being perfectly correlated with the DOW is counterintuitive.  In Canada, for instance, whenever the Toronto Stock Exchange gets hammered [admittedly resource centric] – the Canadian Dollar gets creamed.  Secondly, the suggestion that foreigners are “flocking into Dollar [Treasury] vehicles [flight-to-quality] to avoid risk requires some deeper examination:

From the most recent U.S. Treasury TIC report, it is clear that, for the 12 months ended April 09, Gross Foreign Purchases of Domestic U.S. Securities declined from 32797 to 24968 Billion. Furthermore, apart from Treasury Bonds, Private net purchases of Gov’t Agency, Corporate Bonds and U.S. equities all crashed.  Additionally, Official net purchases for the same categories also declined heavily across the board.

What the data does show is that Foreigners “PILED IN” to the short end of the interest rate curve [less than 1 year in duration] buying U.S. Government Treasury Bills in an unprecedented fashion.  Shortening of maturity is typically what creditors do to borrowers before they pull the plug on them completely.

While such a move could be described as risk aversion it is ANYTHING BUT AN ENDORSEMENT of the Dollar.  So the notion that foreigners “want” to hold Dollars is misplaced and false.

So what really did happen?

The Numbers Don’t Lie

A forensic examination of the available evidence would tend to suggest another unstated reason for this financial sleight-of-hand, besides mere coincidence that Benedictus would have us believe.

Take note of when the Currency Swaps began with foreign C.B.s:

These foreign currency swaps supplied the U.S. Federal Reserve with as much as ½ Trillion worth of foreign reserve liquidity.  The Fed cannot print Euros, Yen, Cad., Francs, Pounds etc. - TO SELL – to defend the DOLLAR.  Prior to doing currency swaps with foreign CBs the Fed could only RAISE interest rates, or, SELL gold to defend the Dollar. 

Raising interest rates was clearly OUT OF THE QUESTION.

As for selling gold, let’s just say that you would be required to possess physical gold to do so.  Perhaps this is why the U.S. Treasury / Fed has stonewalled GATA’s freedom of information requests regarding the true state of sovereign American gold reserves which have not been verifiably audited since the Eisenhower Administration in the 1950s.

It seems that the true state of “declared” sovereign gold stocks is a highly questionable matter.  There is compelling new insight [or questions, perhaps?] on the state of sovereign Swiss gold stocks in the subscriber portion of this article.

We note how the U.S. Dollar finally displayed ‘temporary strength’ on the back of these currency swaps completed by the Axis of Central Banks: 

The charts are suggestive that the “real unstated” reason for the foreign currency swaps was to provide the Federal Reserve with “dry powder” [foreign reserves] to defend against a MASSIVE run-on-the-BUCK.

We’re seeing anecdotal evidence, with the renewed breakdown in the Dollar, that much vaunted “green-shoots” of early spring have wilted and turned brown with the summer heat.  The Fed has all but exhausted their initial salvo of currency swaps [fantasy finance] and the U.S. Dollar has endured two negative MACD crossovers - in both April and July 09 at “lower lows”:

Central Bankers on the Other Hand….

Of course, Sir Benedict of ǝʞuɐuɹǝq will never admit that this was the true reason for the foreign currency swaps, nor should we be surprised.  Remember folks, it was none other than former Vice Chair of the Federal Reserve, uɐןɐ ɹǝpuıןq, years ago, who told the world on the PBS Nightly Business Report,

              "The last duty of a central banker is to tell the public the truth."

Ladies and gentlemen, it would appear that the esteemed Chairman of the Fed has the art of obscuring the truth down to a finely tuned, ‘nuanced’ art form.  Do you think that Ken Lewis over at Bank of America would agree?  How about ʞuɐɥ uosןnɐd?

Watch for the next round of Central Bank currency swaps as the Federal Reserve chews through their initial installment of foreign currency swaps / reserves before the snow flies.

The fact that ALL Western Central Banks have hitched their wagons to the sinking fortunes of the profligate, money printing, deceitful Federal Reserve doesn’t bode well for their near term prospects either. 

Western Central Banks have stood united and together they will fall.  Unfortunately, we are going to have to live with the consequences resulting from the upside-down and backward policies and lies they’ve inflicted on us all.

Got physical Gold and Silver yet?

More for subscribers. 

By Rob Kirby
http://www.kirbyanalytics.com/

Rob Kirby is proprietor of Kirbyanalytics.com and sales agent for Bullion Custodial Services.  Subscribers to the Kirbyanalytics newsletter can look forward to a weekend publication analyzing many recent global geo-political events and more.  Subscribe to Kirbyanalytics news letter here.  Buy physical gold, silver or platinum bullion here.

Copyright © 2009 Rob Kirby - All rights reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Rob Kirby Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules