Federal Reserve Launches Blistering Attack On The ECB In New Paper
Over the years the worlds’ central banks have operated in lockstep and with a unified front. Friday, the Richmond Fed put out a paper highly critical of the European central bank for not “easing” enough. This is curious because first off the Richmond Fed surely did not go “rogue” on their own and put this paper out without permission. So this was an “official” slap in Europe’s face. Secondly, this was highly public and highly critical. This looks to me like something has gone bad behind the scenes (which we are not privy to yet) and the fingers are starting to point.
What cracks me up is that the Fed is screaming PRINT at the top of their lungs. Can you imagine what they were to have done before 2008? “Printing” now is just “normal” and no one even thinks twice about it. Has it worked? The only question in my mind is how long it will be before sanity shows up uninvited and ruins the party. One thing that I really don’t understand is why do this publicly? If you want the ECB to get with the program and print to reflate, why not do it through back channels and privately? This in my view brings “questions” into play that I am sure the Fed does not want asked pertaining to inflation and intentional debasement.
Do you remember a little over a year ago when Europe was still talking about “austerity?” Austerity is obviously no longer a choice; it was maybe 10 years ago but is no longer because of the debt buildup and mathematical unsustainability. The only thing that austerity would do is to expose just how broke everything really is. No, printing is “way out” and the perceived road to riches. I can only believe that this finger pointing and public scolding of the ECB is to lay the groundwork to be able to say, “It would have worked if Europe had listened to us.”
Now one must wonder what comes next. Does the ECB cave in and monetize? Do they verbally fight back and point out the obvious, that printing doesn’t work AND destroys the currency? Will they respond publicly…or privately as WAS customary between central banks in the old days? Another thought to throw in is that the ECB has its strings pulled by Germany and the Bundesbank. Didn’t they just request that 300 tons of their gold be shipped back to them…and were told “no, wait 7 years?” Cannot getting their gold back lead to “unity”… or mutiny?
Unfortunately, the looming currency war is not confined to just the U.S. and Europe. Over the weekend Yau Yudong had more harsh words for the dollar as the world’s reserve currency and reported by Zero Hedge. The problem as I see it (other than the fact that the currency mechanisms are in fact broken) is that this has become public and they are arguing publicly. This can only eat away at confidence…which is the only thing left holding the system together.
It is clear that the currency wars are heating up and also clear that sovereign nations are chewing up available gold supply rapidly as they front run any systemic “change” that’s coming. History has shown us that actual war has been used as a tool for both retribution AND by the powers that be to retain their power. The fact that nations are pointing fingers at other nations and doing it so that commoners can see is a very bad sign. You must ask yourself a question, “If nations themselves are stockpiling gold…what is their reason?” These are all easy dots to connect and the disorder and distrust amongst nations and their central banks is a very important sign that should not be missed.
Bill, coming up on the year mark for QE3. We know they can’t take their foot off the gas. Is next round of QE imminent? Will the juice propel the DJIA to 16000, 18000, 2000+..? Or do you think the effects will be less and less as distrust grows? At what point do they lose control of the bond market? Won’t rising interest rates will but pressure on equities? Interesting times indeed. Feels good to be in physical precious metals at this time, despite all the attempted management of perception.
all good questions, we may see them announce a “taper” because of a shortage in collateral…which of course will not work…they are truly in a box.
Taper? Won’t the losses be too huge? We saw what happened when the fed uttered the notion earlier this summer.
yes I understand but they are eating up too much collateral, the shadow banking system is sputtering…like I said, they are in a box…they must QE but it is becoming more and more unproductive.
Can you expand on what you mean by collateral. So do you think we’ll see a big market sell off/correction before Bernanke
exits stage left?
a total collapse could begin at any time on any day for any reason. That said, the Fed is buying too large a percentage of Treasuries, mortgage backed securities and other “collateral”. They are basically becoming too large of a player and not leaving enough for the shadow banking system to lever with. In other words, credit coming out of the shadow banking system is stalling…so we will get a collapse either way…taper or no taper.
I enjoy reading your daily blog bill. As well as Andy’s. I guess when you’re so used to the Fed manipulating markets, and controlling the perception of the masses. Your resolve and greater understanding of the fundamentals can sometimes be put into question. I agree that the music will stop at some point. The timing and the trigger that set it off are the tough questions. So many potential catalyst are in the horizon. But, an interesting point you make about the banksters publicly turning on each other. Signs of the end game? You know the rats will abandon ship when things get dicey. Guess in the mean time keep $ cost averaging into PMs, and pray things don’t go mad max!
they certainly are turning on each other…publicly.
Bill thanks again for the article. It is said by many after a crash we have currency wars, trade wars and then world wars. Something is strange about this summer and also the coming fall. I have seen the film on PBS about the Great Depression. This year the day and dates match exactly. Also the weather patterns are abnormal just like 1929. The policies and problems we are facing are similar(only we have them on a larger scale) and this time is it a worldwide Phenomenon. This fall is either the beginning of the next leg down or it is the final leg down. We are having too much military drills and botched police shootings, banks getting caught and paying minimal fines for their crimes. Everything that matters is on the “hush” and what does not matter is in the news. With the way things are going and happening it seems as if we are going to just have one major event in one day. After that one event then the tremors will come and keep things unstable for a long time.
Bill, here’s my 2 cents: Unless ALL the banks QE, the likelihood of a financial black swan event in a minor locale triggers an imbalance and brings down the whole system. It’s like a conspiracy where they need everyone to tell the same story to avoid getting caught.
If everyone inflates at an equal rate to the Fed, then the relative debt to the dollar will remain roughly the same, and all will inflate equally. If just one doesn’t play ball, the imbalance creates a domino effect. What do you think?
too many balls up in the air to juggle…one will fall…followed by many others.