"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Friday, March 25, 2011

Federal Reserve Officials talking the Dollar up - Gold down on Cue

It is no secret to those attuned to market action that the US Dollar's technical chart picture is horrendous. It had broken through a critical support level near 77 on the USDX last week and had further descended down towards the tremendously important 75 level. No matter what appeared to be happening in the world, the US Dollar could not get much if any of a safe haven bounce.

Currency traders had been moving to the Swiss Franc as their choice of a safe haven. The Aussie has been making new highs and the Canadian Dollar has been very strong as well.

Now, it is also obvious that the US would dearly love to see the Dollar stay weak to help it deal with its massive debt load but the ugly truth is that the Dollar was on course for a major crisis if it violated the 75 level.

Enter the Fed officials today and yesterday. Apparently the strategy was to get several of the FOMC governors to hit the airwaves talking about ending the QE program. Since it is QE that has been partly responsible for Dollar weakness - along with the abysmal fiscal condition of the nation - something had to be done to prevent a Dollar crash. This is the reason we are getting a sudden rash of Fed officials looking for microphones and venues to talk about ending QE.

Result? Up goes the Dollar and down goes the precious metals market. Coincidence? I hardly think so. If you understand what I wrote earlier this week explaining the antagonism of Western Central Bankers against gold, then you can easily understand that its rise to a new all time high is testifying against the steady debauchment of the US currency by the Federal Reserve.

As a kicker, they also manage to further knock down the Japanese Yen saving themselves and the rest of their pals at the G7 from having to actually pay to undergo another round of currency intervention.

You have just witnessed a shrewdly hidden round of verbal intervention camoflauged as normal policy discussions.

1 comment:

  1. So it's all just smoke and mirrors? Not a shred of credibility in the statements? Maybe they're disillusioned enough to actually believe they can exit QE. It'll blow up in their face, but what do they have to lose? What benefit is there to their preposterous lip service measures of talking up the dollar for a couple of months only to lose face in June when they can't follow through with their exit strategy - if they actually have one.


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