Sunday, January 31, 2010

Deception -- Currency Liquidity Swaps

So the "Fed Meetings" have been predictable....and thus ignorable.

NOT!  This is big, real big.  And you aren't going to see this anywhere else.   This article will not be posted on any other blog.  It's simple...."they" aren't ready for the truth, but this truth can make a select few make better investment decisions.

In September 2008, when the S Started to HTF banks around the world didn't want to lend to any other banks, this shot up the effective dollar interest rate.  It made it harder for people to borrow USD, and thus restricted liquidity.

So the financial markets needed a lube job and they got it by a promise from the US Gov that if you borrowed USD, when it came time to pay it could pay it back at the exact exchange rate that you borrowed it, thus eliminating FX exchange rate risk.  So for debts and trades that needed to be cleared in the USD, a low risk source of dollars was provided.

This also flooded the world with USD, thus decreasing the value of USD.

These reports imply was over $500 Billion of these "swaps".

Well that just came to an end.  Feb 1, 2010.   Further research indicates that perhaps they have been "draining the swamp" over time. 

I like to give some EW'ers a hard time when they get on their high horse trotting out how "news" matters not a bit, and that it is only waves that matter.  This is "news" that does matter.  Trust me....I totally believe that 98% of all "news" is bullshit....stories fabricated to explain what already happened.   It gives people confidence that they know what is going on...the confidence necessary to place your hard earned money at risk.

The dollar will continue it's rally.

FAQ on Currency Swaps

It is not clear to me whether the previous strong inverse relationship between the USD and the US Equities Indices will hold.   But if so, that would be an additional headwind against the Indices. 

The above chart was shown on

He is a Berkley Economist with some very interesting opinions.  He was very vocal against the "Torture Memo" constructed by his fellow professor John Woo.   Just on Saturday, Bush's lawyers and those who created the "justification" for torture in a very sneaky way, were "found" to have no liability.

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Insightful and Useful Comment!