dollar short squeeze update
Posted by WARREN MOSLER on May 25th, 2011
Looks like it’s happening as suggested if might just as crude started breaking down after the Ben Laden assassination.
And the Saudi investor prince’s proclamation that the Saudis thought $70-80 for crude was their target might at least indicate that they aren’t in price hiking mode.
Another point up in the dollar index might bring the beginning of short covering by trend followers.
But still looks to me like it’s only the beginning of what should trigger the end of the looming inflation that never was and a return to deflationary psychology in general.
The fallout of the dollar reversal will continue to be lower term rates, weaker stocks, weaker commodities, and in general a reversal of the ‘the fed’s printing money’ hysteria. And I also suspect Congress and the President will come through with a deficit reduction package that will further exacerbate the dollar shortage and add a bit of drag to the world economy.
Nor is any of this is good for the euro zone which continues to fight the fact that the only way it all works is if the ECB writes the check, provided, of course, they all recognize capital requirements for the ECB are nothing more than a self imposed constraint.
(And yes, I know that’s asking a lot.)
May 25th, 2011 at 11:45 am
6 months ago I would not have understood this post. Remarkably I now do.
Thanks Warren.
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Robert Kelly Reply:
May 25th, 2011 at 11:56 am
@Adam2, I second that emotion!
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May 25th, 2011 at 11:46 am
“deficit reduction package that will further exacerbate the dollar shortage and add a bit of drag to the world economy”
Is there any way to gauge how short on currency the economy is? With the congress talking in terms of trillions in deficit reduction, how far they can go until it breaks the economy’s back?
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May 25th, 2011 at 12:48 pm
Sen Coburn doesn’t see it: http://www.bloomberg.com/news/2011-05-24/how-we-can-solve-the-debt-crisis-really-.html
He also uses that catchy new phrase “financial repression” to describe optimal fiscal operations. Thanks Carmen….
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Tom Hickey Reply:
May 25th, 2011 at 1:12 pm
@art,
Orwellian double-speak.
BTW, MMT comes up in the comments there.
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May 25th, 2011 at 2:13 pm
> asking a lot
Only of certain audiences. Unfortunately that includes all current policy officers.
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May 26th, 2011 at 9:02 am
Just got stopped out of my DXY futures position.
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WARREN MOSLER Reply:
May 26th, 2011 at 9:16 am
haven’t been watching. hit some kind of chart signal?
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Geoff Reply:
May 26th, 2011 at 9:42 am
@WARREN MOSLER,
I’m not much of a technical analyst, but I was watching 75.50 on the spot. Could be a whipsaw. It certainly would not be the first time!
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May 26th, 2011 at 9:55 am
Crude prices are worrying me.
Seems if they go back up the dollar is at risk again.
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Geoff Reply:
May 26th, 2011 at 10:28 am
@WARREN MOSLER,
@#$%ing Saudis
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May 26th, 2011 at 6:28 pm
Hi Warren,
Mario Draghi will be the next ECB president. He was director general of the Italian treasury from 1991 till 2001. So, he was around when you had your meeting with Professor Luigi Spaventa that you describe in your book 7 DIFs. You described that Spaventa actually understood monetary operations and reserve accounting.
How do you see the chances that the ECB under Draghi will indeed write the cheque and solve this euro debt crisis?
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WARREN MOSLER Reply:
May 26th, 2011 at 9:58 pm
he has yet to make any statements along those lines. but hoping for the best!
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