An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Monday, May 10, 2010
Fed Hinting on Mortgage-Bond Sales Brings Bernanke Tightening
As the Fed "funds" Europe with its unlimited forex swap lines, it is tightening money for Americans. Bernanke is hinting at mortgage bond sales, which will effectively raise mortgage rates.
I wanted to buy put options on FXE today if it got to 130, it never made it, now I'm pondering to just buy put options at the open manyana. The banks and co-opted governments are railing against thier citizens, it will end badly for world economies, but when will the turn come? What catalyst? One thing is for sure the euro will go to parity .
Where is the risk in the swaps? The Fed gets back the same number of our dollars at the end of the swap and the swaps are only made to politically friendly and floating-currency issuing central banks. Arguably the USA actually benefits from these transactions because it prevents our trading partners from defaulting on dollar denominated obligations that would occur for no other reason than dollar shortages. Those defaults would reduce the value of our assets and make us poorer and cause instability in the banking system. Or am I missing something? I realize it is irritating as a forex trader to have big brother meddle with your markets but we all have had a lot of THAT lately.
I wanted to buy put options on FXE
ReplyDeletetoday if it got to 130, it never made it, now I'm pondering to just
buy put options at the open manyana.
The banks and co-opted governments
are railing against thier citizens,
it will end badly for world economies, but when will the turn come? What catalyst? One thing is for sure the euro will go to parity .
Yes, I think the euro WILL go to parity. And when it gets there, it will go lower.
ReplyDeleteWhere is the risk in the swaps? The Fed gets back the same number of our dollars at the end of the swap and the swaps are only made to politically friendly and floating-currency issuing central banks. Arguably the USA actually benefits from these transactions because it prevents our trading partners from defaulting on dollar denominated obligations that would occur for no other reason than dollar shortages. Those defaults would reduce the value of our assets and make us poorer and cause instability in the banking system. Or am I missing something? I realize it is irritating as a forex trader to have big brother meddle with your markets but we all have had a lot of THAT lately.
ReplyDelete