Monday, March 14, 2011

Bank of Japan does record injection and no cries of "money printing."

The Bank of Japan injected a record, $183 bln into the banking system overnight in reaction to the unprecedented crisis that is unfolding.

Yet despite this we didn't hear any cries of "printing money" or "taxpayer on the hook" as we do whenever the Fed even so much as talks about doing some monetary operations.

The Fed may spread its support (rate setting) out in dribs and drabs, over half a year or a even a year, but the dollar sellers will immediately come flying out of the woodwork and work themselves into a frenzy trashing the greenback. You'll hear cries of currency debasement and imminent hyperinflation both in the media and from mainstream economists.

So what did the yen do in response to this massive, one-day injection? It rallied sharply.

Two years ago, when the ECB did a $600 billion injection IN A SINGLE DAY, did the euro collapse? No, it rallied and once again, nobody talked about the ECB printing money.

These incidents clearly show where dollar sentiment lies: It's absolutely, 100%, incontrovertibly negative, whether that's justified or not.

The fact is, there is no serious reason for the dollar to be the target of nonstop selling...NONE! It's just being driven by a belief that the dollar should go down and that everything the Fed does is wrong. That's it...a BELIEF!

But when another central bank does the same thing investors act with bored indifference. This proves that the markets are truly irrational. But as Keynes said, "Markets can remain irrational longer than you can remain solvent."


Matt Franko said...


The mainstream economic reporting is really the "amateur hour" when it comes to monetary and fiscal. Thank goodness for blogs ;)

You write: "where dollar sentiment lies: It's absolutely, 100%, incontrovertibly negative, whether that's justified or not. "

Mike I feel bonds are probably in the same position...


mike norman said...

Yes, I agree. I was thinking about that today and about Pimco's, zero-percent exposure to Treasuries. There's something behind that, I totally believe it. I wouldn't fade Gross--not because he's some economic genius, he's clearly not, but because he has a lot of political pull and sway on the Street. I could see Gross easily putting pressure on the FOMC and getting them to hike rates. I think that's what he's working on, seriously.