This article might interest some of you:
http://www.bloomberg.com/news/articles/2015-08-23/the-fed-is-looking-at-a-very-different-dollar-than-wall-street
Credits to smooth for linking me to it.
http://www.bloomberg.com/news/articles/2015-08-23/the-fed-is-looking-at-a-very-different-dollar-than-wall-street
Credits to smooth for linking me to it.
The Fed is caught between a rock and a hard place. If it raises interest rates, the dollar will get even stronger. But if it doesn't raise interest rates pensions will go soon start defaulting.
And it if doesn't raise interest rates by backing out its bloated balance sheet then it has no ammunition for a future scenario where it needs to QE again.
The Fed will and must take a middle ground so it will raise rates in baby steps. But this will spiral out-of-control due to the contagion outside the USA, and with the USA stock markets skyrocketing, the Fed will feel compelled to raise interest rates faster in order to prevent a selloff of bonds. Well even if the Fed doesn't do it, the bond sellers will drive interest rates sky high as they exit to buy US stocks.
You heard it first from me. No one else has ever explained that bolded part.
Expect MA to echo me soon.
Edit: MA is already getting closer to realizing or stating the above (but I beat him to it):
http://www.armstrongeconomics.com/archives/36393
Quote
This three-month rout in equities is scaring the hell out of everyone and changed the view that the Fed will not raise rates sending the dollar lower in which appears to be completing the bubble in government, particularly in Europe. The bells are ringing across world markets on Monday with a 9% nosedive in Chinese shares that has sent the major commodities into a panicked tailspin and a sharp drop in the dollar as investors try to figure out where to run now.
...
We are seeing a dollar decline in Japan and Europe, which is precisely the two places we need the dollar to drop the most furthering deflation in those economies to push them over the edge.
...
Everything still suggests that we have a Directional Change this week and today could be the intraday low. So pay attention.
...
We are seeing a dollar decline in Japan and Europe, which is precisely the two places we need the dollar to drop the most furthering deflation in those economies to push them over the edge.
...
Everything still suggests that we have a Directional Change this week and today could be the intraday low. So pay attention.
It is almost time to buy the US stock market. Pay attention.