15 March 2011

US Dollar, FOMC, and the Japan Crisis: The Dog That Didn't Bark

Detective Gregory: "Is there any other point to which you would wish to draw my attention?"
Sherlock Holmes: "To the curious incident of the dog in the night-time."
Detective Gregory: "The dog did nothing in the night-time."
Holmes: "That was the curious incident."

A. Conan Doyle, Silver Blaze

The US dollar is rolling over and going lower today, no doubt easily explained away by the meme of Japanese selling their dollar Treasuries to raise cash to pay for their much needed repairs.

Except, that it does not bark sufficiently for me, but in context, the dollar just continues to roll over during what would ordinarily be a classic flight to safety rally scenario, even two years ago.

It is some consolation that the dollar is rolling over, perhaps, because it at least spares us another claim of inevitable victory over all things real from the Deflation's Witnesses. The decline in silver and to a lesser extent gold would have been more impressive except that they have been subject to vicious bear raids almost every day since they went into their delivery period on the Comex.

I can explain the selling and the general declines in almost everything easily enough through hedge fund liquidation. No one wants to meet margin calls under duress should the worst happen. As hedge fund advisor Dennis Gartman said, "Better to panic and remain liquid." I suspect this morning I might have been buying on the cheap from among of the things that Dennis' acolytes were throwing away. I think the metals are going higher if this support level holds. But as always, I make haste slowly.

There is a bit of a flow into Treasuries right after the aptly named Mr. Gross allegedly dumped them, but no net gains for the dollar. Where is all this cash going, and more interestingly perhaps, where is it going next?

And of course it is an options expiration week, and the markets are amazingly subdued given their declines and the dire news this morning on the airwaves. What is skulking in the corners and shadows of the financial sector, waiting for yet another attempt to baffle the world, if but for its sheer banality and obtuseness?

The Fed just had their FOMC announcement, with no change in policy, and absolutely no mention of Japan and any potential actions, reassurances, or impacts. They do see a continuing gradual improvement in the US economy, and a 'firmer footing.'

Of course these are the same Fed folks, the banking regulator as Consumer Advisory Council, that just examined the US mortgage market and said they found NOT ONE instance of a wrongful foreclosure. No surprise there really, since these jokers apparently could not find their own bubble-emitting posteriors with both hands, at least publicly and despite their newly released private meeting conversations. Robert Shiller said today that the housing bubble was the largest asset bubble in US economic history, since at least 1895 which is as far back as his records could go.
"We have now sunk to a depth at which re-statement of the obvious is the first duty of intelligent men." George Orwell
Do these people expect anyone to take them seriously? Little wonder that the Fed and their viceroys are caught in a credibility trap, which seems to be de rigueur in the commonwealth of global oligarchs and autocrats these days.

Many dictators are foul, corrupt sociopaths, violent people who use violence and murder as a matter of course in the self-serving and often obsessive acquistion of wealth and power.

But in the so called civilized western world we have something almost worse: well educated men, leading comfortable, professional lives, committing gut wrenching economic atrocities for the mere sake of appearances, and a clubby kind of quid pro quo.
"Half the harm that is done in this world is due to people who want to feel important. They don't mean to do harm -- but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves." T.S. Eliot, 1950
Curiouser and curiouser.