"The financial system is once again over-leveraged, over-concentrated, fraught with interconnected counterparty risk, and fragile. This is because of the policy failure of the Treasury and the Fed which could be characterized as extend and pretend, without engaging in significant reforms and law enforcement in the aftermath of what might be best described as a control fraud.
I postulated years ago (2002) that when push came to shove, the Fed would gather around itself a few 'friendly banks' which would act on its behalf in private to enforce certain policy decisions in markets in which the Fed and Treasury do not wish to openly operate. It is hard to think of any other somewhat moral reason for the government to babysit and subsidize these very expensive and dangerous TBTF monstrosities, except as instruments of policy to provide some degree of freedom to shape events and responses.
If you want to wage a currency war, you need to have some dreadnoughts packing serious financial throw-weight, and economic muscle. It may be Machiavellian, counter-democratic, and expensive, but that is the diktat of strategy if you want to control things and wield power to do what you will, both at home and abroad.
Is a corollary to the currency war a financial arms race and the construction of institutional behemoths? I think it might be. Or it could just be widespread ignorance and corruption amongst the ruling class which certainly is conceivable. Or some of both. Why do governments sometimes engage in corporatism? Take your pick."
Jesse, Financial Dreadnoughts in Times of Currency War, 22 February 2013
It was 'risk on' today as bully cast aside his fears and engaged the wash cycle in the markts.
Stocks finished decidedly higher.
VIX dropped sharply back to recent lows.
The Dollar edged higher.
Gold and silver were pressed lower again.
Pretty much the kind of pre-option expiration action we have come to expect.
Have you noticed how economic and financial sanctions and restrictions have become a major component of American policy responses with the Fed and the Banks as key components in controlling markets and impacting trade?
Have a pleasant evening.
