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Let's see if the euro short squeeze rally has reached its zenith, implying a bottom for the archaically weighted US Dollar Index.
A significant break of support here negates the double bottom formation.
It is not so much that gold and the dollar have moved lower together, but rather, the euro rally took quite a bit of risk buying off gold, at least from the continent. Asia remains a firm buyer and will most likely do so.
When the perception of sovereign risk changes again back from optimisim to gloom, I would expect both the dollar and gold to strengthen. Unless that gloom begins to encompass the buck, and acknowledge the yawning chasm of state and municipal defaults which the Yanks and their ratings agencies are so far blithely avoiding, deflecting the concerns to Europe.
This soft shoe dance that Ben and Timmy have done so far is getting a bit thin.
And it was almost funny to see the Amazing Krugman wagging his printing finger at China over the threat of impending inflation. Physician heal thyself.
In case there was any question remaining in your mind as to what is really happening.
It should be noted that GE was the number one corporation in lobbying, spending $40 million on the purchase of political influence last year.
Obama is looking more like Herbert Hoover every day, but without the Great Engineer's accomplishments.
As someone said, it could have been worse, Obama could have chosen Lloyd Blankfein as his advisor. But that would have been a demotion for Lloyd, and a probable lessening of his existing impact on public policy.
NYT
Volcker Out, Immelt In on Economic Board
By SHERYL GAY STOLBERG and ANAHAD O’CONNOR
January 21, 2011
SCHENECTADY, N.Y. — President Obama will name Jeffrey R. Immelt, the chief executive officer and chairman of General Electric, on Friday to run his outside panel of economic advisers, replacing Paul A. Volcker, the former Federal Reserve chairman, who is stepping down, the White House said.
Mr. Immelt will chair a new Council on Jobs and Competitiveness that Mr. Obama intends to create by executive order. In a statement issued shortly after midnight, Mr. Obama said he wants the council to “focus its work on finding new ways to encourage the private sector to hire and invest in American competitiveness.”
The council will be a reconfigured version of the board Mr. Volcker chaired, the President’s Economic Recovery Advisory Board. That body, created by Mr. Obama when he took office in the thick of the worst economic crisis since the Great Depression, is set to expire on Feb. 6...
"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group."
Franklin D. Roosevelt
PIIGs on steroids, and selectively applied defaults.
Thank God the Banks will be saved any pain or discomfort.
Washington and New York will rule them all with an iron rod.
NYT
Path Is Sought for States to Escape Debt Burdens
By Mary Williams Walsh
January 20, 2011
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.
House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.
Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.
Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers...
I think the first leg of this correction in stocks is waning a bit as the highly overbought and complacent condition is being worked off, and new shorts are engaging in the market to be squeezed by steady buying in light volumes led by the SP futures.
Perhaps another move down, while Benny's dose of liquidity directly to Wall Street takes effect.
Excepting some event, it is hard to imagine a protracted stock market decline at this time given the artificial support that Wall Street is receiving.
The pigmen feel that they are firmly in control of both NY and Washington.
"The real collapse of our currency began when it became evident that certain industrial circles were more powerful than the government."
Adam Fergusson, When Money Dies
An Economic Philosophy That Has Completely Failed, William K. Black
'Failure' depends on what your objectives are. If looting for short term benefit of the Wall Street monied interests and their well-oiled Washington support system, things are working quite well.
