Chaos: Serving QE2 and Bracing a Crippled King Dollar ~ The Risk Averse Alert

Monday, October 11, 2010

Chaos: Serving QE2 and Bracing a Crippled King Dollar

What are people thinking about QE2? There is no way the dollar can be let go.

You think confidence is fragile now? Sink the dollar to new all-time lows. Yesterday's hot money will turn stone cold, leaving the Fed and Treasury reduced to performing their best Weimar Germany routine amidst a rapid shutdown — a massive contraction — of the U.S. and global economy.

That is why one should thoughtfully consider circumstance preceding QE1: the first trillion. Calamity! Swindle! All amidst circumstance as transparent as coal ... turning hot money flows back into the dollar — a trick made possible only on account of political leadership (particularly here in the U.S.) possessing all the backbone of a jellyfish.

This leadership remains intact until January 2011. (Then enters the austerity crowd.)

Now, do you suppose a bunch of dummies are running the nation's TBTF mortgage servicers? So, then, are these capital-starved, yield-hungry firms halting foreclosures because minor are the issues surrounding "Foreclosuregate" and probably easily resolved?

No! Apparently, the link between mortgages and myriad securities is in grave question. That's why TBTFs are pulling the pin. It's time to blow things up, then sift through the debris for choice assets to be had for pennies on the dollar.

This was the game in 2008 and it appears to be game on now.

The "controlled disintegration" of the physical economy proceeding for decades now has spread into the financial realm and is prime to continue its course. Considering that, those elements philosophically behind this broad direction are disdainful toward notions of nation state, another bout of chaos makes sense. Likewise, too, does the [FT-endorsed] President's "pocket veto" last week. The growing risk of calamity ensuing rather appears intended.

Now, could one see this moment as such — indeed, as no one else does — were not every technical matter raised here over recent weeks proceeding exactly as forecast? Thus, my outlook anticipating the stock market's collapse — technically well-justified — seems all the more bolstered by mortgage market circumstance negatively affecting that basic, wealth building block called confidence.

Welcome aboard the slow-motion train wreck that is the stock market over the past decade.

Fast Money
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