Tapering Impossible, Reserve Asset Avalanche Warns ~ The Risk Averse Alert

Wednesday, November 20, 2013

Tapering Impossible, Reserve Asset Avalanche Warns

Oh so penetrating mainstream fantasy land mouthpieces laying claim to a thesis that, an insolvent Fed merely talking of tapering its juice subsidy to those many times over bankrupt institutions over which it lords is bad news for bonds rather only establish the fact desperate bailout junkies have many ways of delivering their dire message, evermore handsomely dressed in the emperor's new clothes. Yet such talk still remains cheap when money runs from emerging markets squeezed by a dollar reserve system core but closer to imploding...

There's only so much gold to sell in desperate attempt to prop up ceaselessly debased currencies, while from a technical perspective (see PPO, top panel) it appears the much needed currency prop is due for immediate buttressing at a cost bringing more central bank gold to market.

The problem with bonds is not about any talk of phantom Fed tapering, whose probability is equal to that of a snow blizzard hitting New York City in July. Rather, the issue is the insolvent dollar reserve system's forward guidance given in a Queen Confetti nominated to head a bankrupt Fed, that its race to the bottom be quickened.

Already in the age of infinite QE delivered by Capo Confetti in vain effort to paper over a mountain of worthless credit securities backed by a collapsing physical economy, the U.S.'s exportation of inflation trapping foreign central banks reaches a point where the economies over which these lord are so squeezed of the promise of wealth-creating activity—their export markets being atrophied—that, hot money has no sane choice but flea, leaving foreign central banks to sell anything not nailed down in order to prop up their currencies. Gold and U.S. Treasuries are the reserve assets of choice evidently.

And lookie there, too, will you! Rates on 10-year U.S. Treasury Notes appear technically well-poised to go through the roof (again, see PPO, top panel). Little wonder with a Queen Confetti waiting in the wings, who wouldn't dare speak of tapering on account of Main Street U.S.A. waiting with tin cup in hand for hopelessly insolvent albatrosses to lend for something other than leveraged speculations generating fees these need through accelerated derivatives activity maintaining appearances of the viability of these many times over bankrupt enterprises.

So, with reserve assets ceaselessly being drained, we can readily anticipate foreign entities having no choice but impose capital controls whose effect will only accelerate shutdown of the physical economy backing a mountain of wildly mispriced risk up and down the capital structure. Then, the globe's reserve currency, itself, will come under immense pressure, and either Queen Confetti takes the United States to the Wiemar promised land or watches it sink into a replay of the collapse of the Florentine banking empire of the 14th century. These being the only two possibly ways forward, we are wise to remember how quickly Bear Stearns and Lehman Brothers were taken to zero...

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