"The Bernanke Card"
The inverted pyramid of global liquidity - Sources: Bank of International Settlements/Independent Strategy“Washington’s decision to raise the bids for the return to a “strong Dollar”, by compelling Ben Bernanke to intervene, bears the seeds of an acceleration of the global financial system’s breaking process. Ben Bernanke is indeed the last wall before the largest US currency and asset owners become fully aware of the fact that Washington no longer has the means of its monetary policy. What used to be a deliberate policy of currency drop in order to reduce the country’s trade deficits and the real value (for themselves) of the their debt (labelled in Dollar), turned against its perpetrators entailing a major outflow (capital outflow, steadiness of trade deficits, soaring inflation...). The “Bernanke card” is the last psychological card Washington can play. The fact of using it proves that US leaders have reached the last limits of what they can do to hold back their partners into the system founded after 1945 and based on the US economy and currency.
When it will be confirmed that there is no way to stabilise the US currency (not to mention the eccentric idea of pushing it up) because the US economy is sinking always deeper into the recession and because the world is already filled with US Dollars no one knows what to do with, then the global financial system will burst out in various sub-systems trying to survive as much as they can before a new global financial equilibrium is found. As he is embarking on this road to nowhere, consciously or not, voluntarily or not, Ben Bernanke is signing the end of the current financial system. The return to a “strong Dollar” is a bit like the “liberation of Iraq” : wishful thinking turning into a nightmare.
As a matter of fact, if Washington really intended to stabilise the Dollar or, more ambitiously, to push it up against the other currencies, there would only be one way, in two parts: raising significantly the Fed’s interest rates, and lowering drastically the pace of money printing. But if the government decided to implement this type of policy, the US economy (both real and financial) stops dead a few weeks after: the real estate market falls to zero by lack of affordable credit and as a result of soaring interests on Adjustable Rate Mortgage loans, consumption becomes negative (i.e. shrinks back each month), corporate failures multiply exponentially, Wall Street collapses under the burden of innumerable debts and succumbs to the instantaneous implosion of the CDS market due to counterparties default...
Such a series of events, sure to happen if Washington implements a voluntary policy of dollar-rescue, is probably unacceptable by the US authorities. Therefore, apart from talking– and further self-discrediting – they cannot do anything. The method used in the past decades is no longer available: no one will accept to buy large amounts of Dollars in order to rescue the US currency if some voluntary policy is not implemented by Washington.”
When it will be confirmed that there is no way to stabilise the US currency (not to mention the eccentric idea of pushing it up) because the US economy is sinking always deeper into the recession and because the world is already filled with US Dollars no one knows what to do with, then the global financial system will burst out in various sub-systems trying to survive as much as they can before a new global financial equilibrium is found. As he is embarking on this road to nowhere, consciously or not, voluntarily or not, Ben Bernanke is signing the end of the current financial system. The return to a “strong Dollar” is a bit like the “liberation of Iraq” : wishful thinking turning into a nightmare.
As a matter of fact, if Washington really intended to stabilise the Dollar or, more ambitiously, to push it up against the other currencies, there would only be one way, in two parts: raising significantly the Fed’s interest rates, and lowering drastically the pace of money printing. But if the government decided to implement this type of policy, the US economy (both real and financial) stops dead a few weeks after: the real estate market falls to zero by lack of affordable credit and as a result of soaring interests on Adjustable Rate Mortgage loans, consumption becomes negative (i.e. shrinks back each month), corporate failures multiply exponentially, Wall Street collapses under the burden of innumerable debts and succumbs to the instantaneous implosion of the CDS market due to counterparties default...
Such a series of events, sure to happen if Washington implements a voluntary policy of dollar-rescue, is probably unacceptable by the US authorities. Therefore, apart from talking– and further self-discrediting – they cannot do anything. The method used in the past decades is no longer available: no one will accept to buy large amounts of Dollars in order to rescue the US currency if some voluntary policy is not implemented by Washington.”
- http://www.leap2020.eu/GEAB-N-26-is-available%21-LEAP-E2020-Summer-2008-Alert-July-December-
2008-The-world-plunges-into-the-heart-of-the-global_a1800.html
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