Mother of all carry trades faces an inevitable bust

[suityou01]

Pub expert here :

China is pegging the Yuan back to protect the dollar. As soon as they stop and the Yuan strengthens then it's curtains for the dollar.

The problem here is as the dollar weakens, those that are sitting on those dollar reserves are losing out. The very fact that America is weakening the dollar by printing money is p*ssing off those countries that are ditching the dollar. Basically, America is waging wars to make money, and printing money to fund it's war mongering activities, leaving other countries to pick up the tab.

Also, as some point all this QE money needs to be taken back out of the economy, and they do this by raising interest rates to claw back those QE dollars. This is when the hyper inflation kicks in.

QE is due to stop in this country around the next election.

As someone rightly said on here, that will be the day to put the popcorn in the microwave.

The thing is, if a currency collapses, you need to replace it with something. I wonder if the North American "Amero" will become a viable option, and good ole Britannia adopts the Euro.

[centurian]

Also, as some point all this QE money needs to be taken back out of the economy, and they do this by raising interest rates to claw back those QE dollars. This is when the hyper inflation kicks in.

Any stimulus package should be a kick-start only - and it is often the right thing to do.

But the kick start hasn't worked and now they need to keep pumping in money just to keep the economy afloat. But sooner or later this has to stop - and that's when we will really pay the price. Pretty much all of this pain is timed to kick in just after the next general election - funny that...

[suityou01]

Any stimulus package should be a kick-start only - and it is often the right thing to do.

But the kick start hasn't worked and now they need to keep pumping in money just to keep the economy afloat. But sooner or later this has to stop - and that's when we will really pay the price. Pretty much all of this pain is timed to kick in just after the next general election - funny that...

America did this in the 70s. When the time came to claw the money back IR went to 20%.

The amount of money they need to claw back is MANY MANY MANY orders of magnitude bigger this time.

[centurian]

America did this in the 70s. When the time came to claw the money back IR went to 20%.

The amount of money they need to claw back is MANY MANY MANY orders of magnitude bigger this time.

What gets me is why more people aren't jumping up and down warning of the impending problems.

Why are we all sleepwalking into this.

The only answer I can think of - is that there simply isn't any other option available. Basically the boom of the 00's shouldn't have happened because it was based on nothing but debt - and this recession is just a massive reset button to put us back where we started (plus all the debt).

So all the policy makers are hoping that QE etc. will solve the problem because they simply can't think of anything else.


It's not all bad for Labour though. At least they can say that the Tories will be party of high interest rates - and strictly speaking the facts will back them up.

[HairyArsedBloke]

It's not all bad for Labour though. At least they can say that the Tories will be party of high interest rates - and strictly speaking the facts will back them up.

If Labour fall at the next election and if the Tories have the interests of the country at heart, then they must make sure that Labour totaly destroyed as a party and a movement. Otherwise it will continue as a cancer and kill us all. However, I don't believe that even the first condition is true.

[threaded]

If then they must make sure that Labour totaly destroyed as a party and a movement. Otherwise it will continue as a cancer and kill us all.

Democracy results in an adversarial system, and all parties involved take positions that are incompetent.

[SantaClaus]

But I think our DEc put options are probably going to be worthless...........

I think your right Brillo unless there is sudden profit taking before Christmas.
That's why I would only punt what I am prepared to lose on a trade like that.

I have no doubt this market is going to crash, but I don't know when the governments are going to stop propping it up.