G&G Associates
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The Federal Reserve Did it Again ... Crushed the USD
Hotep G&G Readers,
Yesterday's Federal Open Market Committee (FOMC) has major repercussions on the market and your USD, but most folks don't even know what this means.
Ben Bernanke and The Federal Reserve (Fed) has two mandates: employment and inflation. So think about this. Even though the public may claim that there is inflation in energy and food prices, the statistics used by the Fed indicate that inflation is currently very low (Bull Shigidy). So they could scratch off inflation as something they needed to tend to at this Fed meeting, and concentrate on employment only.
There is a saying a Jegna told me a long time ago .... "Liars can figure, but figures don't lie. The key is can you figure out if they are lying or not." So ... who do you thinks lying to you? Yep ... your old trusted government ... of course this is an oxymoron in itself ... to believe government and truth go together.
And how do you get employment to rise?
Companies will hire when they see demand for their product. Currently, US consumers are fairly strapped, their incomes are not going up that much. So companies that cater only to US demand don't have much leeway to see demand for their products or services to rise. Hence they may not hire much. But companies that cater to foreign buyers have a chance to increase demand for their goods if the dollar stays weak. So if Bernanke was able to keep the dollar weak, the Fed might see multinationals based in the US increase demand for their products, and then they might hire soon. And overall, if interest rates in the US stay low, most all companies might borrow cheaply in order to increase their capacity for greater output when the need arises, so keeping interest rates low was paramount to eventually helping out the hiring picture here in the US.
But, what effect does this have on your USD?
Yesterday's Federal Open Market Committee (FOMC) has major repercussions on the market and your USD, but most folks don't even know what this means.
Ben Bernanke and The Federal Reserve (Fed) has two mandates: employment and inflation. So think about this. Even though the public may claim that there is inflation in energy and food prices, the statistics used by the Fed indicate that inflation is currently very low (Bull Shigidy). So they could scratch off inflation as something they needed to tend to at this Fed meeting, and concentrate on employment only.
There is a saying a Jegna told me a long time ago .... "Liars can figure, but figures don't lie. The key is can you figure out if they are lying or not." So ... who do you thinks lying to you? Yep ... your old trusted government ... of course this is an oxymoron in itself ... to believe government and truth go together.
And how do you get employment to rise?
Companies will hire when they see demand for their product. Currently, US consumers are fairly strapped, their incomes are not going up that much. So companies that cater only to US demand don't have much leeway to see demand for their products or services to rise. Hence they may not hire much. But companies that cater to foreign buyers have a chance to increase demand for their goods if the dollar stays weak. So if Bernanke was able to keep the dollar weak, the Fed might see multinationals based in the US increase demand for their products, and then they might hire soon. And overall, if interest rates in the US stay low, most all companies might borrow cheaply in order to increase their capacity for greater output when the need arises, so keeping interest rates low was paramount to eventually helping out the hiring picture here in the US.
But, what effect does this have on your USD?
Take a look at what effect this had on the USD after Ben Bernanke's statement yesterday, the USD got crushed. Take a look at the below 3 year USD chart I had been observing to determine what my next moves would be.
You see ... this was a major trend line support break. This photo was taken after the FOMC statement which clearly shows you what the market thinks about the USD and where it's heading.
Well, guess what, accomplishing low interest rates and a weak dollar are doing with raising bond prices, and how do you raise those bond prices? By keeping demand for them firm. In other words, no taper.
Whether this was politically motivated by a suggestion from Obama is for conspiracy theorists to decide.
But the decision by the Fed not to taper certainly accomplished the objectives of keeping the dollar weak so that US companies can stay competitive on a world scale. The weakening of the yen the past 10 months has been a thorn in the side of many US multinationals who have to compete with Japanese companies in cars, electronics, heavy machinery, and the like. The no taper decision gives them breathing space. And it certainly provides a method for the Fed to work on its mandate to provide employment stability. It is a way out for the current administration if they run into snags with the debt ceiling or the seeming impossibility of a job stimulus package (that adds to the debt) to employ workers to build new infrastructure projects that are sorely needed here in this country.
So the latest salvo in the currency wars has been fired. Who will fire the next shot? Who needs it most? In any case, we are now starting to see the logic in the Fed decision not to taper.
Well, guess what, accomplishing low interest rates and a weak dollar are doing with raising bond prices, and how do you raise those bond prices? By keeping demand for them firm. In other words, no taper.
Whether this was politically motivated by a suggestion from Obama is for conspiracy theorists to decide.
But the decision by the Fed not to taper certainly accomplished the objectives of keeping the dollar weak so that US companies can stay competitive on a world scale. The weakening of the yen the past 10 months has been a thorn in the side of many US multinationals who have to compete with Japanese companies in cars, electronics, heavy machinery, and the like. The no taper decision gives them breathing space. And it certainly provides a method for the Fed to work on its mandate to provide employment stability. It is a way out for the current administration if they run into snags with the debt ceiling or the seeming impossibility of a job stimulus package (that adds to the debt) to employ workers to build new infrastructure projects that are sorely needed here in this country.
So the latest salvo in the currency wars has been fired. Who will fire the next shot? Who needs it most? In any case, we are now starting to see the logic in the Fed decision not to taper.
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Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on what I’ve learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here. It’s your money and your responsibility. Nothing herein should be considered personalized investment advice.
