A Global Chancellor And A Global Banker Will Arise To Resolve The G-Zero Deficit

1)  … A review of trading on February 1, 2011
The US Central Bank purchase of debt, which was first announced at Jackson Hole in August 2010, and then formally announced in November 2010, for the purpose of supposedly providing inflation to prevent a deflationary collapse, has monetized the US Debt, causing a severe loss of value in the 30 Year US Government Bond, EDV, and the 10 Year US Government Note, TLT.

Graham Summers of Phoenix Capital Research says: “The cliff approaches, we cry “stop!” but he cannot hear us. All of Bernanke’s monetary policies and actions can be traced to his one core belief: that the US Federal Reserve didn’t do enough to stave off the Great Depression. Never mind that this belief is completely inaccurate (as the data clearly shows), it is the foundation of Bernanke’s entire academic and now monetary career.”

And Steve Matthews of Bloomberg reports Fed May Discuss Easing If Data Weak, Hoenig Tells Market News. The Federal Reserve may consider buying more U.S. Treasury securities than planned if U.S. economic data show weakness, Kansas City Federal Reserve Bank President Thomas Hoenig told Market News International. The economy will expand at least 3.5 percent this year, Hoenig said yesterday in an interview. He reiterated he would like to “normalize” monetary policy by shrinking the Fed’s balance sheet and raising interest rates, the news service said. The Kansas City Fed president expressed concern over rising land prices, Market News International said. “I don’t predict bubbles, but we certainly are beginning to see an acceleration of prices in this part of the country that I haven’t seen since the late 70s or early 80s,” he was quoted as saying. (Hat Tip To Gary of Between The Hedges)

The bond vigilantes gained control of the Interest Rate on the 30 Year US Government bond, $TYX, with the first announcement of QE 2; and then gained control of the 10 Year US Note, $TNX, with the formal announcement.

Monetization of the debt eventually has consequences, and today there was a realization of consequence, with the bond vigilantes calling world government bonds, BWX, and international corporate bonds, PICB, higher; and the currency traders selling the US Dollar, $USD, and calling other world currencies higher and in particular the commodity currencies, CCX higher; these rose 0.96%, giving boost to base metals, DBB, and the precious metals, JJP.  Currencies presented in this Finviz Screener, rose as follows:
Swedish Krona, FXS, 1.3%; causing Sweden, EWD, to rise.
Mexico Peso, FXM, 1.2%, causing Mexico, EWW, to rise.
Australian Dollar, FXA, 1.2%, causing Australia, EWA, to rise.
New Zealand Dollar, BNZ, 1.1%, causing New Zealand, ENZL, to rise.
Canadian Dollar, FXC, 1.0%, causing Canadian Small Caps, CNDA, to rise.
The Euro, FXE, 1.0%, causing European, VGK, to rise.
Emerging Market Currencies, CEW, 1.0%, causing Emerging Markets, EEM, to rise.
The Swiss Franc, FXF, 0.9%, causing Switzerland, EWL, to rise.    
The Yen, FXY, 0.9%, causing Japan, EWJ, to rise.
The British Pound Sterling, FXB, 0.8%, causing the UK, EWU, to rise.
The South African Rand, SZR, 0.6%, causing South Africa, EZA, to rise.
The Indian Rupe, ICN, 0.5%; India, INP, failed to rise.
The Brazilian Real, BZF, 0.4%, causing Brazil, EWZ, to rise.
The Chinese Yuan, CYB 0.3%, causing China, YAO, to rise.
The Russian Ruble, XRU, 0.2%, causing Russia, RSX, to rise.

The rising Euro, FXE, drove European countries such as Italy, EWI, Spain, EWP, and European energy companies Repsol, REP, and ENI, E, to new rally highs. Much was the same for the European Financials, EUFN, and Siemens, SI, whose weekly chart shows three white soldiers. The European charts look completely different from the US Community Banks, QABA, which are in an Elliott Wave 3 Down of disinvestment. It was the announcement of the EFSF monetary authority that began the Euro recovery and its actual funding that completed the rally. The insolvent bank, Banco Santander, STD, rose from a June 2010 low of 8.41 to its current value of 12.69. The chart of Banco Santander, STD, shows that it is cresting up into an Elliott Wave 2 high today and will soon be entering an Elliott Wave 3 Down. The same is true of the Euro, FXE, shown in the above chart which shows a dark filled candlestick on the eve of the Announcement of QE 2, making for a recovery high at 141.50.  James G. Neuger of Bloomberg reports that the EU Nears Agreement on Bailout Fund Buying New Bonds. “European officials are nearing a consensus to enable the euro rescue fund to buy distressed governments’ debt in private placements, while divisions fester over possible acquisitions of outstanding bonds, said three people familiar with the discussions. Agreement on allowing the 440 billion-euro ($605 billion) European Financial Stability Facility to purchase bonds from the issuers may mark a step toward a broader overhaul of the rescue fund. Moves under discussion include secondary market purchases, using loans for governments to retire traded debt at a discount, and better aid terms, the people said.” Bond purchases were the original declared purpose of the EFSF, which was cobbled together on a May weekend after a hastily engineered 110 billion-euro loan package for Greece failed to calm markets. The EFSF was then used to offer loans instead, deemed by Germany to be an easier way of making sure that countries receiving aid cut budget deficits and overhaul their economic management.” It was insider awareness that the EFSF monetary authority will likely have success and that Asian buyers would fund its activities, that brought the Euro and the European Financial Institutions, EUFN, back up from the grave. Some financial institutions have seen an awesome recovery benefit from a rising Euro, FXE; Netherlands, ING Groep NV, ING, is a case in point.

Needless to say the US Dollar, $USD, died today February 1, 2011, as the bond vigilantes called the interest rates higher on US Sovereign Debt, strengthening global competitive currency devaluation which they commenced in selling the emerging market currencies beginning in January 2011. The currency traders now have won their second victory in their ongoing global currency war for control of the world’s people and resources.The recent lollipop hanging man candlestick and the fall in the relative value of the Small Cap Pure Value Shares relative to the Small Cap Pure Growth Shares, RZV:RZG, documents that global competitive currency deflation has been underway since early January. Many are thrilled today because the major indices, the Dow, DIA, the S&P, the New York Composite, NYC, are all at rally highs. Their joy is unfounded and unreasonable as their trading currency, the US Dollar, $USD, buys 0.95% less today.

The currency deflation chart RZV:RZG

The US Dollar, $USD

Those who were invest in gold, GLD, saw their currency and their investment rise 0.72%.

The bond vigilantes and FX currency traders gave seigniorage, that is moneyness, to junk bonds, JNK, higher to close at 40.33, yet the world is passing through an inflection point moving from investment liquidity and into ill-liquidity.  

The gains that the currency traders are achieving, means that the world is passing from an age or risk acceptance, credit availability, economic expansion, affluence … and into an age of risk avoidance, credit shortage, economic contraction, and austerity.

Yes the world is passing from the age of leverage and into the age of deleveraging.

The chart of the Interest Rate on the 30 Year US Government Bond relative to the Interest Rate on the 10 Year Government Note, $TYX:$TNX, shows a deleveraging out of the long term US Treasuries that came with the two announcements of QE 2. It is the inverse of the yield curve.
The 2  30 yield cure is the spread between 2-yr and 30-yr Treasuries, $UST2Y:$TYX; and Mike Mish Shedlock reports the 2 30 Yield Spread reached another new, all-time high  of 401 bps.

The chart of the Carry Trade ETN, ICI, shows a disinvestment out of carry trade investing that commenced with the two announcements of QE 2; borrowing funds at the Bank of Japan at 0.25% interest is no longer a winning process for investing long the markets.

2)  Bible Prophecy reveals that the Sovereign and the Seignior will resolve  G-Zero deficits.  
Ben Schott of Schott’s Vocab relates G-Zero is a term used to denote the absence of a politically and economically dominant country or bloc and states: For the first time since the end of World War II, no country or bloc of countries has the political and economic leverage to drive an international agenda,” argued Eurasia Group President Ian Bremmer and head of research David Gordon, writing in Foreign Policy: The United States will continue to be the only truly global power, but it increasingly lacks the resources and domestic political capital to act as primary provider of global public goods. There are no ready alternatives to U.S. leadership. Europe is preoccupied with a multi-year bid to save the eurozone. Japan has complex political and economic problems of its own, and rising powers like China and India – are too focused on managing the next stage in their development to take on new international responsibilities. We’re referring to this new era as G-Zero, because that phrase captures the lack of international leadership at the heart of so many emerging political and economic challenges. Why the G-Zero and not the formation of blocs that allow countries to pool their influence to get things done? Because the default policy response to a breakdown in global economic governance is every man/nation for himself. As demonstrated even in a politically integrated Europe, without adherence to common rules, there’s no such thing as collective economic security. In the G-Zero, domestic constituencies will become increasingly effective in pushing populist agendas on trade, currency, and fiscal policy.

The currency traders will continue their global currency war until are currencies are sorely depleted.

Bible prophecy of Revelation Chapter 13 reveals that out of the currency traders global war with the world central bankers, a global Chancellor, a Sovereign, (Revelation 13:5-10) and a Global Banker, a Seignior, (Revelation 13:11-18) will arise to provide order, moneyness, credit and eventually a global currency.

Investment Watch relates that “At a Fed policy symposium in Jackson Hole, Wyo., Bernanke gave his strongest indication yet that the Fed is ready to resume its large purchases of longer-term debts if the economy worsens. Such purchases would add to the Fed’s already substantial holdings … “We have come a long way, but there is still some way to travel,” Bernanke said. “Central bankers alone cannot solve the world’s economic problems.””  

I relate that the Sovereign and the Seignior will come to the aid of Ben Bernanke and the other world central bankers to address the coming world economic, banking and monetary problems caused by the G-Zero deficit.


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