Dear CIGAs,
1. A $150 million dollar reverse repo called a ‘test’ is a joke. This is not a tool that is capable of draining international liquidity and the Fed has made their position clear. The US dollar will remain the carry trade currency of choice more than likely into 2012.
N.Y. Fed accepts $180 mln in reverse repo test
Tue Dec 8, 2009 8:20pm IST
NEW YORK, Dec 8 (Reuters) – The New York Federal Reserve Bank said it accepted $180 million in a tri-party reverse repurchase transaction on Tuesday as a test of the cash draining tool.
A total of $180 million was submitted in the test. The Fed has said such tests are designed to have no material impact on the availability of reserves or on market rates.
2. The problem in Dubai is being played out in the manner that any bankruptcy attorney would advise. If you do not use the ‘D’ default word there is no way to work out a settlement with your creditors.
3. The downgrade of Greece and problems in the UK do not make the US dollar a refuge as the US was warned of losing their premier credit rating as a product of the Federal spending deficit.
Stocks, Gold, Oil Drop on Dubai World’s Loss, Greece Downgrade
By Nick Baker
Dec. 8 (Bloomberg) — Stocks, gold and oil fell while the dollar rallied after Dubai World’s Nakheel PJSC lost $3.65 billion, Fitch Ratings downgraded Greece’s credit and German industrial production unexpectedly dropped.
4. A slowdown in industrial production statistics in Germany will also occur in the USA in the not too distant future.
German Industrial Output Drops 1.8% in October
By PATRICK MCGROARTY
BERLIN — German industrial production unexpectedly fell 1.8% in October from the previous month, but shouldn’t interrupt the broader upward trend in output, the Economics Ministry said Tuesday.
The decline, driven by weak production in the energy and construction sectors, will, however, contribute to the economic recovery probably being more moderate in the fourth quarter, the ministry said.
5. This is extremely meaningful as the USA plans to stimulate jobs which was accompanied by the statement that the "US will spend its way out of a recession." This factors directly into the US Federal Budget Deficit.
Obama urges major new stimulus, jobs spending
Obama offers plans to help US ‘spend our way out’ of recession, promote creation of new jobs
By Tom Raum, Associated Press Writer
On 5:45 pm EST, Tuesday December 8, 2009
WASHINGTON (AP) — President Barack Obama called for a major new burst of federal spending Tuesday, perhaps $150 billion or more, aiming to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment.
Despite Republican criticism concerning record federal deficits, Obama said the U.S. has had to "spend our way out of this recession" with so many people out of work but insisted he was still mindful of a need to confront soaring deficits. More than 7 million Americans have lost their jobs since the recession began two years ago, and the jobless rate stands at 10 percent, statistics Obama called "staggering."
In conclusion, not only has nothing changed but dollar fundamentals are now worse.
There is no major upside to the US dollar. The price of gold now is totally in the dollar times ten.
Stay the course. Gold is going to $1224, $1274, and $1278 on its way to $1650 and beyond.
