As you might know by now, Jim and I will be interviewing with Greg Hunter tomorrow for early Sunday release. We plan on talking about the current “technical” dollar short created by all the emerging market dollar loans currently on the books. Richards Russell first spoke of this and called it the “synthetic” dollar short. You see, when a borrower from a nation with a currency of their own, borrows dollars, the loan must be paid back in dollars. This creates artificial/short term yet very real demand for dollars when the loan is paid back.
What I want to talk about today is “MOPE”, management of perspective economics and give you a little background as to what to listen for when Jim and I talk. I’m doing this in the hope it will make listening to the interview more fruitful rather than listening to it cold.
So, Jim coined the phrase many years back to describe a situation where lying about the current fundamentals could be supported or confirmed by pricing in markets. In other words, “the economy is great, just look at the Dow Jones”! Of course, markets were taken over by machines that used the fuel provided by the central bank(s) and lowered interest rates. It became one glorious and they hoped, self sustaining circle (bubble). The thought was, if markets are up then people will feel good and then borrow and spend more. They were right, but the problem is the game has “no ending” because after markets close for the day, they must reopen again the next day. What I mean here is, no matter what levels the markets got to…there is always tomorrow to deal with.