January 31st, 2015
in Op Ed
by Reverse Engineer, Doomstead Diner
Discuss this Rant (below) at the Podcast Table inside the Diner
Greetings Doomfans, and welcome to another edition of the Frostbite Falls Daily Rant, here on the Doomstead Diner.
Well, the Worst Nightmare for the Clowns & Jokers in Brussel Sprouts has come to pass, as Alex Tspiras and the Greek Syriza Party won a BLOWOUT victory in the latest round of Greek Elections. They are so far out in front of everyone else on the Popular Front over there that not even election rigging could fix that one.
Alex has promised to go to the WALL against the Troika Austerity that has been hammering down on Greece for the last 6 years, since the initial financial crash in 2008. Basically Syriza has opened up the window and shouted to the world, "We're Mad as HELL, and we're not gonna take it anymore!"
This basically amounts to opening Pandora's Box here, because the Brussel Sprouts are now between the Rock and Hard place. If they cut the Greeks loose, the Euro collapses even faster than it already is collapsing. If they capitulate and forgive Greek Debt, every other PIIGS Nation will pull the same stunt, beginning with the Spaniards, but quickly moving through the Portuguese, Italians and Frogs too. Soon as one of these major debtor nations has debt written down, they ALL will want their debt written down.
Everybody has their eyes GLUED to this Kabuki Theater at the moment, and the game of Chicken is on in earnest, to see who blinks first here. By no means is it clear that Syriza can keep control if the IMF takes the hard line and cuts them off from all credit. Even if Alex prints New Drachmas for the locals to use as currency, they won't buy any Oil or any imported goods and will rapidly hyperinflate relative to the Dollar.
The knock on effect of this is already apparent with Chinese Renminby (aka Yuan), which on the Forex market already is close to limit down on the peg against the dollar. The PBoC can only maintain this peg for so long, eventually if the pressure is enough on the forex market they will have to capitulate just like the SNB capitulated against the Euro. You cannot maintain a peg like this if every FOREX trading desk is betting the other side, which is what happened to the Swissie. It forces the CB to keep printing and buying more worthless dogshit every day. The PBoC has a bigger buffer than the SNB, but it's not infinite in size.
The Greek political situation is not the only thing impacting here on the value of the Euro obviously, which has been on steady downward trajectory for a few months. Deal here is that what Super Mario Dragon is proposing, which is a QE for the Euro and willy nilly bond and stock purchases by the Central Bank also can only serve to further erode the value of Euros relative to everything else. So if Super Mario follows through here and starts buying Trash for Cash in Europe, this can only serve to knock down the Euro value still further. It's also hard to justify buying Spanish Debt if you STOP buying Greek debt just because they voted you down. LOL.
So, as of right now, you have just about every other major currency besides the Dollar circling the toilet. The Euro is in serious trouble, so is the Ruble, so is the Yen and now it appears Renminby also is toilet circling. Still standing tall and in fact getting comparatively taller here as these currencies collapse is the local Greenbacks, aka the Almighty Dollar.
Can the Dollar withstand currency collapse, and for how long? That's the $64,000 question everybody would like an answer to, not the least of whom are Gold Bugs betting the value of Gold against the Dollar as this progresses here. In all likelihood, the Dollar will in the final accounting go the exact same way as the Euro, Renminby and Yen. However, as usual the timeline question on this problem is difficult to answer, and also difficult to answer is precisely WTF you should do with savings you have either recorded as Digibits in a Savings Account or the Paper Certificates of Stocks & Bonds in a Trading Account.
I'm going to put this Rant on PAUSE here until tomorrow, to see what occurs in the immediate aftermath of this election. Impacting here or really BOLLIXING up making any really good analysis possible is the fact the entire East Coast including New York Shity and Boston are set to be snowed under anywhere from 1-3 FEET of snow by Tuesday, which could provide reasons for shutting down the NYSE trading and just generally slowing any real information flow.
OK, back at the microphone here on Monday night, with plenty of new newz on all fronts of the currency collapse ongoing.
The biggest bombshell of the day is the Junking of Ruskie Goobermint Bonds, which means the entire country of Russia complete with all it's energy reserves now has a lower credit rating than Netflix, which of course further smashed the Ruble down to new lows, while the Almighty Dollar inexorably climbed upward on the other side of the trade. Econ Pundits all over the place are starting to get concerned about the huge fluctuations ongoing here in the currency markets, which indicates to them that the monetary system may be unstable. YA THINK? Jeezus, instability is being telegraphed everywhere here, finally they get the picture?
Because of all the market manipulation and sloshing liquidity dished out by Da Fed and PBoC for the last 6 years, about none of these currencies are valued correctly anymore, even with respect to each other. The biggest mismatch here is the Dollar-Yuan pairing, which has the same kind of peg the Swiss Franc had with the Euro, and at some point here the PBoC will be forced to pull an SNB and yank the peg, at which point you will see a massive devaluation of Renminby against the Dollar, which will make the Swissie-Euro recalibration look like a Sunday Picnic. By no means is the fallout from that one done yet either, and with Alex Tspiras currently taking the Hard Line against the Troika, there is no telling what will happen there. Anybody who thinks a Grexit is "Priced In" and the Blowback can be contained needs to review the Bear Stearns collapse leading to the Lehman Collapse. If/when Greece goes down, Spain will follow. Then all hell breaks loose and the CBs do NOT have the firepower now they did when Lehman collapsed.
To top the whole clusterfuck off, the latest rumour is that the Western Illuminati are threatening to cut the Ruskies out of the SWIFT transaction clearing system, which is the same thing as a complete embargo of ALL trade with Mother Russia. If you wanna get a full on World War going with the Ruskies, that's certainly the way to do it. Medvedev came back with the other big bluff, which is that if they pull that stunt, anything and everything will be done in retaliation. You can count on all the gas valves to Western Europe being shut down to start with. There is nothing that would better guarantee that the Chinese jump in bed with the Ruskies, as at this point all the USTs they hold would be worthless anyhow. They're currently trying to set up an alternative clearing system which supposedly will be ready by May, which would essentially bifurcate the monetary system creating a bipolar political structure, at which point the tanks start to roll and then the nukes start to fly.
Only time will tell if they are dumb enough to try and pull this stunt. Meanwhile, the action and volatility continues to pick up, the Dow took a beating today and so did the Singapore Dollar, the latest currency sucked into the FOREX War Vortex.
On the upside, Juno dumped a lot of snow on Boston, but for the most part the lights stayed on and it is back to BAU on Wall Street tomorrow. And that's all the Doom, this time until next time, here on the Doomstead Diner.