Global Research, December 07, 2015
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So what exactly happened last Thursday? The markets (including the dollar) crashed …and this was not supposed to happened?
It’s
actually quite easy to understand if you see what they did was “only a
test” … Do you understand what I mean when I say a “test”?
I will explain shortly but first,
the Fed came out with piggybacked governors talking about a rate hike.
Hilarious on the face of it if you just look at the U.S. economic
implosion going on.
But let’s assume this is reality, the Fed really wants to hike rates
(they do not “want to”, they HAVE to). For the sake of saving face and
retaining any credibility they absolutely MUST raise interest rates
after seven years …how do they do this?
Please read this piece by E.D. Skyrm,
just a .25% rate raise in rates will require the equivalent of up to
$800 billion of collateral necessitated to being pulled. Did you get that? $800 billion??? A huge number and enough to tank the whole system …unless someone is willing to replace it.
For
starters you must understand if the Fed does tighten and collateral is
withdrawn from the system, because everything is now so levered
…”collateral” from somewhere else must be added. That “somewhere” was
supposed to be Europe. Mario Draghi tried to push the EU governing
council into further QE, in essence the German hawks refused and instead
want to let some air out of the current bubbles. Europe was supposed to carry the baton of QE, they instead dropped it.
Mario
Draghi tried to fix it on Friday with his “whatever it takes”
statement. I see a problem with this and it has to do with collateral,
or the lack of. You see, Europe is experiencing the same limits the Fed
ran into during its last round of QE, not enough unencumbered
collateral left to purchase.
Another way to say this would be …”there
is just not enough debt outstanding”. I know it sounds crazy because
the underlying financial and economic problems have arisen BECAUSE there
is too much debt …but, there is not enough to accommodate the needs for
more QE.
What
happened on Thursday was a “test of wills” between the Fed and the
Bundesbank, the Fed clearly lost even though Friday was a giant reversal
from Thursday. I say this because Mario Draghi can say whatever he
likes, his mouth will not create the collateral necessary to substitute
for any tightening by the Fed. He can say what he pleases but the
governing council of the EU (run by hawkish Germans) will not reach for
the QE baton. Mr. Draghi can now only jawbone and try to mold
appearances.
So where does this leave the Fed and their quarter point rate increase? I would say they have already seen the future and … IT WAS THURSDAY!
If they decide to hike rates and the EU does not pick up the collateral
slack, I believe we will not see the markets stay open for more than a
week or so. I say this because in essence the Fed will be issuing a
margin call into a system already lacking for liquidity. As I’ve said
before, they originally treated a “solvency” problem with more liquidity
and it has now morphed into a far bigger solvency problem. Only this
time as liquidity is also lacking, they do not have the tools
(collateral) to create the needed additional liquidity.
The
Fed has truly painted themselves into a corner of their own making. I
am shocked they have been so vocal and vehement they were going to raise
rates. Did they not have a deal already in place with the ECB or were
they double crossed? On the one hand if they do not hike rates, their
credibility is toast. On the other hand if they do raise rates they
will smoke the financial markets faster than you can call your broker
with a sell order. I can only think the Fed somehow believed they had a
deal with the ECB? Even the BIS has warned the Fed about raising
rates, is the Fed just not listening to the rest of the world? Whether they see it or not, they have created a currency crisis with the dollar being the central character.
The way I see this, the U.S.
now has very big problems on the credibility front. You can add to the
above monetary fix we are in with a multitude of other U.S. “pictures”
just not adding up. U.S. “policy” is now being found out geopolitically
thanks to Mr. Putin dropping a few “truth bombs”. The domestic economy
is already in recession and Christmas (the politically correct term is
now “holiday”) sales will be a disaster.
“Truth” is beginning to slip
out from behind several different curtains. I hate to say it but a
giant false flag will have to come out very soon in order to keep cover
and divert attention from the truth. I do not see any other options
left, the reality MUST remain hidden or attention diverted, …or
the unravelling comes.
Standing watch,
Bill Holter, Holter-Sinclair collaboration, Comments welcome bholter@hotmail.com
The original source of this article is Global Research, Copyright © Bill Holter, Global Research, 2015, By Bill Holter~~Global Research, December 07, 2015
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