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Latest from Doug Noland

Doug’s latest is not so far from Martin Armstrong’s most recent post.

the Swiss National Bank (SBN) with the stroke of a press release essentially destroyed the Swiss franc’s long-held safe haven status in the marketplace
— the unconventional toolbox is looking desperate

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Crumbling Pillars
by Doug Noland September 09, 2011

That Dr. Stark would resign today, in the blistering heat of crisis, is a stunning development and provides additional confirmation that the German contingent is anything but backing down. Perhaps it’s too strong to suggest that this throws ECB strategy into disarray. But the market will question the sustainability of the ECB’s support for Italy’s and Spain’s bond markets. And, no doubt, a Greek default would open a Pandora’s Box of debt problems for global financial institutions, not excluding the ECB.

The currency markets turned increasingly chaotic this week. With its commitment to link its currency to the (faltering) euro, the Swiss National Bank (SBN) with the stroke of a press release essentially destroyed the Swiss franc’s long-held safe haven status in the marketplace. The franc dropped 10.8% this week against the dollar and 7.2% against the euro, in another notable example of a policy response that only exacerbates market instability. On the back of euro and franc weakness, dollar momentum gained intensity as the week progressed. It would appear that dollar short positions (i.e. “carry trades” and such) came under heightened pressure, with euro weakness, dollar strength and general market tumult all feeding upon themselves.
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Whether it’s monetary or fiscal policy – at home or abroad – there seems to be confirmation everywhere that policymaking has become largely ineffectual and, increasingly, incapacitated. This is fundamental to my bearish thesis. With each passing market day it seems to take a greater leap of faith to believe that additional monetary and fiscal stimulus will ameliorate a sovereign debt crisis fomented by ultra-loose monetary and fiscal policies. Increasingly, it appears impossible for policies that fomented monetary instability to now somehow engender a return to market stability. Liquidity-challenged global markets are convulsing through a problematic period of de-risking and de-leveraging, and once such a process commences it basically has to run its course. Efforts to intervene in the marketplace, as we’ve been witnessing, are likely to beget only greater uncertainty and instability. Fed take note.

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