Okay, at the risk of being mocked, I am going to update my *chaos* prediction. Aecetia is right: I made my last prediction in early September 2008, and approximately three weeks later the market did enter a heart-pounding phase. It is only a year later that we finally discover – from Geithner and Bernanke, themselves – that the global financial system was only hours away from collapse. What I could not and did not foresee was TARP, which has managed to paper over some seismic fractures that are growing wider every day now.
However, these cracks are now reaching their breaking point. The Fed bought a year, but that year is now almost up. It really seems unlikely that any efforts by the Fed, Treasury or Congress can continue to prop up this corpse of an economy if we get hit by another rogue wave. The resistance to the dollar is now growing quite strong, and I sense that something is going to give in the next two to three weeks. There are just too many articles in global media now bemoaning the death of the dollar. When chatter reaches this level, something inevitably happens.
I don’t know if it’s going to be a run on the dollar, a COMEX failure to honor a physical delivery of substantial tonnage of gold/silver or the implosion of yet another pillar of American finance. Or it could be an Israel/Iran event that sparks the kindling.
Hard to know how this will get started, but it most certainly feels like something very big is coming very soon:
“Dollar Reaches Breaking Point at Banks Shifting Record Reserves ”
Oct. 12 (Bloomberg) — Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
“Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,” said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.”
