If the Fed is going to begin taking away the punchbowl why is the dollar tanking?

For a number of weeks the Fed has been talking about “tapering” its asset purchases, and from the recent spike in US government bond yields and the decline in US equities it seems as though investors them at their word. This does however raise an interesting question: If the Fed really is going to begin taking away the punchbowl why is the dollar tanking?

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The Number That Matters

Friday was one of those days when so many markets move so dramatically that it’s hard to know what to focus on. But in this case the headline numbers – US stocks way up, gold way down, foreign markets all over the place — matter less than the interest rate on 10-year Treasuries, which spiked.

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Where would UK property prices be without QE & ZIRP?

In response to the 2008 global financial crisis the government in Britain slashed interest rates to 0.5%, a policy known as ZIRP (zero interest rate policy), and embarked on a £375 billion program of QE (quantitative easing). These measures arrested the fall in property prices, but the question is, where would UK property prices be without QE & ZIRP?

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Recommended Reading: Low Interest Rate Addictions

There is a great deal of debate over whether the ending of QE will adversely affect the US economy. The bulls believe that the Fed’s decision to “taper” is a reflection of an improving economic outlook. However, the bears argue that a Fed exit will trigger a spike in interest rates and a dramatic economic slowdown.

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The Big Picture: From banking crisis to sovereign debt crisis to currency crisis (diagram)

Last week’s article ‘The Big Picture: From banking crisis to sovereign debt crisis to currency crisis’, provides a brief outline of each of the macro forces and trends that are currently impacting the global economy and financial markets. Today’s article attempts to show these forces in visual form so that investors can begin to understand the interplay between them.

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The Big Picture: From banking crisis to sovereign debt crisis to currency crisis

This article attempts to outline all the macro forces and trends that are currently impacting the global economy and financial markets. It is only by understanding all of these forces (and the interplay between them) that investors can begin to see the inevitable path from banking crisis to sovereign debt crisis to currency crisis.

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Chart of the week: US Treasury yields spike as 30 year bond bull market comes to an end

For around 30 years US government bonds have been in a major bull market. The yield on the 10-year note made a low in July 2012 at around 1.4%, however thanks to the recent breakout above major overhead resistance it is looking increasingly likely that the multi-decade bull market in US government debt has come to an end.

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As Trust Evaporates…

Rolling Stone’s Matt Taibbi has once again put the world’s major news organizations to shame by describing, in comprehensible terms, the pervasive corruption at the heart of the financial system. Below are his concluding paragraphs from a much larger article that everyone with money at risk in a bank, brokerage account or business should read.

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Universities’ endowment funds dump Treasuries

Last week, Ben Bernanke made a speech in which he warned that a long period of low interest rates could lead to asset price bubbles and a new financial crash. Bernanke is worried about another banking crisis or another bubble caused by bank lending while low interest rates and Fed manipulations have already led to a new bubble. It’s in US Treasuries.

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This will end badly but not yet

Since the onset of the global financial crisis governments and central banks have been attempting to bring about economic prosperity by creating money and pushing it out into the global economy. After almost six years however, they have failed to produce a lasting recovery, or indeed anything close.

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Precious Metals “Rangebound” Ahead of US Nonfarms, India’s Central Bank Proposes New Gold Restrictions

Wholesale gold prices hovered around $1480 an ounce most of Friday morning, around 1% up on the week, as European stock markets edged higher and the Euro regained some ground against the Dollar ahead of the release of key US jobs data for April, including the latest nonfarm payrolls report.

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