Not only this week if you check volatility with another years. We are in a historic low volatility, and with this comes the bad luck of forex traders.
Practical Economy Lessons by Linuxser:
Iīm not Rockefeller, Greenspan, Soros or any other guru. But is clear for me. All factors are combined to benefits a little group of people.
This people needs the current conditions, lowest volatility in currencies to keep borrowing and borrowing, specially the savings of Japaneses people to buy or merge companies in another country. Nobody wants to borrow if there is no certain stability and guarantees in time.
Meanwhile the stupid Fukui keeps rates at 0.5 to benefit? and to benefit...? and to benefit...?. Please, tell us the truth, to benefit our friends who are making a lot of money.
The lie of 0 interest rates to foment consumption it has no credibility because consumption in japan it has been years suspended.
Average investor does not think in carry trades and they canīt afford the task, but they would be needed to pay the future bill as it was in 99/00, after emergency meetings in NY because multimillion funds was in trouble.
Ballard cases (chairman of RBNZ) are interesting, seems Mr Ballard thinks that with 8% rates he can control inflation meanwhile with interventions he can control the value of the currency. And we are nuts off course.
Last one, also, is a good case about how benefit friends.
Before New Zealand raised interest rates to the current 8 the kiwi started an uptrend of near 350 pips. By this time the consensus about a new rate hike was less than 15%.
Thatīs was followed by an intervention on Sunday open after the currency rallies 80 pips on friday. Donīt you think is strange?
Explanation: insider information. Thatīs the way markets works for the same people enjoying current market conditions.
Because unless you have a good source and a good pocket itīs almost impossible to change the trend of one currency with 15% of consensus and 3 or 4 economist almost unknown predicting a new hike.
Proofs and facts:
1.It's a fact that market intervention does not work because central banks does not have enough money to win the battle.
2.Interest rates does not help to control inflation. Specially when you don't stop to print money.
In the 90īs the world had lower inflation and lower interest rates.
3.The useless of central banks 1. Theyīre dinosaurs form the age when a country needs a common place to print money and avoid everybody take the task.
4.The useless of central banks 2. Also, it was the best way to keeps the relation money/gold under control, because money it needed to have gold backup.
5.The useless of central banks 3. One mandatory of central banks are completely independence to make their decisions and hands off of politicians. But, according to current rules, economy health is a government problem. People don't blame Bernake or Trichet if economy goes bad, blame governments. BUT, inflation is a problem of central banks
and central banker talks about economy.
How do you suppose a central bank can control inflation with an over valuated currency that it favors imports in detriment of exports without a government hike in import taxes?
Central banks today are designed to keeps the friend business running smoothed. And unfortunately they have high impact in forex maket.
And I keep writing a lot but I do not want to boring you.
But here is one last to connect Ballard, useless of central bankers an friends.
Interventions sell 1 billion to make the currency downs 150 pips, then sell another 1 billion to make the currency downs another 150 pips, and last 500 million for another 50 pips, then run out of money and the pair restart the trend. Hey, I can't see any strategy in doing this, specially knowing how market works. Every intervention is a gift to buy cheap.
If prices are going up it's because traders are accepting to pay higher prices again and again and again. Itīs because consensus says there is some uptrend. You buy, set SL and wait.
When consensus goes away and uncertainty comes to the market, trends stop. So, if you, in your central bank chair are worried by the uptrend of your currency it's clear what you have to do.
With the connections and resources of central banks why donīt try to hurt the market, hit where is pain to discourage expectations. Sell 50 millions, hit stops. Imagine, if a retail broker can do that a central bank can make a bloody bath. Sell another 100, hurt again. Do it again. Central banks have enough money to do that. By fifth time none wants to take a positions against what you said.
So, why banker does not do that?