Despite all the powerful concerted efforts being made to convince us all that everything is A-OK on the economic front, the markets and the masses are not happy.
Today, on Wednesday June 15th, the Fed made its latest 'non-decision' and did not raise interest rates. The stock market first rose but then tumbled, likely indicating that the Fed's magic is all used up. As we all know, that’s about the only thing that’s been keeping the stock market levitated of late.
I’m on record as saying that not only would the Fed not raise rates this meeting, but that their next move, when it arrives, will be to lower rates; not raise them.
Got that? Down; not up.
The reason why is simple: the Fed does not lead, it follows. And the rest of the world is dealing with interest rates that are busy heading down, not up. Therefore the Fed will go that direction, too.
If they don’t, then what will result will be a massively strong dollar, as yield-starved people the world over flee the negative bonds of Europe and Japan, and pump their capital into the US for positive yields (tiny, but positive) in a currency that’s appreciating relative to all the other fiats.
Awash In Red
This next chart is a little old…because it was produced a week ago. If updated for today, there would be at least one more red square on there to account for the fact that German bund yields on the 10-year issue are now negative(!):
(Source)
Just meditate on that chart of a bit and you’ll understand why the US dollar has been strengthening of late. If you had billions under management, would you prefer -0.87% on money lent for one year to Switzerland’s government? Or +0.57% on money lent to the US government?
Clearly, a lot of foreign money managers are opting for the positive yield. To do that, they have to buy dollars first and then buy the bonds.
by cmartenson 
