Financial Sense Blog

There is a Great Game being played at the highest levels of our monetary system. The Game has two halves: going long the real, and short the symbol. That is, going long real assets by owning them, and going short the dollar and the financial system by selective and advantageous borrowing.

The central bankers cannot dictate the speed at which money moves. They can only create it and drop it in the mix, speak their incantations, sprinkle pixie dust, offer some loony fiat prayer to the duped public, and continue with the next paper dump.

Almost exactly four years ago the stock market began a sickening plunge that would shake the world. Declining from just over DOW 11,000 to under 7,500 in two short months, only to fall another 1,000 points in the next three, this period marked an unprecedented time of government intervention that you were told was for all of our good, and the good of our nation. You were lied to.

In a truly remarkable piece for the Financial Times yesterday, Wolfgang Münchau took another swipe at the Euro-sceptic and ECB-critical community in Germany, which he accuses of inflation-paranoia and of simply not getting ‘modern central banking’.

“Look, up in the sky. Its a bird. Its a plane. No, its Super Ben.” The market is at its highest level in more than four years—up 14 percent for 2012. By many measures this is the best year since 2003. So where does the market go from here?

In 1971 President Nixon closed the window that allowed U.S. dollars to be sold for gold owned by the U.S. Just before that, the price of gold was $35 an ounce. Since then gold has been called a ‘barbarous relic’, a term used by Keynes, the famous economist. We nlook at the reality of gold's performance since then and the performance of currencies against gold.

Today was the worst one day selloff in the market since June 28. The S&P 500 has now been down four days in a row. Locking in gains as we end the third quarter was mentioned as a reason for the sell off today on many trading desks. Selling intensified when a Fed member commented that he did not believe that recent easing would be effective.

Stocks here gained about 0.5% in the first couple of hours despite a preannouncement from Caterpillar, which has been impacted by cutbacks in spending, most specifically in the base metals, as a consequence of economic weakness in China and the world over.

Correlation is not causation, as we all know. That brings us to the Fed, where many market observers are seeing causation when there might be other reasons for stock market movements. What if the victory lap Bernanke has taken due to stock market results is perhaps a little too early or out of place entirely?

Germany has no option left but to exit the Eurozone. This fact is becoming increasingly clear, especially to the German people themselves, who now fear remaining in the Eurozone (and having their remaining national savings syphoned away by their profligate neighbors) more than than the pain of leaving it.