Money Flow Trading Method along with Risk Management

That is roughly the plan I work with charts. Preparing material for 2yrs correlation to DOU30

< COMMENTARY FROM BENJAMINIS: This will make it CRYSTAL CLEAR to everyone reading my posts this morning and yesterday where we stand. We are surely in uncharted waters in all areas. The financial area as has been pointed out on this thread many many times both from the PERCEPTION and REALITY side of the two faced coin. Now leading into the Political side since November 8, 2016 we see the two faced and DESTRUCTION nature of Politics not only in America now. We have Europe and Brexit. We have India and Venezuela. There is of course Turkey and Syria and Iraq and Iran and Israel and events today in Paris where 70 Nations are now meeting with John Kerry of the USA there. We have the major problems in China and Japan and Europe and of course the USA with the Twenty Trillion Dollars of Debt. Gold and Silver and the changing of the Guard in the USA in 5 days will not go smoothly.

A DIVIDED NATION AND A DIVIDED WORLD.

This is a business that we are involved in and we are not directly responsible so what we do is profit through trading Forex the proper way and as the Money starts to FLOW , not only can we see where the money is flowing to, we know what Asset Classes will move with the FLOW and why.

Using all the parts required which of course include you first of all the Forex trader. Then the MONEY FLOW and of course with all these incredible uncertainties without Risk Management , NO TRADER can survive. Most Forex traders understand Technicals and Fundamentals.

How many understand the first three as I have pointed out many times since December 3, 2016. Our results can only conclude that what we do works and to my personal satisfaction because of all the time and effort that I have invested here in the last 43 days it has all been worth it since others here now understand and have proven it to themselves because of their own personal results. >
Absolutely, we are waiting for the uncertainty. Let's look at the proven performance. Pay attention, in 2000 and 2007, the stock market fell, the yield on 2y.o. was higher than 10year. The graph then put.

http://www.marketwatch.com/story/tru...teid=rss&rss=1


Trump on the EU: Others will leave the union

President-elect Donald Trump, already embroiled in a war of words with China and Mexico, has come out swinging against the European Union and NATO in interviews over the weekend.
Trump predicted more departures from the EU following the U.K.s June vote to leave the trade bloc, according to a Times of London article that featured this quote:
I do believe this, if they [EU countries] hadnt been forced to take in all of the refugees, so many, with all the problems that it . . . entails, I think that you wouldnt have a Brexit. It probably could have worked out but this was the final straw, this was the final straw that broke the camels back.

Trump, slated to be sworn in Friday as the 45th U.S. president, also reiterated his past criticism of North Atlantic Treaty Organization. The Western military alliance is obsolete because its not taking care of terror and only five countries are paying what theyre supposed to, he said, according to the Times article.

With that being said, NATO is very important to me, Trump added.
The president-elect expressed admiration for German leader Angela Merkel, but said she made one very catastrophic mistake and that was taking all of these illegals, you know taking all of the people from wherever they come from.
Read more: Trump open to shift on Russia sanctions, One China policy
He described the EU as basically a vehicle for Germany. Thats why I thought the U.K. was so smart in getting out.
In other parts of his extensive remarks, the incoming commander-in-chief said he will offer a quick and fair trade deal to the U.K. and Brexit will end up being a great thing. He also singled out German car makers BMW AG BMW, -1.30% and Daimler AGs DAI, -1.54% Mercedes-Benz , complaining that automotive trade between the U.S. and Germany was a one-way street.

TRANSLATION : To all regards! Beginning from the new week. Before the inauguration, we will see how the politizirovannyy economic market. On Friday, I lost $ 250-350. They were not predicted motion. BenjaminIs, If you please, you will look to my calculation and to make analysis, this was everything in the order, or there were errors from my side? Later I will place by graphic 2yrs profitableness on the bonds and to attempt to explain my thoughts during DOW30 the correlation of profitableness.
To apply Screenshot_20.png; 2141282 / To give to apply Screenshot_21.png; 2141285 / you will applyAttached Images (click to enlarge)

Thank You wayfarer

I will follow through with your request and now I will review the charts that you produced last night. Thank You.


Benjaminis

Good Morning wayfarer and KeepCalmfx and mbleska and everyone else.

We have the charts that we need and I think that having a 15 minute view would take out the noise fro the 5 minute chart and since we do our shorter term trades more frequently and we know the Trend that we expect to see by using the 15 minute charts our entry should be good.

Our exits go more along our Risk Management strategy and our locked in profit strategy of $250 US Dollars with the understanding that at certain times when we feel strong about the markets we can close all positions.

Please ask me a follow up question or perhaps KeepCalmfx can explain my question and the answer better for everyone on my last point of sometimes closing all positions for special situations.

Finally I am asking for those with better skills with charts than myself, especially wayfarer and KeepCalmfx to take the lead in determining how we use these charts most effectively in our Forex trading.


Benjaminis

Thank you very much KeepCalmfx for your extra efforts. I have now gotten the 451 page book and from time to time I will slowly go through it and you have the perfect approach to learning and awareness.

I will send you a PM shortly however since I did not send it yesterday, now with the week fully starting, it will be within a few days. I appreciate all the efforts that you are putting in.


Benjaminis

Thank you wayfarer

The fact that you put my post here again shows me that I have succeeded in having you understand, why understanding the global picture, or at least being aware of all these issues is a great help in your trading of Forex. It is also most helpful for everyone else to read this again or for the first time.

Your comments and questions on anything is welcome and appreciated.

Hi Benjamin & Wayfarer

What if we do a combination line chart as below each day at +/- 8am EST or 3 pm GMT+2 (Just before the volatility start, to see the correlation.)
Then I will also do the 4 x bar charts as usual for a more visual with support & resistance and other indicatiors?
Then we also keep the timeframe on 15min.

Or what do you suggest Wayfarer?

Excellent work , KeepCalmfx

This is exactly the type of articles that are most helpful in our being aware of things on the RADAR SCREEN.

It keeps us in the bigger picture of what the more important issues are.

Now I will share with everyone especially any Americans or Canadians here why Donald J. Trump causes people especially in North America to become so divided and angry.

By the article that KeepCalmfx just posted I can now make the following opinion even more clear.

What this man continually does is he breaks all the bubbles and open all the sores and changes the STATUS QUO so that everything is open for discussion and change. There is a well known saying of "Shoot the Messenger" All of us become defensive and take it very personally when things that we strongly accept as being the way it is because we are either liberal or conservative.

What has surprised me in a very strong way was that I would have said that I was more liberal and democratic in my way of thinking and judgement.

When I observed how normally intelligent people on the left could become so ignorant and hateful I finally understood why.

Their FEAR of change and their being effectively programmed to not have an open mind and see things outside of the box using common sense rather than pure intellect caused them to behave as they are now.

They are good and decent people however now their FEAR and the start of the realization that now it is time to deal with important issues such as deficits and other important matters especially the race divide between Black and White that has been part of American History since they were born in 1776.

Movie stars sometimes do live in their own fantasy world and so they cannot see reality because they do not know what not being able to have a job is all about.

I have shared my thoughts because they are my thoughts and observations and everyone should decide for themselves what makes sense and is right.

We all need to work together and not be judgmental and when we cannot agree, we still most be kind and fair because Hate and Ignorance always ends in a terrible way.

Please note that at NOON today all markets are closed and things will start with the Asia markets from 7 PM EST on. Time for breakfast now and the reading of the local papers and other things on my to do list for today.


Benjaminis

Hi! Benjamin I was not active, however, I started since last week I have some drop-down and I'm working on it to recover as soon as possible.
Also, I need help how to place orders in the trading station right way, for example, I want sell/buy 100 units. If anyone can explain that that would be great.

Regards,
RD-007

The two graphs: one instrument price, the yield on another tool. We are not interested in the prices of stocks and bonds. We look at the profitability of shares and bonds. When bond yields (2YR T-note) increases, investors are selling indexes (DOW30) and buy bonds. On the index Dou30 price falls. This is based on cash flows .Bendzhamin found these (God bless him), thanks to him for science. Currently the yield on 2year. higher than 10year. This is called inversion. Price indices fall. That's why Benjamin has a plan for DOU30 and yen selling. Such correlations have for other assets. There are news, economic and politichiskie. To date, the policy rules the market. This is what we trying to teach Benjamin. Sorry for my bad English. There will be questions, I will answer.

BenjaminIs, correct me if I'm wrong I think.

Dear Rocky007

I am very happy that you are with us. With your technical knowledge you can become a great Forex trader.

To place a trade whether long or short on the FXCM UK trading platform go to the currency pair that you will execute an order on and there is the ability to enter from 1 to 100 units. We always trade minimum 100 units or $100,000 US Dollars and once the order is filled we go and enter the STOP LOSS at $1000 US Dollars so the maximum risk is $1000 US Dollars or 2% of the total trading capital of $50,000 US Dollars. If anything is not clear then please post a follow up question.

It is nice to have you active and please feel free to share any of your technical or other views here with us.


Benjaminis

UJ we can go long form hear, what you say? Short time profit 115.409 & with tight SL

wayfarer

Do not worry about your English. You are doing great. Both yourself and KeepCalmfx are doing what you need to do to keep improving. You are correct in saying that there is a science or a formula that we follow. I will now post your remarks and clarify for you and others what I need to. You will only get better of that I have no doubt and by doing that you are making us all better including myself.

COPY AND PASTE of wayfarer's comments.

The two graphs: one instrument price, the yield on another tool. We are not interested in the prices of stocks and bonds. We look at the profitability of shares and bonds. When bond yields (2YR T-note) increases, investors are selling indexes (DOW30) and buy bonds. On the index Dou30 price falls.

COMMENTARY FROM BENJAMINIS: We are interested in the Asset Value of US 30 which is Equities, because as the price goes up or down money either flows into them with Risk On or flows out of them with Risk Off for the more immediate safety of mainly the US Bonds.

The shorter terms up to the 2 Year US Bonds are sometimes called NOTES.

When US Bonds are bought and we FOCUS mainly on the 2 Year US Bonds and the 10 Year US Bonds which is the BELL WEATHER indicator for general interest rates such as Mortgages whether in Canada or the USA or other places in the world.

So when we have RISK OFF money will FLOW towards safety based on their PERCEPTION of real safety. The money will flow partly to the US Bonds and also to the safety of USD/JPY and also to the Swiss Franc. (USD/CHF).

Some funds Flow to Gold and Silver however that is more difficult to understand by the masses including the so called experts since GOLD is the ENEMY of Fiat Currencies and because the COMEX is more a paper market where prices are manipulated care must be used going LONG GOLD or SILVER.

This year the Shanghai Exchange will deal with the false price of Gold and Silver that was the creation of Comex in the past. That is a whole other topic for another day.




This is based on cash flows .Bendzhamin found these (God bless him), thanks to him for science.

COMMENTARY FROM BENJAMINIS: We are all welcome since we all benefit from the Knowledge.

Currently the yield on 2year. higher than 10year. This is called inversion. Price indices fall. That's why Benjamin has a plan for DOU30 and yen selling. Such correlations have for other assets. There are news, economic and politichiskie. To date, the policy rules the market. This is what we trying to teach Benjamin. Sorry for my bad English. There will be questions, I will answer.


COMMENTARY FROM BENJAMINIS: The reason that there is a difference in Yields between the 2 Year US Bonds and the 10 Year US Bonds is because when there is RISK OFF the Billions of Dollars are only PARKED there for short period of time so the US Bonds of shorter duration have lower yields as more of those US BONDS or US Notes are purchased.

I believe that I have answered and made clearer the way things work for the moment. Please post questions or add comments if you care to. Thank You.

Rocky007 with regard to the direction of USD/JPY the direction of USD/JPY whether heading back to 120.00 or back to 110.00 can be easily seen by the CORRELATION that we use here. There is NO CHART in the World that can tell you that with any certainty.

Charts are only a X RAY of the currency pair at the moment. The TREND IS YOUR "BEST" FRIEND. I added the "BEST"

So if US 30 drops 500 points tomorrow and it just might then USD/JPY should head towards 112.00 and if US 30 heads back towards 20,000 then USD/JPY will go back towards 115.00 and 116.00.

I think it is that simple in my opinion.

I now cover another topic of Risk to Reward. Using in general Risk of $1000 US Dollars to Reward of $2000 US Dollars (1 to 2) or Reward of $3000 US Dollars. (1 to 3) gives you the ability to make better profits then what most Forex traders do through scalping on the charts.

I hope that I have answered all your questions.


Benjaminis

UJ this is what I think, however CORRELATION is the best way to trade I'm Agree with Mr. Benjaminis.

Foreign Exchange Reserves in Japan decreased to 1216903 USD Million in December from 1219291 USD Million in November of 2016. Foreign Exchange Reserves in Japan averaged 290975.26 USD Million from 1957 until 2016, reaching an all time high of 1306668 USD Million in January of 2012 and a record low of 455 USD Million in September of 1957.

Foreign exchange reserves in China declined by 41 billion to USD 3.011 trillion in December of 2016, central bank data showed. It was the sixth straight month of decline bringing the reserves to the lowest level since February 2011 as the central bank continued to sell foreign currency to slow the renminbi’s depreciation, the State Administration of Foreign Exchange said in a separate statement. In the December quarter of 2016, the local currency decreased by 4 percent, due to a surging US dollar and accelerated capital outflows. For the whole year of 2016, the yuan depreciated 6.6 percent against the dollar, the biggest one-year lost since 1994. This year, the currency is expected to weaken further despite efforts to slow its slide. Foreign Exchange Reserves in China averaged 890750.12 USD Million from 1980 until 2016, reaching an all time high of 3993212.72 USD Million in June of 2014 and a record low of 2262 USD Million in December of 1980.

China is killing us on trade-Trump

HEADS UP LADIES AND GENTLEMAN

I have NEVER READ a more accurate and to the point analysis then this one. Please print out a copy and even if it takes you a week to understand please do this,

Here is the link.

https://dailyreckoning.com/7-federal...y+Reckoning%29

I will put the whole article here so it can be read by all and any questions that come up then I will be very glad to answer. The ones fortunate to read and understand this might then be more knowledgeable then 90% of the people in the world

The Full Text by Mr Rickards.

7 Federal Reserve Tools and Why Theyre All Flawed

[Ed. Note: Jim Rickards latest New York Times best seller, The Road to Ruin: The Global Elites Secret Plan for the Next Financial Crisis (claim your free copy here) transcends politics and the media to prepare you for the next crisis]


In recent decades, the Fed has engaged in a series of policy interventions and market manipulations that have paradoxically left it more powerful even as those interventions left a trail of crashes, collapses and calamities.

The following is a survey of seven Federal Reserve tools in the Fed toolkit to stimulate the economy if recession or deflation gains the upper hand and why their toolkit is flawed.

Helicopter Money
The image of the Fed printing paper money, and dumping it from helicopters to consumers waiting below who scoop it up and start spending is a popular, but not very informative way to describe helicopter money. In reality, helicopter money is the coordination of fiscal policy and monetary policy in a way designed to provide stimulus to a weak economy and to fight deflation.

Helicopter money starts with larger deficits caused by higher government spending. This spending is considered to have a multiplier effect. For each dollar of spending, perhaps $1.50 of additional GDP is created since the recipients of the government spending turn around and spend that same money on additional goods and services. The U.S. Treasury finances these larger deficits by borrowing the money in the government bond market.

Normally this added borrowing might raise interest rates. The economic drag from higher rates could cancel out the stimulus of higher spending and render the entire program pointless.

This is where the Fed steps in. The Fed can buy the additional debt from the Treasury with freshly printed money. The Fed also promises to hold these newly purchased Treasury bonds on its balance sheet until maturity.

By printing money to neutralize the impact of more borrowing, the economy gets the benefit of higher spending, without the headwinds of higher interest rates. The result is mildly inflationary offsetting the feared deflation that would trigger helicopter money in the first place.

Its a neat theory, but its full of holes.

The first problem is there may not be much of a multiplier at this stage of the U.S. expansion. The current expansion is 90 months old; quite long by historical standards. It has been a weak expansion, but an expansion nonetheless. The multiplier effect of government spending is strongest at the beginning of an expansion when the economy has more spare capacity in labor and capital.

At this point, the multiplier could actually be less than one. For every dollar of government spending, the economy might only get $0.95 of added GDP; not the best use of borrowed money.

The second problem with helicopter money is there is no assurance that citizens will actually spend the money the government is pushing into the economy. They are just as likely to pay down debt or save any additional income. This is the classic liquidity trap. This propensity to save rather than spend is a behavioral issue not easily affected by monetary or fiscal policy.

Finally, there is an invisible but real confidence boundary on the Feds balance sheet. After printing $4 trillion in response to the last financial crisis, how much more can the Fed print without risking confidence in the dollar itself? Modern monetary theorists and neo-Keynesians say there is no limit on Fed printing, yet history says otherwise.

Importantly, with so much U.S. government debt in foreign hands, a simple decision by foreign countries to become net sellers of U.S. Treasuries is enough to cause interest rates to rise thus slowing economic growth and increasing U.S. deficits at the same time. If such net selling accelerates, it could lead to a debt-deficit death spiral and a U.S. sovereign debt crisis of the type that have hit Greece and the Eurozone periphery in recent years.

In short, helicopter money, which both Trump and the Fed may desire, could have far less potency and far greater unintended negative consequences than either may expect.


Negative Real Rates Achieved Through Financial Repression
Another form of stimulus in the Feds toolkit is negative real interest rate policy achieved through financial repression.

Negative real rates exist when nominal interest rates are lower than the rate of inflation. A simple example would be a 2.5% yield on ten-year Treasury notes and inflation of 3.0%. That would produce a negative real interest rate of -0.5% (2.5% 3% = -0.5%).

A negative real rate is an encouragement to borrow and invest because the borrower can repay the lender in cheaper dollars. Negative real rates also cause a fall in the exchange value of the dollar since capital will flow to other currencies with positive real returns.

A lower dollar is inflationary in itself because it increases the costs of imported goods. The U.S. has a persistent trade deficit and is a net importer so such increased costs feed through supply chains and result in higher prices.

The Fed can achieve negative real rates by using financial repression, also called fiscal dominance. The Fed can encourage inflation by keeping nominal short-term rates low, while negating higher long-term rates with bond purchases.

Negative real rates and financial repression have been used in the past to erode the real value of government bonds and reduce the U.S. debt-to-GDP ratio over time. The period from 1946 to 1970 is a classic case during which the U.S. debt GDP ratio declined from 100% to 30% before gradually going up again (today the ratio is 104%).

The difficulty is that in the 1950s and 1960s the economy had an inflationary bias due to a rapidly growing consumer population bumping up against capacity constraints. Today the situation is the opposite with an aging demographic and numerous deflationary forces from debt deleveraging and technology.

The Fed may want to engineer a mild form of negative real rates using financial repression, but it is not clear the Fed can actually do so given deep-seated deflationary trends. The Feds failure to hit its inflation targets for the past four years suggests this particular stimulus tool may not be availing.


Interest Rate Cuts in a Recession
Although the nominal Fed funds target rate is low, just 0.50% currently, it is still positive. The Fed could announce two 0.25% rate cuts at two successive FOMC meetings if it so chose.

This is unlikely at the moment because the Fed has announced its intention to increase rates three times in 2017. However, each rate hike can be viewed as adding one bullet to the Feds revolver, giving the Fed more ammunition to fire if the U.S. economy goes into a recession.

Historically, it takes 300 to 400 basis points of rate cuts to steer the U.S. economy out of recession. Fed policy today can be understood as a desperate race to get the fed funds rate to 3.5% before the next recession hits without actually causing a recession in the process.

The Fed is unlikely to achieve its goal because it may take until the end of 2019 to raise rates that much and the economy is likely to go into recession before then. Still, the Fed will raise rates as much as it can, whenever it can in order to cut them again when a recession emerges.


Savers Save More When Facing Negative Interest Rates
Negative interest rates were first viewed as an extension of interest rate cuts after the policy rate hit zero. If a central bank had a policy rate of 1%, it could implement four 0.25% rate cuts before hitting zero. At that point, the central bank could cut rates further by pushing the policy rate into negative territory.
This can be done by paying a premium above par for non-interest earning Treasury bills that mature at par thereby earning a negative total return on the bills. The original view was that negative rates were just more of the same from the perspective of rate cuts.

However, empirical evidence from negative rate experiments in Japan and Europe suggests that negative interest rates are not just more of the same from a rate cut perspective. Negative rates are designed to stimulate lending and spending. Yet, certain behavioral reactions produce the opposite of the effects intended.

Savers facing negative rates actually save more to compensate for lost interest. Consumers interpret negative rates as a deflation signal and defer purchases in anticipation of lower prices. Negative rates actually produce more saving and deferred spending.

While negative interest rate policy remains in the Feds policy toolkit, there are high hurdles to its use based on unsatisfactory results to date.


Market Manipulation and QE
Forward guidance is the technical name for Fed propaganda or market manipulation through its choice of words in The Federal Open Market Committee (FOMC) statements, press conferences and speeches. It is used to signal future Fed policy without tying the Fed to specific dates and policy rates.

Forward guidance is one of the Feds favorite tools because it can be used ambiguously and can easily be reversed when the Fed wants to signal a change.
https://files.admin.agorafinancial.c...ng-635x120.jpg
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Forward guidance was used extensively in conjunction with quantitative easing (QE) from November 2008 to March 2015. The Fed executed three programs of QE called QE1, QE2 and QE3.


QE1 lasted from November 2008 to June 2010 and involved the purchase of $600 billion of mortgage-backed securities.

QE2 lasted from November 2010 to June 2011 and involved the purchase of $600 billion of mostly intermediate term Treasury securities.

QE3 started in September 2012, and was initially indefinite as to an end-date and the amounts to be purchased. QE3 involved both Treasury securities and mortgage-backed securities. Actual purchases reached $80 billion per month until December 2013 when a taper program began that reduced purchases monthly until they reached zero on Oct. 29, 2014.

The Feds goal was to suppress rates so that market participants would bid up the price of riskier assets such as stocks, real estate, and corporate debt.
Many purchases of risky assets are made on a leveraged basis with funds borrowed in short-term money markets such as repurchase agreements or floating rate notes.

In order to work as intended, market participants needed some assurance that the Fed would not suddenly change course, and raise rates. This would cause huge losses on the leveraged portfolios. The Fed provided this assurance by forward guidance.

Initially the guidance was provided by specific dates and intentions such as keeping rates at zero for an extended period, or for some time, or at least through 2015 etc. Later the forward guidance took the form of expressions of intent such as patient with regard to rate hikes.

The meaning of words like patient was supplied by Fed insiders to friendly reporters like Jon Hilsenrath at the Wall Street Journal who dutifully passed the information along to readers and the market as a whole.

It was understood that some time would elapse between the end of forward guidance and the beginning of a rate hike cycle. This was designed to allow market participants time to unwind leveraged bets or arrange longer-term financing in an orderly way. Any market participants who missed the signals or read the tea leaves incorrectly were on their own.

Forward guidance officially ended in March 2015 when the FOMC removed the word patient from their policy statements. The first rate hike took place nine months later in December 2015.

Forward guidance worked exactly as planned in the sense of channeling investors into stocks and real estate instead of artificially low yielding Treasury notes. But, it is not clear what if any impact this portfolio channel effect had on economic growth.

It is more likely that the combination of QE and forward guidance created asset bubbles in stocks and real estate that are in danger of bursting or that will need to be unwound in the next liquidity crisis.


Forward guidance can be used independently of QE as it was in the brief period from November 2014 (after the taper) until March 2015 (the end of forward guidance). This is likely to be the case in future.

If the economy begins to show signs of a recession in 2017, the Fed will not only pause in its rate hikes, but will use forward guidance to indicate it does not intend to resume rate hikes soon.

Any future use of forward guidance will be a strong indication that rate cuts may be coming next. In an economic downturn, the likely sequence of events will be a pause in rate hikes (signaled by forward guidance), then actual rate cuts, then more forward guidance signaling that rates will remain at zero, and then finally a new round of quantitative easing, QE4.

Whether negative rates are added to this monetary science experiment remains to be seen. If negative rates are used, they are likely to be presaged by their own unique form of forward guidance.


Using Currency Wars to Stimulate the Economy
Reducing the foreign exchange value of the dollar, also known as a currency war, is another means of trying to stimulate the U.S. economy. This can be done by coordinating rate policy with foreign central banks.

If the Fed pauses in its tightening cycle while the European Central Bank persists in its current taper of asset purchases, the net result is likely to be a decline in the USD/EUR cross-rate.

Currency wars can also be fought by direct market intervention, although this is rare and is usually reserved for cases of disorderly market movements in exchange rates.

The problem with currency wars is that any beneficial impact of exchange rate devaluation is strictly temporary as trading partners on the losing side tend to cheat and try to devalue their own currencies in a sequence known as beggar-thy-neighbor. The end result of currency wars is usually inflation in the form of higher import prices, rather than real growth through higher exports.



The Nuclear Option Gold
The final weapon in the Feds arsenal is the financial equivalent of nuclear war. The Fed could instantly create inflation and achieve nominal if not real growth by massively devaluing the dollar when measured as a unit of gold.

This was last done in 193334 and was highly successful. Stocks rallied and commodity prices boomed in the middle of the Great Depression (19291940). This boom was not sustained because the Fed and Treasury prematurely tightened monetary policy and fiscal policy in 1937, which put the U.S. economy back into a severe technical recession from 19371938.

The Fed could use this nuclear option by coordinating with the Treasury to make a two-way market in gold using printed money. This would work exactly like quantitative easing, except the Fed would buy or sell gold instead of Treasury bonds.

The Fed would set an arbitrarily high fixed price for gold such as $5,000 per ounce. The Fed would make that price stick by offering to buy gold from any seller at $4,900 per ounce and selling gold to the market at $5,100 per ounce. This amounts to a 4% band or spread around the target price, a classic pegging technique.


Gold could be removed from or added to the U.S. hoard at West Point, NY, and money would be created by or destroyed by the Fed in order to make the target price stick.


If, for example, the price of gold was $1,300 per ounce before the operation, the effect would be to devalue the dollar from 1/1,300th of an ounce of gold to 1/5000th of an ounce of gold, a 75% devaluation of the dollar. This devaluation would not take place in isolation.

A 75% dollar devaluation in gold would signal devaluation in all other goods and services and result in $100 per ounce silver, $200 per barrel oil, etc.
This is obviously an extreme measure and would only be used in the face of strong persistent deflation.

Yet, the fact that that technique exists and has been used in the past is one reason to conclude that deflation will not in fact persist beyond certain limits because the Fed and Treasury have the ability to stop it as they did in 1933.

This review of 7 Federal Reserve tools in their toolkit consisting of interest rate hikes to fight inflation, and a litany of tools to fight deflation, shows that the Fed will be fully engaged in manipulating the U.S. economy for an indefinite period of time.

Kind regards,
Jim Rickards
for The Daily Reckoning


Ed. Note: The most entertaining and informative 15-minute read of your day. That describes the free daily subscription of The Daily Reckoning. It breaks down the complex worlds of finance, politics and culture to bring you cutting-edge analysis of the days most important events. Our top economists and writers will offer you an entertaining even risqu insiders guide on the world today. Click here now to sign up for FREE.


Benjaminis

Hello Intro007

It is very nice to see your post here. Your view is correct and if it does trade up to the parallel lines even better, since you have an excellent Entry point using of course Risk Management to Limit Loss to $1000 US Dollars.

I hope to see more of your posts and your thoughts.


Benjaminis