Is the end game of fractional reserve currency coming?
We kick off today with Chris Temple with a discussion on currencies and if central banks would change their ongoing narrative. While it can be hard to take any one comment at face value from central banks there are people thinking the continued rate cuts may come to an end. This would result in a continued weakening in the US dollar.
Click download link to listen on this device: Download Show
Hey guys. Any reason why gold is inversely correlated to USD/JPY ?
Stewart Thomson says: “The dollar is the world’s largest “risk-on” market, because America is the world’s largest debtor. Japan is the world’s largest creditor.”
And I agree with him.
Gold, of course, is a risk-off asset. Don’t be fooled by CNBC types.
ditto on CNBC………..
Matt i thought china is biggest creditor. Ok but specifically why is gold up when Usd/jpy is down? Should USD/JPY affect DXY index meaning being down yet DXY was up today and it’s still slightly up today. I don’t get the correlation?
has to do with the carry trade…yen up, spoos down, gold up
The reason the DXY can be up while USD/JPY is down is that the DXY (or USDX) measures the value of the US Dollar relative mostly to the euro. The difference in weighting of the two currencies in the basket of foreign currencies that the dollar is measured against is a very disproportionate 4 to 1, roughly. The euro takes over 57% of the basket while the yen occupies under 14%. So the yen can be quite strong and still not turn the DXY up is the euro is weak.
Ok thanks Jose. I assume you meant s&p with spoos. The other thing that is really hot debate is if we get deflationary event like in 2008 if gold will go up or get flushed with baby down the drain like in 2008? I really can’t find good answer to that although since 2008 i assume would be same.
Matt so essentially the reason why gold is up with USD/JPY being down is cause S&P down then correct?
I would say that the action we’re seeing in each of those assets, including the S&P, is due to the environment growing increasingly “risk-off.” Gold is the number one risk-off currency and the yen is number two.
I am still convinced that stocks are in a new cyclical bear market.
Mad Max – are you Original JJ?
You’re the only one I know that continually talks about spoos and the USD/JPY correlations effect on gold. I’ve posted a number of times about the very strong correlation between the direction of the Yen and Gold, and always think of you on those days.
Hope all is well man.
Excelsior no i’m not JJ. I’ve asked about USD/JPY first time ever so no i don’t ask that all the time. Feel free to post a link to where i asked about that in past. You won’t fine one. Feel free to correct me or post a link from past where you explain it and i’ll read it. I’m not trolling. I don’t post here very often. I did in past but i listen all the time.
Matthew knows me a bit as i argued my point with him in past and i have nothing against him.
Fwiw, I have not had the impression that you are JJ.
Mad Max, I didn’t phrase that question well and I think you misunderstood. To clarify, I wasn’t implying you posted on the Yen/Gold correlation all the time.
I was asking if you were Original JJ because HE was one of the only people that discussed spoos and often commented on the Yen to Gold correlation.
Sorry about the confusion, I was just trying to see if you were he.
P.S. – I never said anything about you trolling either. Again, sorry for the mix up, and for what it’s worth I agree about the strong Yen/Gold correlation, and have posted on it a few times myself. This was an area where Original JJ and I were usually in good agreement. Turd Fergusson also discusses the strong Yen/Gold correlation quite often.
Cheers!
5 Year chart showing the Yen and Gold plotted together. Their correlation is fairly tight over half a decade:
http://stockcharts.com/h-sc/ui?s=%24XJY&p=D&yr=5&mn=0&dy=0&id=p59468365577
Yes, Stewart’s latest article has some good points about silver, also. A couple weeks ago Craig Hemke mentioned the yen and how if it hit 116, get out of gold. Today it’s 110.34. Seems to all be coming together, no?
I forgot to provide the link:
http://www.321gold.com/editorials/thomson_s/thomson_s_040516.html
Thanks for the article form Stewart Thomson.
The dollar/yen seems to trigger algos for or against gold. Recently it appears with the dollar weakening against the yen, the manipulators had to take contrary action to keep gold capped.
Agreed David. It seems the two are linked with the Algos, like Oil and the Loonie.
The $US is up against the GBP. The ratio is the other way around.
Ok but why is gold up every time USD/JPY is down?
The Veneer of Justice in a Kingdom of Crime
Since the conversation is banks I thought this fit.
He has and presents the proof Goldman is above the law and controls the DOJ.
Its about 40 mins.
Kinda funny, they cant commit crimes, they are the law.
So we have the answer as to banks never being prosecuted.
That’s why G.S. stands for Government Sachs. Look at all the G.S. alumni in positions of power all around the world…how many central bankers…etc.
Chris the only thing wrong with your food dinner analogy is that you forgot the doggy bag.
In reality the diners took home doggy bags of cheap food, which reduced consumption in the future.
That is the point of monetary policy. Cheap money brings forward production and consumption from the future into the present, because as interest rates drop discounted cash flow does not have much discount.
Unfortunately, after years of cheap money, we are now in the future from which the consumption was moved into what is now history.
OK…doggy bag…but same outcome.
I hate to mention this………..BO mentioned QE4 , in his interview with Gregg, at usawatchdog..(no hate mail please…….. 🙂
Not sure why you would get hate mail ootb
Lots of people have been saying a QE4 for awhile now.
b……just the mention of BO………. 🙂
Tweety might get excited…….
No excitement. Just a comment on value. Don’t you think that someone charging 14,400 dollars for an annual subscription might be offering more than just the average market advice? Maybe they should at least be able to get you on the right side of golds trade as one example, not make calls that were improbable. Like 2000 gold by year end 2015?
I am not sure what was included in the annual subscription price. Therefore, I can not judge what the “value” should be. IF, it is only a “call”, then, I might have to agree, that the “charge” might seem a little high.
You get his personal phone number just for starters.
IF, we get his phone number, we can ask him for a cut to promote him……….. lol
OOTB..I happen to like BO..His optimism for the metals is refreshing after watching 4 years of pummeling..and he has been right on occasion…
Hello Gator…….glad to hear from you……..hope all is well…… J….and DITTO
Thats what I was saying yesterday Gator “Who doesnt like to hear their investments are valuable and they are smart for buying it?”
If only the people and their banksters who promised wealth without work had not hated and despised the stinky goat herder who warned them 3,500 years ago not to take usury, we wouldn’t be in this mess: ““If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest.” Exodus 22:25.
A godless people (LGBTXYZ) that hate the laws of finance and economics, NOT TO MENTION the laws of biology, shall surely perish.
gOOd input Wayne….
Dont charge interest to a person that is needy?
Well, nobody would ask if they wernt needy. So, interest is bad, no?
Isnt that what is being done to interest rates going to zero?
There’s a difference between the needy and business purposes…best analogy of the kind of revolution/enema we need is in the Book of Nehemiah. . .esp. Chapter 5 and on. Of course, Nehemiah would be charged with inciting riots/bank runs today. And Ezra would be called a “religious cult leader” — the FBI’s “Hostage Rescue Team” would put a bullet in his brain.
Well, I guess its interpretation.
I see anyone that needs to be needy.
But really my comment was more towards interest rates.
Zero rates are a contributor to the situation we are in.
You could go further and ask why not just give the funds, a needy person might not have the ability to repay anyway and as I recall, giving till it hurts was mentioned somewhere.
Lots less hassle just giving it away.
But KIVA gives no interest loans and that sure works, course they are for business.
I tried forgiving my KIVA loans at Christmas time, they wouldnt let me.
Doesnt really sound like whoever wrote that knew much about economics, which George Carlin points out pretty well.
All knowing,all powerful, but cant handle money, and always in need of a little more.
George Carlin always cracked me up.
Chris:
Your analogy of the visit to the restaurant and later being offered more for a giveaway price was very good. Very easy to understand the banks dilemma.
While taking my morning walk, I must have passed 50 houses with the garage doors up and most of them are storage units; the cars sit in the driveway. People don’t have room to store any more junk, kids toys, etc.
Doesn’t the economic term of elasticity fit in here somewhere? Thanks again.