A Tough Act to Follow: A Fiat Farce

by Rob Kirby, Kirby Analytics. May 15, 2006

While many of us were feasting at Mother's Day festivities, the world's fleet footed financial floozies were formulating [or perhaps fumbling, take your pick?] a fix for their fascinating fiat follies:

IMF acts to avoid markets meltdown
Heather Stewart, economics correspondent
Sunday May 14, 2006

The International Monetary Fund is in behind-the-scenes talks with the US, China and other major powers to arrange a series of top-level meetings about tackling imbalances in the global economy, as the dollar sell-off reverberates through financial markets...

Figuring financial failure would finally fester, the feted David Brown, chief European economist at Bear Stearns finally fancied,

"We are in meltdown mode."

Also known as a fiat funk:

As fans of free-falling festooned fiat, financial flunkies fashioned a fraudulent fix:

They firebombed gold futures in forty-five minutes!

...and issued more phony Figures:

MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES [TIC DATA] (in billions of dollars) HOLDINGS 1/ AT END OF PERIOD
	Mar	Feb	Jan	Dec	Nov	Oct	Sep	Aug	Jul	Jun
Country	2006	2006	2006	2005	2005	2005	2005	2005	2005	2005
Japan	640.1	658.3	654.3	671.0	668.7	667.6	673.3	670.6	669.4	667.1
China	321.4	319.8	316.7	310.9	304.0	301.7	306.3	302.2	296.4	297.9
United Kingdom 2/	179.5	162.7	157.1	146.4	135.8	100.6	96.0	87.4	73.3	58.8
Oil Exporters 3/	98.0	96.2	89.4	78.2	79.3	75.3	66.0	65.3	64.1	68.5
Korea	72.4	72.8	71.2	68.9	68.8	63.7	64.0	62.4	62.6	63.0
Taiwan	68.9	68.9	68.7	68.1	68.3	68.9	68.8	68.4	68.8	67.8
Carib Bnkng Ctrs 4/	61.7	54.4	65.4	78.6	82.7	75.0	68.3	67.5	65.1	70.9
".[more]"

Is anyone wondering, like me, where or how the U.K. is finding/funding their fortunes in fiat?

Food for thought.

Today's Market

Overseas equities began the week on a sour note with Japan's Nikkei Index losing 114 points to close at 16,486. The North American market ended the day mixed with the DOW up 47.78 to 11,428.77, the NASDAQ falling 5.30 to 2,238.50 and the S & P closed at 1,294.50 – up 3.25 on the day. NYMEX crude oil futures fell 2.63 ending the day at 69.41 per barrel.

In foreign exchange markets, the U.S. Dollar Index gained .56 to close at 84.39.

The interest rate complex saw longer dated bonds rally and the yield curve flatten somewhat, with the benchmark 2-year bond ending the day +.02 to 4.98%, the 5-year +.04 to 5.04% and the 10-year +.04 to 5.15%.

Precious metals were walloped hard with COMEX gold futures plunging 26.90 to 684.60 per ounce while COMEX silver futures dropped .89 to 13.42 per ounce. The XAU was hammered for 9.76 points closing at 149.65 while the HUI fell 25.33 – ending the day at 343.27.

On tap for tomorrow, at 8:30 a.m. April PPI data is due; headline expected +.9% vs. prior +.5%. Core expected +.2 vs. prior +.1%. Also at 8:30 a.m., April Housing Starts – expected 1980K vs. prior 1960K and Building Permits – expected 2050K vs. prior 2094K. And at 8:30 a.m. – May N.Y. Empire State Index data is due – prior 15.8 reported. At 9:15 a.m., April Capacity Utilization is due – expected 81.4% vs. prior 81.3% and also at 9:15 a.m., April Industrial Production – expected +.3% vs. prior +.6%.

Wishing you all a pleasant evening and reminding everyone to be careful out there - it’s a jungle!

Rob Kirby

© 2006 Rob Kirby

Contact Information

Rob Kirby | Proprietor, Kirby Analytics Newsletter - Proprietary Macroeconomic Research
Toronto, Ontario, Canada | Observations | FSU Editorials | E-mail