The “Game” Explained:
On October 12, the minutes of the FOMC’s most recent meeting (on September 21) were released for scrutiny. The gist of these “deliberations” are contained in one sentence - “Policy-makers had a sense that (more) accommodation may be appropriate before long.” This is the expectation on which the world has been basing its investment decisions ever since that September 21 meeting.
The reaction to the release of these minutes was by no means confined to the US. An excellent example of this is a quote from Brazilian Finance Minister Guido Mantega. For weeks, Mr Mantega has been maintaining (quite rightly) that the world is already in a currency war. This is what he had to say about the US central bank - “The Federal Reserve is promising quantitative easing, which is monetary policy’slast resort. I don’t think it will reactivate the economy, but it will weaken the Dollar.”
This is more than “monetary policy’s last resort”. It is Ben Bernanke’s “helicopter money” scenario writ large. The US central bank proposes to use the Federal Reserve notes it creates out of thin air to “buy” the debt of the US government which the Treasury creates out of thin air. This is the last gasp of a monetary “system” which is as far from sane and historically sound money as it is possible to get. Not only is it doomed to failure, it will doom the US Dollar if it is put into practice to any substantial extent.
Since the US Dollar remains the premier global reserve currency, that will leave the rest of the world with absolutely no choice but to institute radical changes to the money which underpins everything. In the modern sense of the term, there can be no markets without a viable money. The Fed is on a path which will remove the money. The markets can only then survive with a different, and better, underpinning.