US$ Carry Trade DONE

The US$ carry trade is about to get jacked. With the Fed draining liquidity and tightening, this is no time to be betting against the US$ relative to other currencies and many commodities.

It appears to me that the FED just blinked at the threat of the international bond market. It also appears that the administration is getting religion, too.

One can only hope.

This could get very painful for the American people, but it beats the h*ll out of a full scale collapse and anarchy. Still, I doubt this administration and this Congress as the Chutzpah for what needs to be done.

BTW, anybody who thinks the Fed tightened because they see inflation, or an uptick in economic output, is on powerful narcotics (though you will hear it, and often, by the cerebrally challenged nit-wits in the Media). The Fed raised the discount rate, and perhaps soon the Fed Funds rate IN ORDER TO SAVE THE MONEY MARKET SYSTEM. With rates at zero, money market funds were closing, falling like Iguanas in the recent Florida Freeze. Who the hell wants to manage TRILLIONS of $$$ only to lose 15 basis points per year because rates are ZERO? Not me. The Fed recognized, and rightly so, that a 25 bps hike will save the money markets, a desperately needed function in our system, while not really harming borrowing.

Simple like that.

My bet is, you won't be seeing any more hikes (other than the coming 25bps hike in the Fed Funds to compliment the hike in the Discount Rate) any time this year or next (or the year after).