In today’s podcast at 11AM Eastern,
Inflation Fuels Record Central Bank Debt Sale: Argentina Credit
Argentina’s central bank is selling a record amount of notes linked to deposit rates to curb money supply growth and inflation.
The central bank sold this week 2.2 billion pesos ($555.5 million) of nobacs, the most since the auctions began in April 2005. The securities pay 250 basis points, or 2.5 percentage points, more than the 10.88 percent badlar rate. Six-month futures show the rate will climb to 12 percent, compared with a one-month London interbank offered rate of 0.25 percent.
Meanwhile, in the USA, Here’s Why QE2 Could Threaten The Dollar’s Status As The Global Reserve Currency
With QE2, the Fed will buy $600 billion worth of longer term treasuries (and will “reinvest” another $300 billion of revenues from the previous QE1). The only plausible scenario in which this can prove useful is by “beggaring thy neighbor”. Bernanke has talked openly of his desire to raise inflation expectations, and that in combination with lowering interest rates could make America a less attractive investment option. If so, the dollar could depreciate, increasing US competitiveness in traded goods and services. This could boost exports and depress imports.
The QE2 is “quantitative easing”, that is, the the Fed’s move to buy an additional $600 billion in government securities which will flood the economy with more printed money. Enter the era of dollar devaluation.