The Fed Wants to Unleash a BIG QE 2 Program … But CAN It?
by Phoenix Capital Research
Last Friday I wondered aloud if perhaps China and the US had struck a “backroom” deal regarding their roles in the ongoing “currency wars.”
My primary reason for wondering this stemmed from a dramatic change in Treasury Secretary Tim Geithner’s rhetoric concerning the US Dollar, combined with China’s sudden decision to raise interest rates.
After all, the US had been branding China a currency manipulator and blaming it for the former’s financial and economic woes for months. China, in turn, had responded by lowering the rate of its purchases of Treasuries, charging that the US Fed was damaging global balances and issuing veiled threats that it might consider the “nuclear” option of actively dumping US debt.
In this context, the sudden change in Geithner’s rhetoric, combined with China’s move to raise interest rates, marks a MASSIVE change in monetary posturing. It is, in a sense, a 180 on the US’s part combined with an “actions speak louder than words” move on China’s part.