Got a whole lot of money that’s ready to burn
So get those stakes up higher
I’m gonna keep on the run
Gonna have me some fun
If it costs me my very last dime
If I wind up broke up, well
I’ll always remember I had a swingin time
– Viva Las Vegas
The WSJ has a must read piece from the currency table, which rolls 24/7. The Journal writes,
Currency trading volume around the world has hit $4 trillion a day,…the $4 trillion mark represents a 20% gain from $3.3 trillion in 2007, the last time the global foreign-exchange markets were surveyed, according to the Bank for International Settlements.
….the continued rise in trading reflects the increased globalization of investing. With the big developed economies of the U.S., Europe and Japan struggling, investors are turning toward other markets for returns and generating more foreign-exchange trading in the process.
Now small investors are increasing their foreign-currency exposure. They are piling into mutual funds which make bets on currencies as a core part of their strategy. More broadly, U.S. stock mutual funds that invest overseas have taken in $42 billion over the past year, according to Morningstar Inc.
In addition, exchange-traded mutual funds, whose shares trade like stocks, are making the currency markets more accessible to small investors. There are now 44 currency ETFs, up from 16 in April 2007, according to Morningstar. In 2004 there was only one.
But it gets better. Can you say leverage? Can you say bubble? Boy, just looking at how currency markets are operating, all you can say is thank god for Frank/Dodd, right?
Currency trading usually involves placing bets with borrowed money. That has regulators concerned about individual investors’ ability to handle large amounts of leverage, though action has been limited so far.
On Monday, federal regulators backed off a plan to place stricter limits on how much individual investors who trade currencies can borrow.
Currently, investors can borrow $100 for every dollar they invest. The Commodity Futures Trading Commission, which regulates foreign-exchange trading in the U.S., tried to cut that amount to $10.
But after a wave of protests from brokers and individuals, it settled on $50 for every dollar invested, which is the amount of borrowing many large brokers currently allow.
No, no, baby! This place is hot! You can’t cut 100 to 1 leverage down to 10 to 1, where’s the fun in that? Hell! You can’t make shit in this stock market, even with all Ben’s pumping!
Kevin Rodgers, global head of foreign-exchange derivatives at Deutsche Bank in London, says funds of all stripes—hedge funds, mutual funds and sovereign-wealth funds—are seeing the currency markets as a distinct asset class and not just a way to make an investment priced in another currency.
Trading among “nondealers,” which includes hedge funds and mutual funds, grew 42% to $1.9 trillion per day…
So, here’s the results when the Fed and other central banks started the last bubble by inflating/deflating currency with ZIRP policies, QE, and other methods of pumping money into deflating global assets markets. They are undermining the value of money itself, and more importantly the current structure of currency markets allows them much less control than they think. The question is what happens when this bubble pops? The general answer is economic carnage, what that looks like specifically is the real question, and a money maker, that is if you can figure out how to keep it in a currency with any value.
Viva! Viva! Viva!
Cross-posted from
Archein