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Thursday, September 22, 2011

Dark Clouds

Despite the announcement by the Fed of Operation Twist, where it will buy $400BN in 6-year to 30-year Treasurys by June 2012 and over the same period sell $400BN of Treasurys maturing in 3 years or less, markets are in free fall.

For why?

The inclusion of more 30-year bonds than expected means that the Fed wants to keep very long-term rates lower for a long period. This means that the Fed views America's economic problems as being long term (they rubbed salt into the wounds by stating that the economy has "significant downside risks").

Aside from American economic woes, the shambles that is the Eurozone continues to sap the global economy.

Chris Williamson, chief economist at PMI compiler Markit, summed up the reality:

"The recovery has finished, we are now contracting. 

The forward looking indicators suggest that things will deteriorate further in the coming months."

Meanwhile, has anyone seen the Greek Prime Minister George Papandreou since he abruptly turned his plane around mid air and aborted his trip to the USA?

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