Macro Economics
A Hidden Ship Passing

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By qazulight
January 16, 2009

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I have been watching the dollar and the bond market with complete fascination. It is so fascinating because they are doing exactly opposite of what they should be doing, in theory at least.

You know, down here on the coast, we have a lot of water, it is shallow, but there a channels deep enough to float large ships. Now my experience with water is that it is level, it stays at the same height all the time. If the tide comes in, it comes in everywhere, and when it goes out, it goes out everywhere. The water, like everything else on the Gulf coast moves pretty slow.

With this in mind, if a boat passes down a ship channel one could reasonably expect that the only rise and fall of the water would be the wake of the boat. However, when a ship passes down the ship channel strange things start happening.

One day I was working on the Witch Queen, a 300 foot dive support vessel, we had set some equipment on the deck, but it was still connected to the dock. So, when the ship rose and fell the equipment would slide across the deck to a position further from the dock or closer to it, depending on the level of the water in the ship channel.

Barges with their tows passed up and down the channel, the wake did not even rock the Witch Queen. Then a large tanker came by. It was strange, because before it arrived the Witch Queen started rising and the equipment started sliding across the deck away from the dock. I needed to get between the equipment and the dock to free some lines so that they would not break in this unusual event. About the time I was completely between the equipment and the dock, the tanker came even with the Witch Queen, and as it passed the water level at the dock started falling, and falling quickly. The equipment started sliding back across the deck getting closer and closer to the dock, people were yelling for me to get out, move, climb, do something, because it appeared that I was about to be crushed. In fact, I thought I was about to be crushed because I could not get past the web of lines and pipes to move out of the way. I backed up against the ships railing and sucked in my gut, the equipment slid up to my toes, and the water level stopped falling. I did not even receive a scratch. After just a little while everything returned to normal.

I suspect that there is a hidden ship passing through the channel of our currency and bond markets, it is the unregulated and private hedge funds unwinding their positions. It seems that these funds are like the tanker, pushing an unseen bulge of water in front of them and creating an unseen dip in the water behind them.

In this brief time where the normal rules do not apply, it is important that we do not let ourselves be drawn into a position where we can be crushed.