Guest Post: Is A Currency War Coming?

Tyler Durden's picture Submitted by Tyler Durden on 10/08/2010 15:47 -0500

Bank of JapanBrazilCentral BanksDominique Strauss-KahnFederal ReserveGlobal EconomyGuest PostInternational Monetary FundJapanQuantitative EasingrecoveryTimothy GeithnerTrade WarWorld BankWorld TradeYuan

Submitted by Kurt Brouwer of Fundmastery

Is a currency war coming?

I have made it clear that I believe the U.S. Treasury wants a weaker dollar.  For more on that, see U.S. Treasury seeks weaker dollar.  In addition to the post itself, the comment string is very interesting and worth reading.

For different reasons, the Federal Reserve and the Bank of Japan are trying to weaken their respective currencies.  China is allowing its currency, the yuan, to strengthen, but not quickly enough for the U.S.

In addition to this potential currency manipulation, we have the Bank of Japan and The Federal Reserve engaging in economic stimulus programs called quantitative easing, which is a new way to debase currency through the digital printing of money.

A central bank two-fer

This amounts to a two-fer for central banks in that they can accomplish two seemingly diverse tasks. It reminds me of an old spoof television commercial showing a couple fighting over whether a product was a floor wax or a dessert topping–”It’s a stimulus program.  No, it’s currency manipulation.  No kids, it’s both.”

By printing more money, central banks (U.S. and Japan) hope to stimulate moribund economies and this manipulation has the salutary effect of also weakening the currency such that exports are enhanced.  Nice.

This MarketWatch.com piece features the thoughts of the International Monetary Fund (IMF) on the current state of play in foreign exchange:

Cooperation on the global economy is “decreasing,” the head of the International Monetary Fund said Thursday, warning countries about the risks of a so-called currency war. Momentum to cooperate on economic policies is “not vanishing but decreasing,” IMF managing director Dominique Strauss-Kahn told reporters ahead of the annual meetings of the IMF and World Bank. He said that falling cooperation is a threat, because “there’s no domestic or national solution to [a] global problem.”

Strauss-Kahn added that some countries consider their currency a “weapon,” and that the “currency war” being talked about by many is a negative thing.

As of yet, we are not in a currency was, but it appears to me that some folks — Treasury Secretary Geithner being one — are itching for a fight.  Congress has also gotten into the act.  This might make sense in a different economic environment, but it is very foolish now.  We really do not need a currency war now and we really do not need further politically-inspired trade restrictions.  Either or both are likely to make our economy worse.

MarketWatch.com continues:

Strauss-Kahn spoke to reporters a day after U.S. Treasury Secretary Timothy Geithner effectively blamed China for stoking a currency war.

“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same, and this sets off a dangerous dynamic,” Geithner said in a speech in Washington. Read MarketWatch’s coverage of the IMF and World Bank meetings.

World Bank President Robert Zoellick echoed Strauss-Kahn’s comments on Thursday, cautioning that currency tensions could undermine the global economic recovery…

Essentially, Giethner is telling China to go along with our program or else.  Anyone, who understands the history of China and of world trade would have to at least admit the possibility that problems will ensue from such a hard line stance.

In a separate MarketWatch.com piece, we see additional information on what is now underway [emphasis added]:

…Brazilian finance minister Guido Mantega said a currency war has broken out, and the head of the IMF, Dominique Strauss-Kahn, warned of the risk of one if governments try to use exchange rates to solve domestic problems.

“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” Strauss-Kahn said in a Financial Times interview.

Geithner and other developed country officials say the fast-growing, reserve-rich emerging market economies need to let their currencies strengthen but the leading emerging nation, China, has by and large resisted efforts to allow its currency to strengthen. (Brazil too has put up barriers.) In late June, China took steps to allow more movement in its currency, the yuan, but the currency has only appreciated about 2% vs. the dollar since then…

The yuan has appreciated 2% since June against the dollar, but that is not enough for some.  As you could see from the comments thread on the post I mentioned in the first paragraph, there are different points of view on this issue.

However, I would hope that our central banks stop short of actually inciting a currency war, which would almost certainly escalate into a trade war.

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by bugs_
on Fri, 10/08/2010 – 15:54
#636585

It looks like World War Three (and a half)

Login or register to post comments by Popo
on Sat, 10/09/2010 – 09:22
#637704

Is a currency war coming?

Last January just called and wants it’s story back.

Login or register to post comments by suckapump
on Sat, 10/09/2010 – 10:30
#637805

“It’s a stimulus program. No, it’s currency manipulation. No kids, it’s both.”

Well, sort of. It’s currency manipulation and an “involuntary concentration of wealth” (i.e., theft of citizens’ savings) disguised as a stimulus program.

WWIII might very well (literally) be on our own turf.

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 15:57
#636593

This is a socially engineered IMF agenda. I say, bring it on.

Login or register to post comments by Myzery
on Fri, 10/08/2010 – 19:37
#636977

Pretty much.

 

1 IMF to rule them all.

 

I don’t think TPTB in America want this NECESSARILY to happen, they just have no alternative. They’ll still be given a pretty nice seat.

 

Who knows, the FED might look papable by comparison to the IMF.

 

We need a consitutional amendment to get our 8000 tons of gold back before the treasury uses it to ‘settle.’

 

 

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 19:53
#637002

That indeed is the game play. The Marxist want us to revolt & comply with new system.

Bottom line, we can cancel out the FED by a pen stroke. Re-coin currency without the FED or IMF intervention.

We have US military toys in the air. Turning cities into glass is passé.

Login or register to post comments by Oracle of Kypseli
on Fri, 10/08/2010 – 16:26
#636599

Watch the yen pop to 84-85 level by Tuesday. You heard it here first

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:11
#637033

i’ll be watchin’.  i’ll also be watchin’ “corn poppin’.”  never told my Corn Pop story, did I?  Trust me…it’s a good one.

Login or register to post comments by Rasna
on Fri, 10/08/2010 – 16:35
#636607

The poster appears to be late to the game…

“Is a currency war coming?”, HUH??? We are engaged in a full fledged currency war taling place right now.

The Treasury/Fed DOES indeed want a weaker dollar.

 

What’s next?

Login or register to post comments by SWRichmond
on Fri, 10/08/2010 – 17:05
#636702

+1.  The war is merely undeclared.  The amount of paper you can buy with gold tells the story.

Login or register to post comments by cossack55
on Fri, 10/08/2010 – 18:11
#636754

I think our last “Declared” war was in 1941.  Huh? That was also the last one we won, and obtained the Black Eagle Fund.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:18
#637047

wait a minute here.  “Show me the money.”  We still have a war going on–undeclared against Pakistan when last I checked. That is a real war.  They are a nuclear power with nuclear weapons by the way. There is nothing that prevents Ben Bernanke from raising rates, too.  It’s been done before.  I must say I find the concept of an “atomizer” very disturbing as well.

Login or register to post comments by hugolp
on Fri, 10/08/2010 – 16:37
#636620

Coming? Its already here.

Login or register to post comments by PeterB
on Fri, 10/08/2010 – 16:43
#636641

The FED is nothing more than a synthetic debt pusher. Let’s see if they eventually accept repayment by credit card or real future labour hours i.e. physical dollars.

Login or register to post comments by downrodeo
on Fri, 10/08/2010 – 16:44
#636644

OMFG, gold just flatlined

 

http://www.kitco.com/charts/livegold.html

 

is everybody okay?

Login or register to post comments by RobD
on Fri, 10/08/2010 – 16:53
#636668

I was wondering about that, did the traders take off early for a long weekend or something?

Login or register to post comments by downrodeo
on Fri, 10/08/2010 – 16:57
#636675

I check this often. I’ve never seen the flatline last this long before. Somebody is asleep at the wheel, lol

Login or register to post comments by Myzery
on Fri, 10/08/2010 – 19:38
#636982

Are you kidding me?

It’s a 3-day weekend.

‘They’ set the PM fix that morning.

 

Login or register to post comments by groucho_marxist
on Fri, 10/08/2010 – 16:55
#636672

looking at the linked chart, this is the third day in a row its happened: is this indicative of some pattern happening at the close of NYGlobex, or a software glitch in the chart?

Login or register to post comments by Caviar Emptor
on Fri, 10/08/2010 – 16:59
#636686

We’re in a confirmed, early currency war because there already are countries that perceive themselves as “winners” and “losers”. Japan’s stock market plunged this week over concerns about the flying Yen. South Korea and Brazil are fighting the Fed’s dollar devaluation policy. 

But that is the least sinister of what’s really happening. The stakes are really, really big. 

At the very least, this outbreak will force a reaction by global financial oversight organizations. That is IF they can all agree and IF members actually comply. Those who view themselves as winners will have to restrain themselves and the losers will have to undergo pain. What are the chances of that?

Login or register to post comments by scaleindependent
on Fri, 10/08/2010 – 17:01
#636691

I need help.

 

If everyone knows the US is trying to get out of this mess by monetizing, then why the hell is China going along with it. I mean, in a couple weeks the Fed will own more UST than China.

What is their game plan?

Hopium? Do they have an exit plan?

I sincerely do not get it.

Login or register to post comments by Caviar Emptor
on Fri, 10/08/2010 – 17:05
#636701

I’ve said it before: no, there is no plan. Just feed the smack errr liquidity addiction over and over, on call 24/7 if needed and just hope for the best. Yeah right. Like it really helped Japan’s economy. Guess they’re still in the “Reagan proved that deficits don’t matter” fantasy that ‘s quickly becoming a spooky carnival gone bad.

Login or register to post comments by scaleindependent
on Fri, 10/08/2010 – 17:13
#636719

Correct, but China must know that all of their nation’s hard work and savings will evaporate as per the machinations of a madman.

In the 70’s-80’s, when Japan realized the US was inflating, it required that future loans to the US be paid back in Japanese currency.

 

Login or register to post comments by Scarlo
on Fri, 10/08/2010 – 17:23
#636742

Of course they know. What are they to do with such a surplus though? They can plow megatons more into their own economy, threatening to create huge bubbles (check), they can start currency exchange programs with other nations (check), they can start stockpiling natural resources (check). The realize of course that they’ve been hornswaggled, but they’ve also benefitted from this in a huge way. Who’s in a better position than they were 20 years ago, the US or China? Um, China! Who’s relatively a lot worse off? U.S.!

So now China wakes up, smells the roast is fresh, and starts their own gold exchange so they can create a liquid market on their own soil. The lockdown resources flowing out, continue to import them, and work their way slowly towards using all their surpluses to acquire hard and/or productive assets. This is already obviously underway.

Login or register to post comments by scaleindependent
on Fri, 10/08/2010 – 17:28
#636762

Thanks,

 

but if and when inflation and monetization  really takes off, then I’d think they would try to put a stop to it.

The best time to sell UST is with QE2, as the Fed artificially lowers yields.

Sell into strength

Login or register to post comments by kaiserhoff
on Fri, 10/08/2010 – 17:37
#636774

That’s sure as hell what I would do.  Last best chance. 

This could get entertaining.

 

Login or register to post comments by PhattyBuoy
on Fri, 10/08/2010 – 17:24
#636747

Dow 11K …

J6pK is relishing the moment, and will go buy a new flat panel this weekend …

JIT for the elections !

Login or register to post comments by goldsaver
on Fri, 10/08/2010 – 20:23
#637024

Have you seen the movie “Rollover”? In this movie, the Arabs had billions of dollars in US banks but recognized the risk to their future. They began secretly, with the cooperation of a US bank, moving their dollars to gold a few hundred million at a time. The gig was up when they panicked and demanded all their dollars from all US banks causing a bankrun and the destruction of international currencies. At that point they didnt care anymore. To quote the lead Arab: “It is the end of the world as you know it!.

The Chinese have been positioning for a few years now selling the products of their slave labor in the US for dollars and using those dollars to purchase hard assets (gold, silver, mines, oil, lumber and steel) They keep their reserves as a weapon of mass destruction. When they feel it is strategically advantageous they will sell their bonds and crash the US dollar. They will emerge on the other side as the sole super power without firing a shot and at a profit to boot. Not hard to understand.

“The supreme art of war is to subdue the enemy without fighting”

 

Login or register to post comments by trav7777
on Fri, 10/08/2010 – 22:15
#637223

Total fucking nonsense.

You guys don’t understand the reality of China’s forex reserves and why they had to accumulate them.

China has nowhere to dump their bonds to.

Look what part of China buying the fucking yen and Brazil buying the dollar don’t you get?

Login or register to post comments by Keri at Bankste…
on Sat, 10/09/2010 – 04:57
#637464

Can you explain this more?

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:28
#637059

this is a very interesting question.  you’re getting into the subject of “ChiAmerica”–and I am recommending the book.  I would argue “you have inflation, you have deflation and you have starvation.”  If you think feeding farmers is hard–try and feed people in a city.  The largest cities in the world are all in mainland China and they are growing rapidly–hence their “close cooperation with commodity producing nations and certain American Senators save for Chuck Shumer.”  There is of course the interesting question about whether “we in the USA need the food, too.”  Maybe that explains my humor:  I’m living in the USA and I’m going hungry. 

Login or register to post comments by AnAnonymous
on Sat, 10/09/2010 – 02:19
#637427

The largest cities in the world are all in mainland China and they are growing rapidly

 

Sure, buddy. The largest city in the world is by far Tokyo in Japan and it will take long for a Chinese city to catch up.

China has a long tradition of controlling internal migration, dating way before the Europeans came to instill communism.

Chinese cities are not among the largest cities in the world (top ten at least) You can find cities bigger on every other continent.

Login or register to post comments by TGR
on Sat, 10/09/2010 – 05:12
#637469

What are you talking about? Population of Tokyo is approx 13m, population of Beijing about 22m, Shanghai 20m…not being picky just pointing out facts.

Login or register to post comments by AnAnonymous
on Sat, 10/09/2010 – 05:40
#637473

Tokyo is around 30 M and Beijing around 10 M.

Still a long road to go.

Login or register to post comments by Gloomy
on Fri, 10/08/2010 – 17:18
#636731

Currency Wars To Be Feared—Not Celebrated

 

By Comstock Partners

On Tuesday the market soared on the grounds that global efforts to engage in another round of monetary ease and devalue currencies would boost economies around the world. We think that the market’s initial reaction is a wrong-footed move that will soon be reversed upon further reflection. What we are actually facing is an all-out global currency war and old-fashioned “beggar-thy-neighbor” policies where every nation tries to devalue its currency to create more exports in order to boost its economy at the expense of every other nation.

It is obvious, however, that it is impossible for all currencies to decline in relation to each other. The failure then leads to other desperate measures to increase protectionist barriers such as higher tariffs, quotas and various restrictions on international capital flows. The result is a collapse of world trade leading to depression and the dreaded deflation that nations are trying to avoid in the first place.

As such, the recent actions of Japan, the anticipated start of QE2 by the U.S. and general global currency devaluation moves are something to be feared rather than celebrated. We know because we’ve been there before and know how it all ends. (See the Great Depression, competitive devaluations and Smoot-Hawley tariffs.)

The currency wars started slowly, but have recently been stepped up. Don’t be fooled into thinking that this is merely further monetary easing. The world has already undergone the most massive round of easing in history and we are facing a liquidity trap where further easing will have minimal effect. The real goal of various nations is to devalue. The Fed has indicated its intention to institute QE2, and, in anticipation, Japan has announced its own quantitative easing program to protect any additional rise in the Yen. The U.S. has stepped up its pressure on China to let the Yuan rise by a significant amount. The House has passed legislation allowing economic sanctions on China and other countries that are manipulating their currencies to gain trade advantages. China is vigorously resisting the pressure out of fear that a substantially higher Yuan would slash exports, leading to domestic unemployment and social unrest that would threaten the regime.

Other nations that have engaged in various forms of quantitative easing are Brazil, South Korea, Taiwan, Peru, Argentina and Switzerland. The Brazilian Real has already appreciated 25% against the dollar this year, and the Brazilian Finance Minister has stated his willingness to buy unlimited amounts of Dollars. In just a small sign of what’s to come, Brazil has also implemented a 2% tax on financial transactions to slow down the amount of “hot” money coming into the country. Meanwhile the ECB is one of the few areas trying to actually withdraw its post-crisis support of the banking system, and also has no plans to reduce its 1% refinancing rate any further. However, the Euro has increased 17% against the Dollar and 7% against an average of its major trading partners. This could impact EU growth rates in the period ahead and also put even more pressure on the already fragile economies of their peripheral nations such as Greece, Portugal, Ireland and Spain.

The IMF and World Bank are meeting this weekend, and these issues are obviously on the agenda. Leaders of both organizations have warned that a currency war could destabilize global financial markets. World Bank President Robert Zoellick stated that tensions over currencies could undermine investor confidence at a time when the world needs the private sector to boost growth. We doubt, though, that anything of real significance will come out of the meeting other than a general statement of good intentions. What we fear is that every nation will be bound so much by its own domestic political considerations that compromise will prove to be too difficult. What we hope is that we are not on the same path that led to the Great Depression.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:35
#637069

remember “this is America’s currency war.”  As the global reserve currency–eh, okay.  I mean you’re girlfriend telling you “you better holster that thing cowboy” might be in order.  Having said that “refusing to cooperate at the IMF” I would not advise.  A “discussion” is definitely in order.  We as Americans should be good listeners because “we may have first dibs on the IMF bailout and World Bank public work loans.”

Login or register to post comments by goldmiddelfinger
on Fri, 10/08/2010 – 17:26
#636753
Evening Jewel, Check The Label Top Queen Elizabeth II Challenge Cup Invitations

 

Evening Jewel, winner of this spring’s Central Bank Ashland (G1) and undefeated in three starts on the grass, and Check the Label, winner of this spring’s Appalachian (G3) here, top a list of 10 3-year-old fillies issued invitations to next Saturday’s 27th running of the $400,000 Queen Elizabeth II Challenge Cup (G1) at 1 1/8 miles on the Keeneland turf course.

Login or register to post comments by Buttcathead
on Fri, 10/08/2010 – 17:27
#636760

I aint paying my house note but I am buying stocks.  I am gunna be rich.

Login or register to post comments by goldmiddelfinger
on Fri, 10/08/2010 – 17:38
#636779

Silver Medallion in the 9th at Keeneland tommorrow but only at 15-1 or better

Login or register to post comments by squidward
on Fri, 10/08/2010 – 17:37
#636775

Don’t hate the player hate the game.  China is acting rationally in our messed up Bretton Woods system.  Why wouldn’t they act in their best interest.   It’s not like we don’t exploit printing the worlds reserve currency. 

Scapegoating is the lowest common denominator in dealing with a crisis. 

Login or register to post comments by NoVolumeMeltup
on Fri, 10/08/2010 – 17:55
#636813

Yes, but our shitty politicians aren’t about to point the finger at themselves (where a fair portion of the blame rightfully resides), so I’m afraid you’ll see more bashing to come.

Login or register to post comments by trav7777
on Fri, 10/08/2010 – 22:23
#637233

will you people stop acting like a currency manipulator ponzi protectionist nation like China is a victim?

They have bought dollars for DECADES to keep the yuan artificially weak.  THEY have abused the dollar as much as anyone.  Our debt grew THEIR ECONOMY.

Login or register to post comments by three chord sloth
on Fri, 10/08/2010 – 22:47
#637254

Thank you.

Login or register to post comments by AnAnonymous
on Sat, 10/09/2010 – 02:24
#637432

There is always a competitive edge difference between somebody implementing the rules of the game for its one benefits and other people managing to find holes to draw benefits for themselves.

It is impossible for China and any other countries in the world to abuse the USD as the US can and has.

That equalitarian in crime mindset is typical of US citizens.

Yet people living off junk and people releasing the junk are always two different sets of people. 

 

Login or register to post comments by Gloomy
on Fri, 10/08/2010 – 17:51
#636808

Wanted: Chinese Leadership on Currencies

 

George Soros

WASHINGTON, DC – I share the growing concern around the world about the misalignment of currencies. Brazil’s finance minister speaks of a latent currency war, and he is not far off the mark: it is in the currency markets that different economic policies and different economic and political systems interact and clash.

The prevailing exchange-rate system is lopsided. China has essentially pegged its currency to the dollar, while most other currencies fluctuate more or less freely. China has a two-tier system in which the capital account is strictly controlled; most other currencies don’t distinguish between current and capital accounts. This makes the renminbi chronically undervalued and assures China of a persistent large trade surplus.

Most importantly, this arrangement allows the Chinese government to skim off a significant slice from the value of Chinese exports without interfering with the incentives that make people work so hard and make their labor so productive. It has the same effect as taxation, but it works much better.

This secret of China’s success gives the country the upper hand in its dealings with other countries, because the government has discretion over the use of the surplus. And it has protected China from the financial crisis, which shook the developed world to its core. For China, the crisis was an extraneous event that was experienced mainly as a temporary decline in exports.

It is no exaggeration to say that since the financial crisis, China has been in the driver’s seat of the world economy. Its currency moves have had a decisive influence on exchange rates.

Earlier this year, when the euro got into trouble, China adopted a wait-and-see policy. Its absence as a buyer contributed to the euro’s decline. When the euro fell to $1.20, China finally stepped in to preserve the euro as an international currency. Chinese buying reversed the euro’s decline.

More recently, when the United States Congress threatened legislation against Chinese currency manipulation, China allowed the renminbi to appreciate against the dollar by a couple of percentage points. Yet the rise in the euro, yen, and other currencies compensated for the fall in the dollar, preserving China’s advantage.

China’s dominant position is now endangered by both external and internal factors. The impending global slowdown has intensified protectionist pressures. Countries such as Japan, South Korea, and Brazil are intervening unilaterally in currency markets. If they start imitating China by imposing restrictions on capital transfers, China will lose some of its current advantages. Moreover, global currency markets would be disrupted, and the global economy would deteriorate.

China expert Michael Pettis has shown that consumption as a percentage of Chinese GDP has fallen from an already low 46% in 2000 to 35.6% in 2009. Additional investments in capital goods offer very low returns. From now on, consumption must grow much faster than GDP.

External considerations, too, cry out for allowing the renminbi to appreciate. But currency adjustments must be part of an internationally coordinated plan to reduce global imbalances.

The imbalances in the US are the mirror image of China’s. Whereas China is threatened by inflation, the US faces the risk of deflation. At nearly 70% of GDP, consumption in the US is too high. The US needs fiscal stimulus to enhance competitiveness, rather than so-called “quantitative easing” in monetary policy, which puts upward pressure on all currencies other than the renminbi.

The US also needs the renminbi to rise in order to reduce the trade deficit and alleviate the burden of accumulated debt. China, in turn, could accept a stronger renminbi and a lower overall growth rate as long as the share of consumption in its economy was rising and the improvement in living standards continued. The public in China would be satisfied; only exporters would suffer, and the surplus accruing to the Chinese government would diminish. A large appreciation would be disastrous, as Premier Wen Jiabao says, but 10% a year should be tolerable.

Since the Chinese government is the direct beneficiary of the currency surplus, it would need to have remarkable foresight to accept this diminution in its power and recognize the advantages of coordinating its economic policies with the rest of the world. China’s leaders need to recognize that their country cannot continue rising without paying more attention to the interests of its trading partners.

Only China is in a position to initiate a process of international cooperation, because it can offer the enticement of renminbi appreciation. China has already developed an elaborate mechanism for building consensus at home. Now it must go a step further and engage in consensus-building internationally. The reward would be acceptance by the rest of the world of China’s rise.

Whether it recognizes it or not, China has emerged as a world leader. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the world economy with it. Either way, the Chinese trade surplus is bound to shrink, but it would be much better for China if that happened as a result of rising living standards rather than global economic decline.

The chances of a positive outcome are not good, yet we must strive for it, because, in the absence of international cooperation, the world is headed for a period of great turbulence and disruption.

Login or register to post comments by Gloomy
on Fri, 10/08/2010 – 17:58
#636818

Key statements:

1.”The impending global slowdown has intensified protectionist pressures.” i.e., yes, a double dip recession is coming. 

2. “Whether it recognizes it or not, China has emerged as a world leader. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the world economy with it.” What is the chance China would do anything to weaken its position-zilch. i.e., all hell is going to break loose.

Login or register to post comments by StarvingLion
on Fri, 10/08/2010 – 19:22
#636957

China has emerged as a world leader.

Leader in what, shipping bicycles to the western world?  EROI (Energy Return on Investment) is the only thing that matters and they have no solutions to prevent that from dropping further.  The Limits-to-Growth computer models have been accurate so far and bulldozing the suburbs to create ObamaPlantation aint gonna prevent a population die-off.

Login or register to post comments by goldsaver
on Fri, 10/08/2010 – 20:18
#637044

Do you truly believe they care if a few hundred million peasants die in the transition period? It would actually help them become stronger. Once they destroy the US market and arise as the world’s only super power, the Europeans will be groveling at their feet.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:42
#637078

peasants?  no.  knowledge workers in Shanghai.  Yeeeeeessssss they do.

Login or register to post comments by RockyRacoon
on Fri, 10/08/2010 – 22:15
#637222

So, our elite class is bankers and their lackey politicians.  China’s elites are educated people who can actually produce something.  Let’s change the word from “elite” to coddled class. Somehow there is a dichotomy that will be difficult to balance.   We have a nation indebted to the hilt and they have the hand on that throttle.

Login or register to post comments by trav7777
on Fri, 10/08/2010 – 22:27
#637238

Sorass is categorically correct.

CHINA has abused the BW system to the detriment of the ENTIRE globe.  THEY and their incessant need for ponzi growth are at the CENTER of this.  THEY are the nation that invested in dramatic overcapacity…in everything.

This is all that superior chinese GO thinking bullshit huh?  They can’t permit their export ponzi to normalize because the CCP’s gravy train might end.

Login or register to post comments by AnAnonymous
on Sat, 10/09/2010 – 02:26
#637433

The US has  not abused the BW system? How so?

Best denial comment so far.

Login or register to post comments by SWRichmond
on Sat, 10/09/2010 – 08:25
#637535

Sorry Trav. Most of the interactions that we have with others on the planet are economic.  The ability to manipulate the value of “money” is the ability to control life itself.  The whole fiat regime of central bank manipulated currencies is corrupt and unjustifiable.  China has simply used a Western-imposed phony system to beat the West.  And now western bankers cry “Hey! You’re a currency manipulator!”  It’s complete crap.  The problem is not China.  The problem is the existence of central banks and people clinging to the notion of a currency board of wise men deciding who wins and who loses.

Login or register to post comments by gwar5
on Fri, 10/08/2010 – 18:23
#636869

The Fed should buy the gold still on the books at $42/oz in the Treas which will back the dollar and raise the price of gold to around $8200./oz and puts all currencies on de facto gold standard again.

There, that should do it (hey, not me, that’s Rickards and others now repeatedly saying that)

Login or register to post comments by masterinchancery
on Fri, 10/08/2010 – 19:33
#636971

I recommend $20000/oz, better safe than sorry.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:43
#637079

like I said “we’re not even in Woodrow Wilson territory yet.”

Login or register to post comments by MacedonianGlory
on Fri, 10/08/2010 – 18:28
#636880

It’s a multi-leveled power game beyond reason

What is coming is beyond imagination

Login or register to post comments by zen0
on Fri, 10/08/2010 – 18:47
#636910

A good summary of all of known history. Well done.

Login or register to post comments by Silversinner
on Fri, 10/08/2010 – 19:21
#636954

Only see one currency war between paper digital currency and good old gold

guess who wil win??

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 19:24
#636961

FIAT EMPIRE – Why the Federal Reserve Violates the U.S. Constitutionhttp://video.google.com/videoplay?docid=5232639329002339531&total=100&start#

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:44
#637083

and much more.  I look forward to Ben dressing in drag and “steppin’ out.”  He’s such a baddddy.

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 19:30
#636967

McDonough: The Importance of Central Bank Independence in Achieving Price Stability

July 2, 2002 

http://www.ny.frb.org/newsevents/speeches/2002/mcd020702.html

 

What has changed?

Login or register to post comments by Poofter Priest
on Fri, 10/08/2010 – 19:35
#636975

I mentioned this [quietly] last week.

 

I think we started a currency war in 2000. That is when Greenspan suddenly started taking up residency on Capitol Hill. More than ever in his tenure or more than any other chairman in the history of the FED.

I believe we ran over two decades trying to get China to let their currency float free and they refused.

I think in 1999 they decided to take it downtown.

Look at it. Way back in the early 80s many people were warning about China’s potential. And I read one thesis that easily pointed out the risk to global trade if a large trade imbalance between China and the U.S. went too far or too long.

I don’t think Greenspan is stupid. I don’t think Bernanke is stupid. I think they wanted to devalue the buck to force China’s hand. The best way (and most covert in a psy ops manner) was to pump excess money into the economy.

I’ve seen all sorts of credible actions that would support this theory.

You CAN predict a bubble if you are the one pumping money into [it]

This article is a wake up call 10 years late.

Login or register to post comments by sweet ebony diamond
on Sat, 10/09/2010 – 00:15
#637340

If this is true, it is the stupidest plan ever. These Central Bankers have way over-reached.

Login or register to post comments by Poofter Priest
on Sat, 10/09/2010 – 12:43
#638029

This would beg the question why is it “stupid”?

[If] the theory is valid, now else would they be able to fight the ongoing artificial devaluation of a powerhouse economy?

I’m trying to find holes in this theory and as of yet there has been no actual argument against it.

Login or register to post comments by Silversinner
on Fri, 10/08/2010 – 19:40
#636984

just about 1 in 100 have real gold

only 1 in 10.000 are all in,we will be the ones who will gain

most purchasing power.Our anchisters would have figgerd this

out allready much faster then most of us!!When banks starts

collepsing change your paper promisis for real money(gold and silver)

It is really that simpel.Even a morron like me knows this.

Good luck

Login or register to post comments by wgpitts
on Fri, 10/08/2010 – 19:51
#636988

If the Chinese and Japanese want to see a flight to safety and appreciation in the dollar – just sell off $100 billion of equities – and if that doesn’t work sell $100 billion more and if that doesn’t work, sell $100 Billion more until Uncle Ben says Uncle….

“On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two.” – Rep. Kanjorski

Rep. Kanjorski: $550 Billion Disappeared in “Electronic Run On the Banks”
http://www.youtube.com/watch?v=-5HOscRbNwM

 

Login or register to post comments by Poofter Priest
on Fri, 10/08/2010 – 20:17
#637043

How would selling off the all the equities appreciate the dollar???

I’m assuming you are talking about the U.S. equities right?

That would flood the market and drive the dollar lower.

Login or register to post comments by wgpitts
on Fri, 10/08/2010 – 22:53
#637262

I was thinking we may see some headlines like this:

ETF Trends: U.S. Dollar Attracts Flight to Safety Capital

http://seekingalpha.com/article/152400-etf-trends-u-s-dollar-attracts-flight-to-safety-capital

Dollar gains as AIG news sparks flight to safety

http://www.reuters.com/article/idUSL219250520090302

Dollar rallies on flight to safety

http://money.cnn.com/2009/03/09/markets/dollar/index.htm

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 20:16
#637041

Tyler & Marla, after 9/11 I became actively involved in how the financial system works.

Meet the Federal Reserve – forward to 2:50m

http://www.blip.tv/file/958260

Again, I cannot stress how corruption has caused these problems. Society (J6P) has no grasp to the problems mounting.

I do not want global governance to emerge out of the ashes. As stated, the event is all socially engineered.

Joseph tainter; The Collapse of complex Civilisations

Above link all ties into the austerity plans on a global plane.

Login or register to post comments by Atomizer
on Fri, 10/08/2010 – 20:21
#637051

Thank you Tyler and staff. You did a hell of a job in exposing the obvious this week. Keep up the good work.

Cheers

Login or register to post comments by gnomon
on Fri, 10/08/2010 – 20:51
#637092

The Currency War is a proxy for the Resource War.  Which country STARTED the Currency War MANY years back?  And which country, (which has the highest population in the world), is in dire need of Resources?

And which country will have your guts for garters, (to be sold on the open market), if you become a political prisoner?

Which country, in fact, makes almost no pretense in regards to human INDIVIDUAL rights.

If  there is to be a dystopia in our future, which country would you least like to have running the show?  One of totalitarian heritage or one with a heritage of individual rights and the rule of law, (however much abused AT THE MOMENT).                                                      

 And there is NO moral equivalence between the two, however much anyone tries to spin it.

 

Login or register to post comments by Poofter Priest
on Fri, 10/08/2010 – 21:15
#637128

Uh….if you are referring to my post, there was no question or issues about who is right. So there is no spin.

It was about understanding the possibly ‘why’ of what has happened over the last decade.

Login or register to post comments by doolittlegeorge
on Fri, 10/08/2010 – 20:55
#637101

So is it “time to start Atomizing” atomizer?  Hit us with “the LASER” beam? Whatever happened to “Hi.  I like you and you like me.  Let’s go out on a date”?  I mean–if we all have to worry about food and food stamps–is this our victory in the war on terror?

Login or register to post comments by trav7777
on Fri, 10/08/2010 – 22:37
#637246

A world power famous for poisoned dog food, baby toys, counterfeit luxury goods and IP theft.  Any legitimate power would be embarrassed to have that going for them.

China is for China by any means necessary.

Login or register to post comments by carbonmutant
on Fri, 10/08/2010 – 22:48
#637255

OK, I’m face down in the mud and some ass**** is shooting at me and the idiot with a microphone is asking, “Are we in a war yet?”

That’s what’s wrong with this country, Baghdad Bob has the microphone…

Login or register to post comments by wgpitts
on Fri, 10/08/2010 – 22:57
#637260

There are 2 likely outcomes from our current economic condition: 1. A collapse of the equity markets back to 1985 levels (Dow 3000 S&P 200) or No. 2 A collapse of the Federal Reserve Note a/k/a US Dollar / Treasury Market. China, Japan are now calling Bernanke’s hand. However No. 1 will be a Cat 5 Hurricane on the Economy and will preserve save No. 2 But No. 2 is nuclear devastation

Login or register to post comments by LOL123
on Sat, 10/09/2010 – 01:48
#637404

The article by Benn Steil  (Foreign Affairs, May/June 2007)”The end of national currency” is interesting in light of the above article. In summary: Global financial instability has sparked a surge in “monetary nationalism”–the idea that countries must make and control their own currencies. But globalization and monetary nationalism are a dangerous combination, a cause of financial crises and geopolitical tension. The world needs to abandon unwanted currencies, replacing them with dollars, euros, and multinational currencies as yet unborn.” …..interesting wouldn’t you say? The wheels of Government move slooooooooowwwwwwwww.

 

Login or register to post comments by chistletoe
on Sat, 10/09/2010 – 03:51
#637455

I still don’t see anybody else even noticed

that a Pearl Harbor attack occured yesterday

over at CME.

I am expecting that this was only the first round.

within weeks, both grocery prices and gasoline prices

are going to be spiralling out of control in the US.

Now, how long do you all think it is going to take

for some of these tea-party types to break out their heavy artillary

declare “revolution”, and start blowing up gas stations and supermarkets?

 

Methinks the USA has already lost this war, and no one even noticed ….

Login or register to post comments by imapopulistnow
on Sat, 10/09/2010 – 07:54
#637527

The Central Bank 2fer:

1) Liquidity raises financial asset values, commodity investments.  Very good for the wealthy.

2) The lower dollar increases import prices and further increases food and energy costs.  Essentially a hefty tax on the limited incomes of the lower middle class and unemployed.

The wealthy will do quite well.

Login or register to post comments by jm
on Sat, 10/09/2010 – 08:06
#637539

I think that BOJ is going to intervene soon.  When they do, it will shake everyone out.  A 10% move will be nothing on this sandpile.

Login or register to post comments by Quinvarius
on Sat, 10/09/2010 – 08:31
#637560

Countries are going to start ending FOREX crosses with each other in the endgame.  It only takes one bad player to ruin the system, and China is it.  It is absurd to think soverign nations are going to allow China or any other nation to dictate the success of their economies through the manipulation of their own currency.

Login or register to post comments by imapopulistnow
on Sat, 10/09/2010 – 08:44
#637582

I currency war is needed.  We have tried to negotiate nad cajole for the past 30 years without success. 

Print dollars and drive up currencies around the world until the mercantilists say “no mas”.  Then and only then will they be willing to negotiate.

Login or register to post comments by Poofter Priest
on Sat, 10/09/2010 – 12:44
#638035

That is what I’m betting has been going on.

Login or register to post comments by mcarthur
on Sat, 10/09/2010 – 08:56
#637615

Like Maggie Thatcher once said, you can’t make the poor rich by making the rich poor but this is precisely the card played by countless nations for a generation.  I think the US allowed this in order to bookend communism but there is no need now. Time to throw up the temporary import tarrifs cloaked under a fancy name.

Login or register to post comments by mcarthur
on Sat, 10/09/2010 – 09:22
#637702

Tongue in cheek, the entire world financial crisis can be blamed on Malcom McLean from Maxton, North Carolina.  He was the inventor of the commercial intermodal container.  Over 100 years ago the Chinese were relegated to building railways and doing laundry in North America since they were willing to do your job for one tenth the salary.  They have effectively accomplished this feat thanks to Malcom.  

Login or register to post comments by Oh regional Indian
on Sat, 10/09/2010 – 09:44
#637727

Simply awesome comment thread.

It’s why I keep coming back, checking in. 

ORI

 

Login or register to post comments by potatomafia
on Sat, 10/09/2010 – 10:49
#637828

Want to slow down China’s currency manipulation?  STOP SELLING SO MUCH DEBT!!!

Login or register to post comments by Chappaquiddick
on Sat, 10/09/2010 – 12:09
#637957

If the Fed were to become the sole owner of all US debt – could it forgive the debt?

I mean if you owe yourself $10Tr is there a debt at all – especially one on which you need to pay interest?

I was thinking that if they forgave the debt, removed the Feds power to print indiscriminately (the flaw in Bretton Woods) and re-established the gold standard on the dollar – that could be a solution.  The debt is gone, the reserve currency status is maintained and the rigour of a gold standard re-established.  Also they recharge their dwindling stockpiles at Fort Knox and elsewhere.  (Obviously they’d seize all gold and silver, no historical prescident there.)

 

Login or register to post comments by plongka10
on Sat, 10/09/2010 – 13:18
#638096

Why would the privately owned Federal Reserve want to forgive the debt? They would own your arse.

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