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Brazil Confirms What Everyone Knows: "A Currency War Has Broken Out"

Tyler Durden's picture


From the FT: "An “international currency war” has broken out, according to Guido Mantega, Brazil’s finance minister, as governments around the globe compete to lower their exchange rates to boost competitiveness." Welcome to the new frontline. It is being played out at every 500x levered FX trade station. No prisoners are taken as those wounded are immediately shot. And the incursions have now entered stocks and bonds. Trading any assets is now retaliation against a central bank somewhere (most typically at Liberty 33 or at the Marriner Eccles building) which is engaged in open warfare against the world's middle class. And yes, the Brazil Central Bank earlier announced that it was heading unto the breach, buying yet more dollars for 1.7094 reais at auction, and has bought as much as $1 billion USD each day for the past two weeks, putting the Japanese intervention from two weeks ago to shame.

From the FT:

Mr Mantega’s comments in São Paulo on Monday follow a series of recent interventions  by central banks, in Japan, South Korea and Taiwan in an effort to make their currencies cheaper. China, an export powerhouse, has continued to suppress the value of the renminbi, in spite of pressure from the US  to allow it to rise, while officials from countries ranging from Singapore to Colombia have issued warnings over the strength of their currencies.

We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” Mr Mantega said. By publicly asserting the existence of a “currency war”, Mr Mantega has admitted what many policymakers have been saying in private: a rising number of countries see a weaker exchange rate as a way to lift their economies.

A weaker exchange rate makes a country’s exports cheaper, potentially boosting a key source of growth for economies battling to find growth as they emerge from the global downturn.

The proliferation of countries trying to manage their exchange rates down is also making it difficult to co-ordinate the issue in global economic forums.

In spite of Mr Mantega’s recent aggressive public statements, however, Brazil has so far held back from taking any action other than intervening in the local currency spot market.

The central bank bought as much as $1bn a day for much of the past two weeks – about 10 times its daily average in recent months – but this was largely to absorb money entering the country to take part in last week’s $67bn share issue by Petrobras, the national oil company.

We feel sad for the central banks, who apparently don't realize that in this war of attrition there are no losers, and the final outcome is the end of Keynesianism. We hope someone promptly discovers the FX equivalent of the nuke, and a global exchange occurs, as we, for one, can't wait for this most destructive experiment in economic fundamentalism to end already.


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Mon, 09/27/2010 - 15:34 | 607938 Turd Ferguson
Turd Ferguson's picture

In the race to the fiat bottom, I keep getting this mental image:

However, in my vision #1 is the yen, #2 is the $, #3 is the euro and #4 is the Swissy.

Mon, 09/27/2010 - 20:42 | 608657 UncleFester
UncleFester's picture

More like this one:

Golden mustard falls behind due to the cap in the face 1980s, loses shoe in the 90s, recovers and takes the lead in 2000.  Green relish dollar tries to cheat in the end but..."face plant, body slam, mustard wins. That's huge."

Mon, 09/27/2010 - 21:52 | 608787 JLee2027
Mon, 09/27/2010 - 23:25 | 608980 UncleFester
UncleFester's picture

Free beer night at the local waterin' hole?

Mon, 09/27/2010 - 21:49 | 608791 morkov
morkov's picture

in a very broad, idealistic sense, this currency fix is a scam...therefore it's short-term. a game changer should turn this around very soon. countries will close up for "d" market

Mon, 09/27/2010 - 15:33 | 607940 Hephasteus
Hephasteus's picture

Paper cuts!! Bitches!!!

Mon, 09/27/2010 - 16:03 | 608038 kato
kato's picture

you are gay

Mon, 09/27/2010 - 16:05 | 608042 Commander Cody
Commander Cody's picture

You are annoying.

Mon, 09/27/2010 - 16:17 | 608075 mtomato2
mtomato2's picture

You are obvious.

Mon, 09/27/2010 - 16:24 | 608098 hedgeless_horseman
hedgeless_horseman's picture


Mon, 09/27/2010 - 16:26 | 608107 mtomato2
mtomato2's picture


Mon, 09/27/2010 - 16:29 | 608119 Hephasteus
Hephasteus's picture

Awe. You're like a linquistic correctional facility. Where's my orange jumpsuit?

Mon, 09/27/2010 - 17:48 | 608322 Miles Kendig
Miles Kendig's picture

Ubefindin'itwityoroll homie  just like the Brazilians.  The joys of the dollar trap.

Mon, 09/27/2010 - 16:43 | 608164 Sudden Debt
Sudden Debt's picture

+1 You just got your AAA+ rating from Moody! :)

Mon, 09/27/2010 - 20:39 | 608652 Al Gorerhythm
Al Gorerhythm's picture


Refer to the he/him trick. 

Who is gay?

He is.

To whom is he referring?


The "m" in "him and whom" is a clue for which pronoun to use. 

The question "Who ....... is gay?", can't have the answer, "Him.... is", it has to be "He is" therefore the use of the pronoun "Who" is justified and correct. 

Grammatically speaking, the who/whom conundrum is resolved, when one can decipher the '"subject/object" rule to the "question/statement" clauses of sentences, about said subject/object.

If "He" is the subject of the clause, then "who" is used. If it was "him" that I was referring to then the clause refers to the object, hence "Whom" 

Mon, 09/27/2010 - 16:32 | 608132 Hephasteus
Hephasteus's picture

"you are gay"

Did you wave a magic wand while you wrote that because I'm feeling pretty gay right now. I think i'm gonna goatse.

Mon, 09/27/2010 - 16:44 | 608151 MsCreant
MsCreant's picture

You knew someone would google that, didn't cha? Click "Eh" for full effect.

Ya know, none of that has anything to do with gay. Just sayin'.

Mon, 09/27/2010 - 17:59 | 608368 spinone
spinone's picture

If you're going to Google, may as well look up vajazzle.

Mon, 09/27/2010 - 18:55 | 608467 Conrad Murray
Conrad Murray's picture

Who doesn't like a good party?

Tue, 09/28/2010 - 10:25 | 609909 mtomato2
mtomato2's picture

You will never, ever, ever, ever be forgiven for that...

Mon, 09/27/2010 - 15:35 | 607945 Segestan
Segestan's picture

got Gold?

Mon, 09/27/2010 - 15:39 | 607964 NOTW777
NOTW777's picture

absolutely and silver and some PGMs and some PM equities

Mon, 09/27/2010 - 15:58 | 608026 Segestan
Segestan's picture


Mon, 09/27/2010 - 20:35 | 608642 Hulk
Hulk's picture

PM shortsqueeze Bitchez!!!

Mon, 09/27/2010 - 22:15 | 608848 geopol
geopol's picture

Hi Hulk,,,How the hell are you?

Mon, 09/27/2010 - 16:29 | 608117 Pining for the ...
Pining for the Fjords's picture

"Got gold"   Errr, no. I wouldn't touch that barbaric relic, a commodity no different than soybeans or diapers.

Please take note of this fact, government watchers and list makers monitoring the most subversive financial site on the internet.  No gold at here at all. None. Move along.

Mon, 09/27/2010 - 17:01 | 608207 Jake Green
Jake Green's picture

I will be surprised if gold saves you. Soybeans maybe, but the have's are greatly outnumbered by the have-not's.

Mon, 09/27/2010 - 20:50 | 608674 Al Gorerhythm
Al Gorerhythm's picture

Accidental post.

Mon, 09/27/2010 - 15:36 | 607950 BobPaulson
BobPaulson's picture

Pax Americana man, how f***ed is that? They make their product (greenbacks) as valueless as they can, and everybody else buys them as fast as possible to keep their value up. Again, the question is how long can it last.

Mon, 09/27/2010 - 16:04 | 608040 Eternal Student
Eternal Student's picture

Probably for quite a while still. But in the meantime, the Gonzo Economic predictions of an imminent bout of hyperinflation due to a loss of confidence in the dollar isn't looking good. It looks like there's lots of interest in keeping the dollar higher than the local currency. The name of the game right now is exports, and to get beggar-thy-neighbor, we're seeing cheapen-thy-currency.

Mon, 09/27/2010 - 16:49 | 608187 midtowng
midtowng's picture

Let's call this what it really is - a trade war. Not a currency war.

Devaluing the currencies are a just a method used to gain trade advantage.

Mon, 09/27/2010 - 20:57 | 608684 Al Gorerhythm
Al Gorerhythm's picture

..... and when that doesn't do the trick, sanctions and protectionism will be the only option left. That's the only way that manufacturing jobs can be enticed back to the Western hemisphere. Unless of course we are willing to accept the wages and living standards of the standard third world agrarian village dweller.

Mon, 09/27/2010 - 15:37 | 607953 goldmiddelfinger
goldmiddelfinger's picture

All day I'm waiting for a reaction to the QE9 news that the Fed will gas the balance sheet by another $500MM. It even made CNBS and nothin nada zip. It's meshugass. Maybe it's the effect of the real QE manipulation.....Quarter End

Mon, 09/27/2010 - 15:37 | 607956 Tiberius
Tiberius's picture

How long does the currency war last until all fiat currencies are worthless?  Anyone have a guess?  Years?

Mon, 09/27/2010 - 16:00 | 608031 tmosley
tmosley's picture

Years? Doubtful.  Once it really gets going, it will be over in days or hours.  We've probably got a matter of months until it really gets going.  But this is the result of the actions of a very small group of people, and as such the timing is unpredictable.  It could happen tomorrow, five minutes from now, or a month from now.

Mon, 09/27/2010 - 16:27 | 608105's picture

What if they had a currency war and nobody came? (Nudge, nudge, wink, wink)...bitchez!

Mon, 09/27/2010 - 16:29 | 608121 MsCreant
MsCreant's picture

How about if one steps up to bat and backs their currency with Gold (Nudge, nudge, wink, wink)?

Mon, 09/27/2010 - 16:38 | 608149 Cognitive Dissonance
Cognitive Dissonance's picture

We (meaning the United Fascist States of America) would invade them.

Mon, 09/27/2010 - 16:40 | 608154 MsCreant
MsCreant's picture

Of Bourse we would.

Mon, 09/27/2010 - 16:45 | 608171's picture

Hegemony Cricket!

Mon, 09/27/2010 - 16:47 | 608179 impending doom
impending doom's picture

MsCreant, will you marry me?

Mon, 09/27/2010 - 21:55 | 608807 JLee2027
JLee2027's picture

Ever seen The Crying Game?

Mon, 09/27/2010 - 16:56 | 608201 merehuman
merehuman's picture

china appears well positioned for that gold based currency. Our president is not encouraging us to buy gold or silver , but China is.


Invade China... lol , right away

Mon, 09/27/2010 - 17:40 | 608298 Hephasteus
Hephasteus's picture

We can't. Jackie Chan and Jet Li taught them all karate.

Mon, 09/27/2010 - 20:38 | 608651 Hulk
Hulk's picture

I believe that would be a Chinese martial art Hep...BTW, they can also fly, which the japanese haven't perfected yet!

Mon, 09/27/2010 - 18:57 | 608470 Clancy
Clancy's picture

Encouraging them to buy, yes, but the US still has far more Gold than China does.

Mon, 09/27/2010 - 19:14 | 608503 doggings
doggings's picture

prove it then: show us the gold

Mon, 09/27/2010 - 20:58 | 608688 Al Gorerhythm
Al Gorerhythm's picture

See my post above.

Mon, 09/27/2010 - 15:38 | 607958 goldmiddelfinger
goldmiddelfinger's picture

Prechter on w Maria at 3:30...gotta love it

Mon, 09/27/2010 - 15:40 | 607968 carbonmutant
carbonmutant's picture

Precter on, saying don't fall for the recovery...


Mon, 09/27/2010 - 15:44 | 607983 goldmiddelfinger
goldmiddelfinger's picture

He warns of hyperinflation and says hold cash. They'll pull his he nobel prize in economics with that boner. He is predicting dow 2000 within a few years. Guess BIDU will be reversing their 10-1

Mon, 09/27/2010 - 16:01 | 608035 carbonmutant
carbonmutant's picture

Well the maket certainly sold off after that interview.

Mon, 09/27/2010 - 16:46 | 608178 Sudden Debt
Sudden Debt's picture

but because most shareholders got a goldfish memory, they are now wondering why they sold. They'll be back tomorrow!

Mon, 09/27/2010 - 15:43 | 607975 SDRII
SDRII's picture

precter loves the dollar - his rationale - I like to look at the other side when everyone is negative - a bit like having terminal cancer and telling yourself you will be the statistics that disproves the rule. Maybe but not probable

Mon, 09/27/2010 - 15:44 | 607981 ZackAttack
ZackAttack's picture

All done because actual trade protection legislation would be impolite or something.

Mon, 09/27/2010 - 15:48 | 607997 faustian bargain
faustian bargain's picture

No, it's being done because they can and because they have to. This is the final gravity well for fiat money...down the tubes...

Mon, 09/27/2010 - 15:45 | 607987 sschu
sschu's picture

Is this the 2010 version of Smoot-Hawley?

Is currency depreciation the best answer to the mercantilist?  Doesn't the $$ currency debasement really hurt China the most of any?

Not sure I have the answers to these questions.


Mon, 09/27/2010 - 16:30 | 608125's picture

Floyd Smoot was a fine conductor of the Cannonball but how they ever let him draft legislation, I'll never know.

Mon, 09/27/2010 - 16:50 | 608189 midtowng
midtowng's picture

That's exactly right. Begger-thy-neighbor is in full play now.

Mon, 09/27/2010 - 17:40 | 608299 sschu
sschu's picture

Begger-thy-neighbor is in full play now.

Since it seems none of the players have any scruples and this is serious hardball, devaluation of the $$ would net in our favor.  Most of the US problems are of our own doing, but the aggressive economies of Asia (Asia Tigers, China, Japan) have been practicing this mercantilism for decades.  It was fun for a while, we could buy stuff that was cool on the cheap.  But the party is over.

Someone is going to get hosed here, and they are going to be fighting mad.  Perhaps China gets the worse end of the deal, and that creates a whole new global dynamic.

There will be war.




Mon, 09/27/2010 - 17:00 | 608205 merehuman
merehuman's picture

america committing financial suicide, weakening itself in every way. In the long term there is no doubt China will be the winner/survivor of any currency or economic war. They have already won from my view.

Mon, 09/27/2010 - 15:52 | 608012 williambanzai7
williambanzai7's picture

This week's must read book:

Mon, 09/27/2010 - 16:21 | 608087 Shameful
Shameful's picture

Been waiting for the english version.  My Mandarin is light years away from being up to the challenge.

Mon, 09/27/2010 - 16:48 | 608184 Sudden Debt
Sudden Debt's picture

And how will you be able to communicate with our soon to be overlords?

You know that only 40% speaks Cantonese do you?... you do speak Cantonese right?

Mon, 09/27/2010 - 17:09 | 608227 Shameful
Shameful's picture

Overlords?  Nah the same establishment on top will stay the same, the enforcers may change but that's pretty minor in the scheme of things.  Though I am attempting to learn Mandarin, but my skill is piss poor to put it lightly.

Mon, 09/27/2010 - 16:28 | 608115 kridkrid
kridkrid's picture

Have you?  Is it translated into English?

Mon, 09/27/2010 - 16:43 | 608165 Chito Campo
Chito Campo's picture

Unfortunately, our Jewish moneymasters will never let the English translation be completed.

Tue, 09/28/2010 - 11:18 | 610169 Optimusprime
Optimusprime's picture

Although the usual suspects junked your post, the notion behind it is supported by the failure for years now to translate Solzhenitsyn's Dvesti Let Vmestye (200 Years together)--a monumental effort by a great man to honestly assess the history of Russian-Jewish relations. 


Apparently a group of gutsy white nationalists are moving ahead on the project despite the unwillingness of the NY or academic publishers to support.  Kevin McDonald is sponsoring a good deed indeed.

Mon, 09/27/2010 - 15:53 | 608013 carbonmutant
carbonmutant's picture

A little local color on next month's G20 in S. Korea

Kim's heir to head disruptive campaign against G20 in Seoul

Mon, 09/27/2010 - 15:53 | 608014 Mongo
Mongo's picture

A war over who has the best toilet paper. I'd like to wipe my ass with the winner!

Mon, 09/27/2010 - 16:16 | 608064 tmosley
tmosley's picture

My money's on Charmania.  

But the dollar will probably win out in the end, since you can wash it and reuse it!

Mon, 09/27/2010 - 16:21 | 608085 mtomato2
mtomato2's picture



Mon, 09/27/2010 - 16:39 | 608150's picture

My money's on Charmania. 

Don't discount Scottland. But even without Alaska and Hawaii, I'd place my bet on the Cottonelle United States.

Tue, 09/28/2010 - 10:26 | 609914 mtomato2
mtomato2's picture

Man, this is the greatest blog ever.

Mon, 09/27/2010 - 16:51 | 608188 Sudden Debt
Sudden Debt's picture

If it passes the Thumb test and doesn't make my ass look sandblasted, it'll do.

Mon, 09/27/2010 - 15:54 | 608017 CPL
CPL's picture

Canadian dollar hit .98 to 1 USD again and the market took it's usual dirt nap.  Fuck it's like setting a watch now.



Mon, 09/27/2010 - 15:55 | 608020 Azannoth
Azannoth's picture

I still think its done on purpose, the USA without running 1.5T deficits and running 2 wars would collapse immidieatly(throug a Revolution or Bancrupcy) with every1 buying dollars

1st US wont go officialy bancrupt

2nd US will pull every1 with them when they fall


The best strategy would be just to cut your self off the international monetary system and go cold turkey, but that would be unthinkable for any politician to implement both moraliy(politicians have a reverse morality) and intelectualy

Mon, 09/27/2010 - 19:41 | 608558 malusDiaz
malusDiaz's picture

When a severe alcoholic is cut off 100%, they can die from the shock of it:

Mon, 09/27/2010 - 15:59 | 608028 Sudden Debt
Sudden Debt's picture

1 billion a day... I guess those hard working, rich Brazilians don't mind that their government is playing poker with their tax dollars...

Mon, 09/27/2010 - 16:20 | 608083 Cognitive Dissonance
Cognitive Dissonance's picture

Destroy what you want. We'll just print up more.

Dollar$. Bet you can't debase just one? 

Mon, 09/27/2010 - 16:22 | 608089 mtomato2
mtomato2's picture


A POTATO CHIP reference...

It's why I love Zero Hedge.

Mon, 09/27/2010 - 16:46 | 608176 Sausagemaker
Sausagemaker's picture

+a 13.5 oz bag and a Coke

Mon, 09/27/2010 - 16:00 | 608030 RecoveringDebtJunkie
RecoveringDebtJunkie's picture

Capitalist elites have already destroyed the wealth of their domestic populations and surpassed the capacity of foreign markets to absorb their crap, so the only "solution" left for them is to capture whatever demand is left in the world by competitively devaluing their currencies.

The US will most likely "lose" this game in the short term, as we have no real exports and the reserve currency, meaning massive amounts of dollar-denominated debt held by domestic and foreign economic actors.

Mon, 09/27/2010 - 16:23 | 608094 mtomato2
mtomato2's picture

I'm a Capitalist.  And I'm not even a little bit elite.

Mon, 09/27/2010 - 16:57 | 608202 Sudden Debt
Sudden Debt's picture
  1. A group or class of persons or a member of such a group or class, enjoying superior intellectual, social, or economic status: "In addition to notions of social equality there was much emphasis on the role of elites and of heroes within them" (Times Literary Supplement).
  2. The best or most skilled members of a group: the football team's elite.
  3. A size of type on a typewriter, equal to 12 characters per linear inch.

You know that you can even be the best as being worst? That also makes you "elite".



Tue, 09/28/2010 - 10:27 | 609920 mtomato2
mtomato2's picture

I was referring to the typewriter font size.

Mon, 09/27/2010 - 17:45 | 608314 tmosley
tmosley's picture

You think the government and the Fed are run by CAPITALIST elites!?

I have a website I would like for you to look over:

Mon, 09/27/2010 - 22:06 | 608832 RecoveringDebtJunkie
RecoveringDebtJunkie's picture

The government and Fed are OWNED by capitalist elites. That should be pretty obvious by this point.

You are making the common mistake of confusing a "free market economy" (free of government interference) with a capitalist economy (marked by capitalist relations of production).

The capitalist elites will use both free markets and government-manipulated markets to further concentrate wealth in their greedy hands.

Mon, 09/27/2010 - 16:08 | 608046 What_Me_Worry
What_Me_Worry's picture

LOL.  Its like a war where everyone just has a gun to their own head.  Everyone is screaming they will shoot if everyone else doesn't put their guns down.

Why don't they just buy zimbucks at face if they want to devalue their currency?  I got a 100T just lying around I can sell them.

Mon, 09/27/2010 - 16:08 | 608048 desgust
desgust's picture


Mon, 09/27/2010 - 16:09 | 608051 Quinvarius
Quinvarius's picture

"The FX equivalent of a nuke."  Maybe the US could figure out a way to put everyone else on the gold standard so that the US dollar could become worthless first.

Mon, 09/27/2010 - 17:46 | 608320 tmosley
tmosley's picture

Reverse armed robbery?

"Take this gold or I'll cut ya!"

Mon, 09/27/2010 - 16:13 | 608055 Yikes
Yikes's picture

Okay, just so I understand the implications of Brazil's effort to devalue their currency.


In an effort to make their goods and services cheaper to the export market, the money they use to buy USD's has to be raised by either taxation which would hurt their GDP or by printing money thus creating inflation.


What do they do with USD's?  Buy UST's? 

Mon, 09/27/2010 - 16:16 | 608066 Yikes
Yikes's picture

Oops, thought of a third: Cut spending!  It didn't occur to me at first because we never do that in the U.S.

Mon, 09/27/2010 - 16:23 | 608096 Dr. No
Dr. No's picture

"What do they do with USD's?  Buy UST's?"  Nothing.  They just buy the USD which are wired from the US to Brazil by all of the brazilians workingn in the US and sending the money home.

Mon, 09/27/2010 - 16:25 | 608101 faustian bargain
faustian bargain's picture

I'm guessing they would just hold on to the USDs, not do anything with them. They want to deflate the USD money supply relative to their money. I think it's less about debasing their own currency and more about fighting the Fed's efforts to debase the dollar. Or maybe equal parts of both. But definitely not limited to just debasing their own currency, or they would just hit <Print>.

Mon, 09/27/2010 - 16:14 | 608060 Prof Quagmire
Prof Quagmire's picture


  In addition to having over 200 million people and an untapped store of natural resources, Brazil is an agricultural powerhouse with an expanding industrial base.  Also, they have no credible enemies in their neighborhood. 

  They're about to get a new president, one who may institute change for real, or for reals.  Google Dilma Rousseff.  Interesting resume.

Mon, 09/27/2010 - 16:21 | 608086 RowdyRoddyPiper
RowdyRoddyPiper's picture

Let's hope they have better luck drilling in the open Atlantic down several miles that BP did in the relatively shallow GoM. 

Mon, 09/27/2010 - 17:44 | 608312 Joeman34
Joeman34's picture

Why would they need to do that.  According to reports I've seen, Brazil nearly 100% energy independent as a result of converting their energy infrastructure to run on bio-fuels, specifically ethanol as corn is a major agricultural product [read:  virtually no reliance on oil].

Mon, 09/27/2010 - 19:10 | 608499 wake the roach
wake the roach's picture

Brazils ethanol is produced from sugar cane which produces higher net energy gains than that produced from corn. Estimates for sugar cane NEG is anywhere from an energy sink to 9.0 although Brazil claims 1.9 which seems quite reasonable... Most independent studies confirm that ethanol produced from corn is an energy sink... It appears that most studies that do not confirm this seem to originate from government and other vested interests (the corn lobby/the children of the syrup/corporate central planners)...

A bit off the topic but nevertheless, educational ;-)


Mon, 09/27/2010 - 20:45 | 608663 blunderdog
blunderdog's picture

US "energy independence" can be easily achieved just as soon as 85% of the population can't afford gasoline or cars or electricity.

Bicycles and bathing in the river, yo.  Wake at dawn and sleep when it gets dark. 

Shouldn't take long at the rate we're going.


Tue, 09/28/2010 - 00:14 | 609082 RoRoTrader
RoRoTrader's picture

you make it so easy to understand william.......and eliminate most of the words at the same time too.

Mon, 09/27/2010 - 16:16 | 608068 Djirk
Djirk's picture

What I don't understand: if the US destroys their currency they will piss off their biggest trading partners by inflating away debt holdings. It will also destroy the willingness and ability for said partners to buy US goods??!? Who will be left to trade with?

Not to mention inflation will crush the demand for US made goods.

gonna get uglier before it gets better.



Mon, 09/27/2010 - 16:27 | 608097 Pining for the ...
Pining for the Fjords's picture


Mon, 09/27/2010 - 16:26 | 608109 Shameful
Shameful's picture

Again I totally understand declaring war on your own savers to drive down wages, extract wealth, and keep exports going.  Don't agree but I understand, and this leaves everyone in a plunge to the bottom and trash heap of currencies.  But call me crazy why not print up a mess of bills and just enter the open market and buy gold or other assets?  It should accomplish the same effect of creating more money and devaluing the currency and the printer will get something tangible for it.  And it's not like the gold/asset will back a currency, the IMF has rules about that.  I know if could create Fun Bux at will I would be buying real assets with them as fast as the printer shot out wads of fun.

Mon, 09/27/2010 - 16:35 | 608141 faustian bargain
faustian bargain's picture

I guess they can't be quite as obvious as that about it. That's what the primary dealers are for. Or rather, maybe the primary dealers are the ones who say 'make us some cash' and the Fed does so. The PDs are pretty much the same people who own the Fed anyway.

Mon, 09/27/2010 - 16:45 | 608174 Shameful
Shameful's picture

Why?  If Brazil can come out and say "We are fighting a currency war and buying loads of $$$"  then why not "We are fighting a currency war and we are printing money to buy gold".  With the almost no yield on treasuries both they and gold are basically a no yield asset.  Now the US can't do this scheme because assuming it works what would we export, other then dollars?

Now all I can think is the first nation to come out and announce that would found to be a hot bed of activity for terrorists and promptly invaded to prevent the use of WMD.

Mon, 09/27/2010 - 17:53 | 608346 faustian bargain
faustian bargain's picture

You're probably right...unless it was one of those "madman with a nuke" scenarios..."I'm buying a zillion tons of gold and taking everyone down with me!"

I dunno, I'm about to give up guessing the tactics and strategies of central banks. I know what they want, and I know the ending isn't going to be pretty.

Mon, 09/27/2010 - 16:29 | 608120 Quinvarius
Quinvarius's picture

All paper currency is fungible via FOREX.  Remember that when you can't figure out why gold keeps going up no matter the lastest scam being played out on the dollar.

When one prints, it effects all of them.  FOREX is a license to print everyone else's currency.

Mon, 09/27/2010 - 16:38 | 608148 faustian bargain
faustian bargain's picture

And it's also a license to sop up everyone else's currency...In the information age, I'm having trouble wrapping my head around the notion that a currency war could ever last longer than, say, a chess game.

Mon, 09/27/2010 - 16:32 | 608131 virgilcaine
virgilcaine's picture

Chavez calls Angela Merkel.. "A Nazi in a pantsuit".


"She is from the German right, the same that supported Hitler, that supported fascism, that's the Chancellor of Germany today," he said.

Chavez said he could confront her about the statements if he attends an upcoming summit of heads of state from Europe and Latin America in Peru.

Mon, 09/27/2010 - 16:34 | 608136 truont
truont's picture

We’re in the midst of an international currency war, a general weakening of currency

Got Gold?

Mon, 09/27/2010 - 16:37 | 608146 papaswamp
papaswamp's picture

trade war next?...then plain old war. That will get economies cranking.

Mon, 09/27/2010 - 16:43 | 608162 MsCreant
MsCreant's picture

Here comes the Gold beat down, it's 3:41, do you know where your stash is?

Mon, 09/27/2010 - 17:17 | 608243 Hephasteus
Hephasteus's picture

Ya they hit it pretty hard. Their 8 dollar beatdown is down to 5 dollars now.

Mon, 09/27/2010 - 17:03 | 608212 sbenard
sbenard's picture

Will the consequences be similar to a trade war? Could this ignite a concomittant trade war?

Mon, 09/27/2010 - 17:34 | 608285 Miles Kendig
Miles Kendig's picture

Flow control has seemingly broken down so let's try and force more pressure on the needs of repatriation paid for by the ever kind Brazilians.

Good old Ross Perot's giant sucking sound seems to be working in reverse these days....

Mon, 09/27/2010 - 17:43 | 608306 blunderdog
blunderdog's picture

OK, so I've got a bit of a handle on the whole four X's thing, but one thing puzzles me greatly...

If EVERY currency is struggling to debase at the same time, why should the poor or middle-class care?

I buy my groceries with dollars.  The groceries come from other countries seeking to drive down their currencies.  If they *all* devalue at a rate anywhere near comparable, it seems to me that it should have relatively little impact on my life, aside from pushing acquisition of precious metals further out of reach.

Anyone who might clear that up?

BTW: I do like gold and would certainly buy it (physical) if I had any wealth to "preserve."  But I don't. 

So is there any real cause for concern for us peasants?

Mon, 09/27/2010 - 18:06 | 608380 sschu
sschu's picture

So is there any real cause for concern for us peasants?

It seems to me the biggest risk here with $$ devaluation is the price of commodities, especially oil.  If the price of oil goes over $100/b and stays there, we are in a depression for sure and for a long time.

Maybe we shouldn't be all that concerned about having a Muslim president .... :-)

There are so many inflection points right now around the world, economic and other, it takes a chess grand master to keep track of it all!



Mon, 09/27/2010 - 18:36 | 608435 blunderdog
blunderdog's picture

Yes, that certainly makes a good bit of sense.  I've never noticed any news or rumor about Saudi currency debasing, but in keeping with my original puzzlement, I'd expect that if the Saudi riyal was debasing at the same rate as the dollar, the oil cost wouldn't change that dramatically either, given that they're the largest exporter.

Although as you mentioned, keeping track of ALLL the inflection points is hopeless.  If we buy most of our oil from Canada, and the riyal collapses and the Saudis want to drop their oil price, does that pull "our" aggregate price up or down?

Uy.  Thanks.

Mon, 09/27/2010 - 18:58 | 608471 sschu
sschu's picture

Saudi currency debasing

This is a bit beyond my knowledge, so some help would be great.  I do believe oil is sold in $$ world wide, you want to buy oil, you pay in $$.  Not sure that the Saudi's really care about their currency, they buy their gold plated Lamborghinis in $$.  The Canadians probably care though. 

The bottom line is our cost of oil and if we debase our currency, the cost of oil in $$ will go up.  This just will accelerate the destruction of the middle class and our demise.  BB etal is playing a very dangerous game.

FWIIW, sschu

Mon, 09/27/2010 - 18:09 | 608388 faustian bargain
faustian bargain's picture

Monetary inflation is a stealth method of capital confiscation. The economy is unable to mend itself in an environment of constant fiat manipulation, whether inflation or deflation. The longer this bubble economy lasts, the lower our standard of living is going to be when it pops.

Mon, 09/27/2010 - 18:09 | 608385 geopol
geopol's picture

I posted this in the wrong position... Cheers


Mon, 09/27/2010 - 18:54 | 608465 trav7777
trav7777's picture

I'm so sick of hearing how debasing your currency helps if such a thing is costless.

It does so by FUCKING labor and FUCKING wage earners in the ass.  Everyone is trying to devalue against everyone else.

As long as the dollar buys oil, we cannot be defeated in this game.  Only a fall in the House of Saud or an exit from Iraq/ME/etc. can dislodge us.  Stupid euros shouldn't have had us be the world's navy, eh?

either way the future is bleak for labor...

Mon, 09/27/2010 - 19:05 | 608490 The Alarmist
The Alarmist's picture

As Colbert says, I want my Brazilian from a Peruvian working at a Spa that serves me a tomato cut by a Gutamalen after being picked by an American.  The tomato and anything else out of Brazil should be taken with a grain of kosher salt.

Mon, 09/27/2010 - 19:17 | 608507 99er
99er's picture

Chart: DX

USD futures appear to have bottomed and may begin to rise within a newly formed channel. It's not just Brazil; it's probably an entire BRIC ready to be thrown at the proverbial fan.

Mon, 09/27/2010 - 19:28 | 608525 99er
99er's picture

Where's The Money?

BRICs: $3,476,781,000,000

USA:       $128,601,000,000

You do the math.

Mon, 09/27/2010 - 23:08 | 608951 tony bonn
tony bonn's picture

currency devaluation is a loser's game - especially for those economies where export trade is relatively small percentage of gdp. :-O

america is the new spanish empire.

Tue, 09/28/2010 - 02:06 | 609234 Grand Supercycle
Grand Supercycle's picture

S&P 500 FINANCIALS INDEX - an important chart:

Tue, 09/28/2010 - 04:15 | 609423 tom
tom's picture

A lot of people griping about recession leading to protectionism, but when the global economy turns down, one way or another, trade contracts. That drives the currencies of countries that run trade deficits down, and the currencies of countries that run trade surpluses up. Resistance is futile.

Tue, 09/28/2010 - 07:02 | 609492 37FullHedge
37FullHedge's picture

In a war of currency debasement the US/Fed is doing a good job, Now Japan takes its gloves off it will be toast, However Japan could win hands down, Just appoint Gordon Brown the former UK prime minister to the governor of the BOJ Gordon Brown is the undisputed world champ at trashing foreign governments national currencys, Hes not cheap but the best never is lol.

Just me being sillly but this situation is beyond silly its World War and is worrying me big time.

Tue, 09/28/2010 - 08:00 | 609544 Shylockracy
Shylockracy's picture

The "trade war" meme assumes that nation states will engage in beggar-thy-neighbor through competitive devaluations. Nation states however do not behave in such maximising behavior vis-à-vis their export sector when an internationalized central bank can dictate the cost of capital to all economic actors.

Guido Mantega is not pursuing a beggar-thy-neighbor. Rather he is lending support to the troubled dollar at the expense of the least capable of defending themselves, the Brazilian workers. In the process he is throwing some meat to the export sector, and the capital markets, but this is a side show.

Tue, 11/16/2010 - 10:55 | 730684 daniel
daniel's picture

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Sat, 02/12/2011 - 01:56 | 955281 shawnlee
shawnlee's picture

The "trade war" meme assumes that nation states will engage in beggar-thy-neighbor through competitive devaluations. Nation states however do not behave in such maximising behavior vis-à-vis their export sector when an internationalized central bank can dictate the cost of capital to all economic actors.EX0-101 \ 350-018 \ 70-290 \ 1Y0-A08 \ 1Y0-A05

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