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War On?
The G20 was a predictable dud. Our boy Tim G went to Korea trying to
sell a plan to limit external deficits to 4%. This was Ayn Rand utopian
economics that does not work in real life so all the other ministers
said “No thanks”.
There was talk in the final communiqué that currencies should not be
manipulated. That was just talk. I love it when they use words like “refrain”. What does that exactly mean?
“Countries should refrain from competitive devaluation of currencies”
The real comment on currencies came from Yoshida Noda, Japan’s finance minister:
"A prolonged appreciation in the yen is not good for Japan’s economy. Our stance, that we will take appropriate, bold action if needed, is unchanged.”
That sounds like fighting words to me. So much for peace and love from the G20. But what does "If needed" really mean?
Since nothing happened this weekend the question is how is the FX market
going to read it? The logical reaction to a status quo G20 is for
status quo FX action. Generally speaking that means a weak dollar play. I
would not be surprised to see USDJPY trade below 81.00. The Euro will
try to catch a bid over 1.40.
So we have an interesting test of the market in front of us. Do we take
another big leg down in the dollar? Or does the market just try to do
that and back away?
I weak dollar move would be a “risk on” market. One thing
fighting against the weak dollar story is that I see little evidence
that the rest of the market actually wants to take more risk on. The
tail is wagging, but the dog is not.
I thought this was interesting:
The United States and Britain, both with large deficits, agreed to be “vigilant against excess volatility and disorderly movements in exchange rates.”
That is new. It does not mean much as the adjustments taking place have
largely been orderly. It does open the door for coordinated intervention
should things actually become disorderly. This statement is most
certainly a measure of what the G 20 ministers are worried about. Their
worst fear? A run on the dollar. The catalyst for a run would come from Bernanke. The German finance minister made that clear:
“I
tried to make clear that I regard that (QE-2) as the wrong way to go.
An excessive, permanent increase in money is, in my view, an indirect manipulation of the exchange rate.”
I wonder if Bernanke even listens to this. He probably spent his Sunday
looking over a textbook on the depression. Why is this man smirking smiling?
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don't expect Timmy or others to say or do much (ever actually!) until after the mid-terms.
Look at this 'market' chasing 70 P/E stocks like drunk frat boys after the lone female at their kegger. This is fuking disgusting.
From Reuters, “World stocks rose and the dollar slumped Monday”
In other words, all the dumb fools that once might have believed and bet on what these world financial leaders say at their G-20 vacations are gone. I’m betting Goldman Sachs and most other investment banks fueled the fire this morning by shorting the dollar and going long gold. Sorry Tim Geithner, it’s bonus season, the health of the world economy will have to wait.
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Ben is going to surprise everyone - he is going to buy assets and the assets will be shiny and yellow.
Buh-bye, USD.
i know we're all hard on bernanke and it disgusts me how wall street seems to end up on top and yes, who the fuck really is the fed?
but debt needs to be inflated away, our gold keeps going up and me and the boys are coming to the US of A in january to slake our thirsts of all that your cheap dollars will buy.
its a mechanism you need when this level of debt is in play, if you don't you're defaulting.
maybe not a bad idea but what would its ramifications be?
i think the future for the usa is still good.
its strength is its geographical position - well away from the breeding hordes of islam.
that Ayn Rand comment is totally off the map. Ayn Rand economics dictate that you would have never showed at the G20 in the first place. A refrain is also a chorus in a song, repeated often, (and signifying not much)
Sorry, Ayn Rand never advocated managed exchange rates or anything else economic. Utopian or just silly would apply to Tiny Tim's lame approach.
This man, Bernake, was Thomas Jefferson's worst nightmare. Let's think, what would Jefferson have done?
Have sex with one of his slave mistresses?
The whole Sally Hemmings 'revelation' came too uncomfortably close to the Lewinsky revelations to suit my tastes.
Of course - who wouldn't? But what would he have done after that?
The real question is whether the currency war now in progress will lead to a shooting war.
Always! However in todays fragile world no one needs to shoot anymore. See the book, One Second After.
http://archive.wbai.org/
Nonfiction All Friday October 22 2:00pm 1 hour Artshttp://maxkeiser.com/2010/10/23/michael-hudson-debt-jubilee-and-debt-parasites/
the FEDREZ is like the biggest kid on the playground who took everybody else's marbles and is now taunting them with "what are you going to do about it?"
the bully is never smart enough to figure out that eventually the smaller kids are going to gang up, pick up rocks and sticks and beat the crap out of him.
To demonstrate that inflation is good for the economy, he just wiped his ass with a $100 Franklin.
We love you Big Ben ! BMW is creating jobs here in the US instead of Germany. Keep the printing passes hot. Stay long ....
Your emulation of the avatar persona is spot on!
Something to keep an eye on as the PIGS rebellion gathers pace :
http://www.independent.ie/business/irish/leaving-the-euro-might-well-be-...
It comes down to character. You can have the best Constitution in the world, (which we do here in the U.S.), but if you have immoral, amoral cretins at the helm it is all for nought.
Garbage in, garbage out.
I wouldn't read too much into the bullsh*t piece of paper that piece of sh*t Timy G. has agreed to sign. He's been proven a total liar and a fraud on too many occasions. Yes, aNd a tax cheat as well.
BEn and Timmy are in the battle to extend the total collapse until AFTEr the 2012 elections, just like Hank Paulson was in a battle to postpone the collapse until after the Bush's term. Paulson didn't make it. The crash happened on Bush's watch. Timmy G. isn't Paulson. Not even close. Timmy G. has no chance whatsoever.
And watch out for asymmetrical warfare from those same regions, viruses of all kind, (natural, unnatural, and cyberwarfare).
The Great Winnowing will soon begin, courtesy of the PLA/PRC.
Watch North Korea; the straw man that will start WWIII.
Err that businessweek article you quote says
"For their part, the richest countries, like the United States and Britain, both with large deficits, agreed to be “vigilant against excess volatility and disorderly movements in exchange rates.”"
It doesn't say
"The United States and Britain, both with large deficits, agreed to be “vigilant against excess volatility and disorderly movements in exchange rates.”
The capital T in "The United States" is kind of important don't you think? It would imply USD/GBP was about to act in concert.
Absolutely makes a difference. his quote should be ".....the United States etc. NOT start off just " The United States....
Very cheeky at best. Inaccurate shoddy journalism at worst.
"The capital T in "The United States" is kind of important don't you think? It would imply USD/GBP was about to act in concert."
I might also be because "The" was the first word in the sentence.
Yes but it wasn't the start was it? The bit that changed its meaning was before it in the original.
Ayn Rand Utopian economics? Not.
Maybe Marxist Utopian economics? Or, Keynesian Utopian economics? Rocky Horror Utopian economics?
.
Exactly. I thought that was a very strange sentence for the beginning of the article, especially considering the context that followed. Either it was errant or there is a basic misunderstanding of Ayn Rand's economic view.
Very difficult situation. The core of the problem is thepursuit of un-democratic policies. As one example war and tax cuts. Now wars usually require sacrifice by the population if they are to be paid for. But by not asking anyone to pay for it there is less scrutiny. The population would have gone for it initially but had they been asked to pay for it they would have ended their support about 4 years ago and the war would have ended. Or the corporations that are the main beneficiaries could have picked up the tab. Anyway if the United States were to stop borrowing we would have to pay for things ut of current income and that would end all these things the population doesn't support becasue people would refuse to pay for it. Has it ever occurred to any of you that the power to govern is the power to tax? That's an ancient maxim that goes back 3,000 years. Our government is just a sham. A relic of a once viable system? Do they have the power to tax in proportion to their giveaways and appetites? no. So they continue their undemocratic policies through borrrowing initially and now outright priting of money. All this talk about helping the population ad the economy is just so much hooey. It's just another Imperial system on its last legs.
Yep, plus the lead circle jerker needs to print to continue an everlasting bailout of the mark to market bankruptcy of the other jerkers.
RE is the only real deflation concern for Benny and the ink jetters. RE is the at the top of the Ponzi, and they are willing to have a run on the dollar to try and keep it propped up.
Of course it won't work as RE prices will continue to come down no matter what they do. Equilibrium will be reached by a bubble cloud burst and continued rainfall of debt default by the masses not getting shot-up with ink.
Putting it in honest perspective. Nice +.
It's interesting how this piece fits in with the Niall Ferguson quote because I think he hits the nail on the head when he states that, in a globalized economy, both fiscal and monetary stimulus go straight to emerging markets and commodities.
And, I would add, to the currencies of emerging market and commodity-intensive countries.
So the effect of both fiscal and monetary stimulus is the same as a competitive debasement.
Yes, the war is on and Bernanke thinks he's Napoleon. But China will be his Waterloo.
It seems the war is on, the sides are lining up. The world cannot withstand the mercantilist Chinese, however foolishly the rest of the world has acted. The political forces, especially in the US, will no longer stand by and watch their economy, property, future and livelihoods be sacrificed on the alter of "free trade".
China is being served notice, let your currency float and open your markets or face trillions in lost asset value, blocked international markets and capital controls. And you better make it happen soon ....
The more one looks at this the more it seems war is the end game right now.
sschu
Do we really deserve all of that?
We abandoned gold and silver-backed currency.
We allowed Washington to grow into the insatiable beast it is today.
We promised pensions and "free" medical care to everyone over the age of 65, without any realistic way to pay for it.
We put military bases on almost every continent and engaged in preemptive war, turning Europeans into soft, defenseless, hopelessly dependent socialists.
We closed off our own energy resources and bought cheap oil from savage Islamist societies stuck in a 15th century worldview.
We made a deal with the devil and opened up trade with genocidal communist oligarchs.
We exported all of our cheap labor to Asia and replaced them with expensive service jobs.
We bought crappy Chinese electronics and kitchen remodels on credit obtained by speculating on an unsustainable housing bubble.
We allowed the banksters to print their own currency and loan it to us, for God's sake.
Is that a path we really want to maintain?
I never said we didn't deserve our fate, quite the contrary, we have made our own bed. At least our leaders have created this mess and the people get the government they deserve.
That does not change the fact that the political forces, basically the voters, will insist on changes. We soon are approaching the point where economic "protectionism", in whatever form, will be a vote getter.
AEP and Martin Wolf both had recent articles to this effect. What is the correct response to the mercantilist?
sschu
We exported all of our cheap labor
It was only cheap once exported; it was a fair wage in America. Remember when there was only one bread winner in most homes? A blue collar wage was sufficient for one family along with college tuition. Now there are at least two and more in many homes and yet 160 million Americans live paycheck to paycheck.
We closed off our own energy resources and bought cheap oil from savage Islamist societies stuck in a 15th century worldview.
Competing technologies were suppressed in order to ensure dependence on oil. What you call 15th century world view is reality, my friend (coming soon to aneighborhood near you!).
Ah yes, the good old two-income trap. Too bad no one is enforcing mark-to-market, maybe then I could afford a modest three-bedroom in California at 3x income instead of 12x. With 20% down and twelve months' expenses in the bank, no less. And my wife gets to stay home with the kids.
As it is I have friends who barely make a 45% DTI on their mortgage with 3% down and both spouses working. Yeah, that's not unstable at all. Sure helps when that $6K property tax bill comes due right before Christmas!
Sad but probably true. Except this time no one knows how to grow food or raise livestock.
"be sacrificed on the altar of free trade."
And what market, pray tell, exemplifies this so called free trade; without governmental regulation, intrusion, suffering the unintended consequences of governmental polices, taxes and interference, crony capitalism, plutocratic behavior, incessant wars and intrusions into individuals rights and privacy's.... That so clearly and presciently suggest that further governmental roles might be deemed beneficial? That all must be ever increasingly managed by a supreme power of human fiat intervention?
Pray tell?
"Free trade" was not the nature of my post and clearly we do not enjoy this here in the US, crony capitalism is more accurate IMHO.
"Free Trade" was the rationalization for opening our markets, NAFTA etal and the loss of many basic industries. Against the mercantilism practiced by China this free market approach has been suicide. We have enjoyed the fruits of cheap flat screen TVs, now we do not like the unemployment and bankruptcy that is the inevitable result. Not surprising.
Don't expect the people to quietly stand by and accept their fate, the voters have been aroused from their sleep. However the PTB decide to "fight" against the Chinese it is game on. This will prove to be very destructive for all.
sschu
And the US pegging their currency to USD, that is what? Not mercantilism?
That is gang mindset. You blame China for being inept at what the US does the best.
And opening the market? What is that new scam? I thought the US produced nothing, had no manufacturing base. If so, what has the US to sell?
The Chinese might be interested in buying goods but the US do not open that market to them.
The US is the core of the world situation today, China is simply doing its business on the side. A bit too well for the taste of many.
And the US pegging their currency to USD, that is what? Not mercantilism?
Not sure what you mean by all this. The Yuan is pegged to the dollar despite massive trade imbalances. This is unsustainable.
And opening the market? What is that new scam? I thought the US produced nothing, had no manufacturing base.
Our manufacturing base has declined without doubt, but I have never said we produce nothing. Not sure what you mean about scam, but the Chinese and the East Asians are experts at mercantilism. We have benefited from this arrangement by an improved standard of living. At some point the credit card meets its credit limit however.
The US is the core of the world situation today, China is simply doing its business on the side. A bit too well for the taste of many.
I am not trying to assign blame, there is plenty to go around. However, our present circumstance is the result of our political and financial leaders incompetence (or some say plan). They knew what was happening and did nothing to prevent it and now the world is facing the consequences of their actions/inaction.
My point is that the American voters will not accept massive trade imbalances with China when U6 is at 17%+. So the politicians who will get votes are the ones who espouse "solutions" to this dilemma. So what can a country do to combat the mercantilist? Currency devaluation is a start, and eventually trade barriers, capital controls and protectionism are the most likely. It is also historical that mercantilism leads to war. Let's hope not.
sschu
Just prolonging the agony by not "allowing" the REAL economy to bottom.
If only the central banks and especially the Fed, would let all the markets find their new equilibrium. Sure, painful dislocations, jarring gyrations, but eventually (and must faster than this prolonged intervening fakeness will take) the an economy that is healthy and supports reasonable lives will exist.
Take the surgery over 10 years of chemo if you have that choice!
Babies smile like that just before they dump their diapers.