We're In a Global Currency War ... But What Does It Mean?

→ Washington’s Blog

There is a currency war raging world-wide.

Japan, Brazil, Peru and countries all over the world are trying to beggar thy neighbor (just as happened during the 1930s) and gain a leg up for their exports by cheapening their currencies.

As the Wall Street Journal writes:

Beggar-thy-neighbor currency devaluations proved ruinous for the
global economy in the 1930s. Is the world setting off down the same
slippery slope again?

Japan's decision to intervene in the
currency market to drive down the value of the yen blew a hole in the
developed world's united effort to persuade China and other Asian
countries to stop artificially holding down their currencies.

If you take a step back, it really is an odd situation. As Joe Weisenthal notes:

Just think for a moment about the screwy times we live in
when central banks are trying to hurt their rivals by buying up their
rivals' bonds -- essentially lending them money.

Such is the state of things in a world where every country wants to weaken their currencies to boost their own exporters.

And the House has passed legislation saying China is a currency manipulator and has to raise the value of the Yuan.

What does it mean?

American
experts say that the Chinese Yuan is undervalued by 25%, which makes
Chinese exports artificially competitive. The U.S. Congress is trying
to blame China's undervalued currency for America's bad economy and
unemployment woes.

But the former U.S. trade representative, Susan Schwab, says
that - while there's a very real problem in terms of China artificially
keeping the renminbi low - this isn't the way to solve anything. Schwab
calls it "a signal-sending exercise during an election season". She
says that the bill won't really do anything, even if the Senate passes
it and it is signed into law. Schwab says it "makes no sense", won't
solve any problems, will escalate tensions, and will only divert
attention from the real trade problems between the U.S. and China.

Indeed,
Schwab warns that other countries might decide that this U.S. bill
means that its open season for addressing currency manipulation, and
that other countries believe that the U.S. is manipulating our currency. She says there could be a "boomerang effect" from the legislation.

(Ironically, an anti-sourcing bill
- the kind of legislation which might actually keep jobs in the country
- was defeated in the same week that the toothless China bill passed.)

Zachary Karabell notes that China is not to blame for all of America's economic woes, and China is in the middle of revaluing its currency:

The idea is that there is direct line between China, its
currency, its exports of lower-cost goods to the United States, and the
erosion of middle-class life and now soaring unemployment. But U.S.
manufacturing has been bleeding jobs for decades

...

What's
more, the recent loss of millions of jobs since 2008 has everything to
do with the collapse of the construction and housing industries along
with the near-death of the Big Three American auto makers than with
any competitive challenge from China. China has become a large car
market for General Motors, but not for export to the United States:
for sale in China. It would take a massive leap unsupported by any
fact to lay the demise of the U.S. auto industry at the feet of China,
or for that matter hold China responsible for the sub-prime and
derivative debacles. Those are the cause of recent job loss.

Furthermore,
China has been revaluing its currency, nearly 20% between 2005 and
2008 and now nearly 3% since June when the government resumed that
policy having shelved it during the midst of the global financial
crisis. It is in the domestic interest of the Chinese government to
raise the value of their currency because they are focused on building
up on internal, domestic consumption market. They have no wish to be
dependent long-term of the vagaries and whims of American consumers,
and higher purchasing power for Chinese consumers is the answer. They
are not revaluing quickly enough to suit an America stuck in second
gear and looking for someone to blame, but revaluing they are.

Martin Wolf points out
that the real problem is global weakness in demand, and China is
understandably trying to avoid what happened Japan's ramped-up currency,
which led to the Lost Decade:

“We’re in
the midst of an international currency war, a general weakening of
currency. This threatens us because it takes away our competitiveness.”
This complaint
by Guido Mantega, Brazil’s finance minister, is entirely
understandable. In an era of deficient demand, issuers of reserve
currencies adopt monetary expansion and non-issuers respond with
currency intervention. Those, like Brazil, who are not among the former
and prefer not to copy the latter, find their currencies soaring. They
fear the results.

***

Here there are three facts, relevant to today’s currency wars.

First,
as a result of the crisis, the developed world is suffering from
chronically deficient demand. In none of the six biggest high-income
economies – the US, Japan, Germany, France, the UK and Italy – was
gross domestic product in the second quarter of this year back to where
it was in the first quarter of 2008. These economies are now operating
at up to 10 per cent below their past trends. One indication of the
excess supply is the decline in core inflation to close to 1 per cent
in the US and the eurozone: deflation beckons. These countries hope for
export-led growth. This is true both of those with trade deficits
(such as the US) and of those with surpluses (such as Germany and
Japan). In aggregate, however, this can only happen if emerging
economies shift towards current account deficit.

***

China
is overwhelmingly the dominant intervener, accounting for 40 per cent
of the accumulation since February 2009. By June 2010, its reserves had
reached $2,450bn, 30 per cent of the world total and a staggering 50
per cent of its own GDP. This accumulation must be viewed as a huge
export subsidy.

Never in human history can the government of one superpower have lent so much to that of another.

***

It
is not hard to see China’s point of view: it is desperate to avoid
what it views as the dire fate of Japan after the Plaza accord. With
export competitiveness damaged by its soaring currency and pressured by
the US to reduce its current account surplus, Japan chose not the
needed structural reforms, but a huge monetary expansion, instead. The
consequent bubble helped deliver the “lost decade” of the 1990s. Once a
world-beater, Japan fell into the doldrums. For China, self-evidently,
any such outcome would be a catastrophe.

Bill Bonner notes
that the core problem is unhinged fiat currencies which are not backed
by anything real, and that a revaluation in the Yuan would hurt the vast
majority of Americans when they shop:

These strange
facts incite the following reflection on the whole scammy system. The
trouble with today's capitalism is that there is little honest capital
left in it. It has been drained away by quackery, debt and fraud. Real
capitalism requires solid capital - money you can trust. But real money
disappeared nearly 40 years ago. That was when the last traces of gold
were removed. Since then, all currencies have been "managed." No
longer fixed measures of real wealth, they have become
tools...supposedly used by the authorities to promote full employment
and growth...but in fact little more than monetary felonies.

From
the end of the Napoleonic wars until the beginning of World Wars of
the 20th century, the world's money system was backed by gold. You
couldn't "manage" it. You couldn't devalue it. You couldn't talk it up
or talk it down. You couldn't beggar thy neighbor by cheapening it or
enrich him by making it more dear. It was what it was. The new
experimental money system began in the Year of Richard Nixon, 1971.
Thereafter, the supply of money could increase much faster than the
supply of goods and services. US money supply (M2) rose 1,314% between
1970 and 2008, from $624 billion to $8.2 trillion. What did all this
ersatz new money do? First it flattered...then it corrupted...and
finally, it robbed.

America's working stiffs were the first to
get whacked. Inflation made them feel like they were earning more; but
they haven't had a real, hourly raise since the system was put in place
4 decades ago. And now, America is struggling to make sure they get
none in the future either. Lowering the dollar against the renminbi
increases the cost of probably 90% of the goods in Wal-Mart and Costco -
where the working classes shop.

But this has been going on ever
since the managers began taking liberties with the dollar. In the
1960s, the working man - 90% of the population - got 60% of the income
gains of the period. By the end of the bubble years - 2001- 2007 - he
got just 11%. This has resulted in a "record income gap," says this
week's news. Half the nation's income goes to the top 20% of the
population, nearly twice as much, compared to the bottom 20%, as in
1967; it's the biggest gap since they began keeping track.

Consumer
prices rose 5 times over the last 40 years. The stock market went up
15 times - from 800 in January 1970 to over 12,000 in 2008 - roughly in
line with the increase in the money supply. But the phony money
betrayed the rich too. Investors were misled. Capitalists erred.
Trillions of dollars went down rat-holes. Consumers were spent out, but
the capitalists kept building shopping malls. Now, stock market prices
have gone nowhere for more than a decade. And household net worth -
most of it in the hands of the wealthy - has declined $12.3 trillion
from the peak. When the mistakes are finally flushed out, they could be
down another $12 trillion.

The horns have sounded and bells
have been rung. It is 1939 in the currency war - just the beginning.
When it is over, every managed currency in the world will be dead or
wounded. But we will be wiser, too. When the new managed dollar was
introduced in the "Nixon Shock" of August, 1971, nobody knew what it
was worth. When the end comes, everyone will know.

And Michael Hudson points out
that - with the dollar as the world's reserve currency - every county,
including China, must devalue their currencies just to stabilize their
economies:

It is traditional for politicians to
blame foreigners for problems that their own policies have caused. And
in today’s zero-sum economies, it seems that if America is losing
leadership position, other nations must be the beneficiaries. Inasmuch
as China has avoided the financial overhead that has painted other
economies into a corner, nationalistic U.S. politicians and journalists
are blaming it for America’s declining economic power.

***

For
over a century, central banks have managed exchange rates by raising or
lowering the interest rate. Countries running trade and payments
deficits raise rate to attract foreign funds. The IMF also directs them
to impose domestic austerity programs that reduce asset prices for their
real estate, stocks and bonds, making them prone to foreign buyouts.
Vulture investors and speculators usually have a field day, as they did
in the Asian crisis of 1997.

Conversely, low interest rates lead
bankers and speculators to seek higher returns abroad, borrowing
domestic currency to buy foreign securities or make foreign loans. This
capital outflow lowers the exchange rate.

There is a major
exception, of course: the United States. Despite running the world’s
largest balance-of-payments deficit and also the largest domestic
government budget deficit, it has the world’s lowest interest rates and
easiest credit. The Federal Reserve has depressed the dollar’s exchange
rate by providing nearly free credit to banks at only 0.25% interest.
This “quantitative easing” (making it easier to borrow more) aims at
preventing U.S. real estate, stocks and bonds from falling further in
price. The idea is to save banks from more defaults as the economy slips
deeper into negative equity territory. A byproduct of this easy credit
is to lower the dollar’s exchange rate – presumably helping U.S.
exporters while forcing foreign producers either to raise the dollar
price of their goods they sell here or absorb a currency loss.

This
policy makes the dollar a managed currency. Low U.S. interest rates and
easy credit spur investors to lend abroad or buy foreign assets
yielding more than 1%. This dollar outflow forces other countries to
protect their currencies from being forced up. So their central banks do
not throw the excess dollars they receive onto the “free market,” but
keep them in dollar form by buying U.S. Government bonds. So the
“Chinese savings,” “yen savings” and “Euro savings” that are spent on
U.S. Treasury securities (and earlier, on Fannie Mae bonds to earn a bit
more) are not really what Chinese people save in their local yuan, or
what Japanese or Europeans save. The money used to buy U.S. Government
securities consists of the excess dollars that the American military,
American investors and American consumers spend abroad in excess of U.S.
earning power.

***

Accusations that Japan, South Korea
and Taiwan are “making their currencies cheaper” by recycling their
dollar inflows into U.S. Treasury securities simply means that they are
trying to maintain their currencies at a stable level.

***

It
is how most central banks throughout the world are responding to the
global dollar glut. They are increasing their international reserves by
the amount of surplus free credit” dollars that the U.S. payments
deficit is pumping out. To pretend that China is “manipulating its
currency” by doing what central banks have done for over a century is
[false]. Back in the early 1970s, U.S. officials told OPEC governments
that if they did not do this, it would be deemed an act of war. And
Congress has refused to let China buy U.S. companies – so China can only
recycle its dollar inflows by buying Treasury securities, thereby
financing the U.S. federal budget deficit.

***

To pretend
that exchange rates are determined mainly by international trade is Junk
Economics Error #3. International currency speculation and investment
is much larger than the volume of commodity trade. The typical currency
bet lasts less than a minute, often being computer-driven by arbitrage
swap models. This financial fibrillation has dislodged exchange rates
from purchasing-power parity or prices for export and imports.

The
largest payments imbalances have little to do with “market forces” for
imports and exports. They are what economists call price-inelastic –
money spent without regard for price. This is true above all for
military spending and maintenance of America’s vast network of foreign
bases and political maneuverings to control foreign countries. During
the 1960s and ‘70s U.S. military spending accounted for the entire
balance-of-payments deficit, as private sector trade and investment
remained in balance. Escalation of America’s oil war in the Near East
and Pipelinistan, and the hundreds of billions of dollars spent to prop
up America-friendly regimes, end up in central banks – whose main
option, as noted above, is to send them back to the United States in the
form of purchases of U.S. Treasury bills – to finance further federal
deficit spending!

None of this can be blamed on China.

***

U.S.
strategists would not mind seeing China’s economy similarly untracked
by letting global speculators bid up the renminbi’s exchange rate – by
enough to let Wall Street speculators make hundreds of billions of
dollars betting on the run-up. “Free capital markets” and “open
financial markets” are euphemisms for setting the renminbi’s exchange
rate by U.S. and European currency arbitrage and capital flight. The
U.S. balance-of-payments outflow would increase rather than shrink,
thanks to the ability of American banks to create nearly “free” credit
on their keyboards to convert into Chinese or other currencies, gold or
other speculative vehicles that look to rise against the dollar.

***

“An
undervalued currency always promotes trade surpluses,” Prof. Krugman
explains. But this is only true if trade is “price-elastic,” with other
countries able to produce similar goods of their own at only marginally
different prices. This is less and less the case as the United States
and Europe de-industrialize and as their capital investment shrinks as a
result of their expanding financial overhead ends in a wave of negative
equity.

***

Congress is increasing the drumbeat of
accusations that China is violating international trade rules by
protecting itself from financialization. “Democrats in Congress are
threatening to … slap huge tariffs on Chinese goods to undermine the
advantages Beijing has enjoyed from a currency, the renminbi, that
experts say is artificially weakened by 20 to 25 percent.” The aim is to
make China “lift the strict controls on its currency, which keep
Chinese exports competitive and more factory workers employed.” But such
legislation is illegal under world trade rules.

***

This
kind of propaganda does not see the United States as guilty of “managing
the dollar” by its quantitative easing that depresses the exchange rate
below what would be normal for any other economy suffering so gigantic
and chronic s payments deficit. What makes this situation inherently
unfair is that while the Washington Consensus directs other countries to
impose austerity plans, raise their taxes on consumers and cut vital
spending, the Bush-Obama administration blames China, not the U.S.
financial system or post-Cold War military expansionism.

The
cover story is that foreign exchange controls and purchase of U.S.
securities keep the renminbi’s exchange rate low, artificially spurring
its exports. The reality is that these controls protect China from U.S.
banks creating free “keyboard credit” to buy out its companies or load
down its economy with loans to be paid off in renminbi whose value will
rise against the deficit-prone dollar.

***

It’s the arbitrage opportunity of the century that lobbyists are pressing for, not the welfare of workers.

***

Paul
Krugman and Robin Wells blame China for Wall Street’s junk mortgage
binge. Instead of pointing to criminal behavior by the banks, brokerage
companies, bond rating agencies and deceptive underwriters, they take
the financial sector off the hook: “Just as global imbalances – the
savings glut created by surpluses in China and other countries – played
an important part in creating the great real estate bubble, they have an
important role in blocking recovery now that the bubble has burst.”

This
sounds more like what one would hear from a Wall Street lobbyist than
from a liberal Democrat. It is as if the real estate bubble didn’t stem
from financial fraud, junk mortgages, NINJA loans or the Federal Reserve
flooding the U.S. economy with credit to inflate the real estate
bubbles and sending electronic dollars abroad to glut the global
economy. It’s China’s fault for running large trade surpluses “at the
rest of the world’s expense.”

***

Wall Street’s idea of
“equilibrium” is for foreign countries to financialize themselves along
the lines that the United States is doing, then global equilibrium could
be restored.

***

Such suggestions are a cover story for
America’s own financial mismanagement. The U.S. idea for global
equilibrium is to demand that that the rest of the world follow suit in
adopting the short-term time frame typical of banks and hedge funds
whose business plan is to make money purely from financial maneuvering,
not long-term capital investment. Debt creation and the shift of
economic planning to Wall Street and similar global financial centers is
confused with “wealth creation,” as if it were what Adam Smith was
talking about.

***

China is trying to help by voluntarily
cutting back its rare earth exports. It has almost a monopoly,
accounting for 97% of global trade in these 17 metallic elements. These
exports are “price inelastic.” There is little known replacement cost
once existing deposits are depleted. Yet China charges only for the cost
of digging these rare metals out of the ground and refining them. They
are used in military and other high-technology applications, from guided
missile steering systems and computer hard drives to hybrid electric
automobile batteries. This has prompted China to recently cut back its
exports to save its land from environmental pollution and, incidentally,
to build up its own stockpile for future use.

So I have a modest
suggestion. If and when China starts re-exporting these metals, raise
their price from a few dollars a pound to a few hundred dollars.
According to theory put forth by Mr. Krugman and the U.S. Congress, this
price increase should slow demand for Chinese exports. It also would
help promote world peace and demilitarization, because these rare metals
are key elements in missile guidance systems. China should build up its
national security stockpile of these key minerals for the future – say,
the next prospective five years of production. Let this be a test of
the junk paradigms at work.

The bottom line is that there really is a trade imbalance with China
which needs to be addressed over some reasonable time-frame.  But it can't be done overnight. 

In the meantime, America hasn't addressed its own fundamental problems
(such as rampant speculation and fraud) which led to our financial
crisis. And as former trade rep Susan Schwab notes, the Congressional
bill is nothing but political theater which might boomerang on us.

Some people think that the currency war could eventually lead to a flight from paper money altogether (and see this), or to an outright conflict between nations (and see this). But those are topics for future discussion.

Comments

[paragshah12]

Global finance and business is the new battlefiel­d of the 21st century. Currency wars are an integral part of the strategy. Government­s across the globe are trying to boost employment­, and one of the best ways to do so is by increasing exports.
http://www.financemetrics.com/the-currency-wars-of-today/

[ViewfromUnderth...]

Uh-oh....

"China is trying to help by voluntarily cutting back its rare earth exports"

According to Michael Hudson writing on GlobalResearch.ca, quoted by Washington's Blog writing on GlobalResearch.ca. (reproduced here, unfortunately).

Why research globally when all you really have to do is to quote at length from the guy on the computer next to you....

People, this is retarded...and you all just nod and lap it up...because it is Zeeerooo Heeedge, stop drooling on your computers and start thinking.

China is a mercantilist state preying on the world. End of story. They think in thousand year terms, they are so smart....really? How much water have they got? How is their top-soil going after they denuded the country of trees in the 60s? How smart are they that they will have social unrest if they drop below 8% GDP growth each and every year....and lo and behold, the number is 8.1%....cos if it isn't, have they got a bullet for you. And these guys are cutting them some slack....?

I could go on, but suffice to say this drivel is up to the standard of Geo Washington's recent reports on the end of the world caused by the drilling catastrophe in the gulf of Mexico...he takes a valid, interesting and thought-provoking point of view, or news story, and fucks it up because he does not know how or when to stop before he is kneck deep in utter bullshit.  

[Coldfire]

Multilateral amendment of the bookkeeping entries in the fiat currency Ponzi scheme is a desperate sideshow. Competitive devaluation is simply destroying the last shreds of integrity of the pricing signals associated with ephemerally flimsy fiat units of account. As all fiat currencies revert to value of the cost of their production, gold is retaking its rightful place. That is why gold confiscation is coming. Plan accordingly.

[bunnyswanson]

China is very interested in low-priced (USD) food exports;- for 1.3 billion people citizens - and if the dollar crashes, in this agriculturally corporate-owned atmosphere, that will have a profound impact on the cost of food for the US and its dollar. 

[gwar5]

Good article. What does a currency war mean? 

It means we have already lost the war, and we are merely playing things out now with currency to determine the conditions of our economic surrender.

The Chinese won by getting us to go bankrupt buying all those little plastic toys. Genius.

.

[SoccerDad]

@Dukkbutt   Retired in 2008 but, I can tell you that most of the Officers are too busy planning their career and increasing promotion potential to care about the economic war.   The sense I had was that the leadership believed it wasn't our fight (military personnel), it was a fight handled by corporations and spy's.   Yes, better technology and weapons with the training to use it are there when/if the time comes for it to be necessary but, nobody in the regular military is often given the opportunity to use them.  

   My perceptions of the World changed tremendously when it came time to plan for retirement and finding a sustainable job that year.   Thanks to zerohedge and contributors, along with some other excellent sites, I've been able to prepare for the endgame over the last two years.

[DukkButt]

Yes, Officers careers are purely political, since their entire promotion potential is based on annual performance reports. By that I mean that it doesn't matter how good or bad a job you do (in and of itself), it only really matters how well your supervisor writes your performance report (or how well you write it for him - been there, done that), which is really based fundamentally on if they like you or not. Anyone who thinks military officers are going to buck the system to uphold the Constitution doesn't understand how the system works. Enlisted are more likely to do something out of the norm because their promotion is based mostly on time in grade, time in service and military and job knowledge tests. Their career can survive a bad rating, where an officer with even one bad rating is finished.

There was a great training video for KC-135 crews that illustrates this point (supposed to be a true incident). Short version: instructor pilot runs the plane out of fuel, engines are flaming out as it approaches the runway. The boom operator (only enlisted crew member) finally decides he's had enough, drops the crew entry hatch and bails out. Once he's gone the rest of the regular crew follows. The instructor pilot stays in the pilot seat and lands the plane, fully flamed out, bounces in the overrun and rolls onto the main runway. The officers would have stayed in the plane and died in the crash, if it went that far, because bailing out like that would end thier career. The boom operator was free to make the wise choice because it wasn't a career ending decision.

[onlooker]

George Washington----- great write up. thanks again

I live in the largest financial crime scene of lord knows when. There are no police or arrests. Leadership of my nation appears to be involved. And, there is a spin up of the leadership that I need to fear China. WHY

Them Chinamens are gonna get us they say. WELL, from what I read them Chinamens have bought up a bunch of junk bonds that my Country prints and that has saved me from falling completely off the cliff. It appears that China may be saving the World.

I am not ascared of the Chinamens, but those boys in Washington DC are a different matter. China appears to be running its country and economy rather well. It may be that they will help us avert the total collapse of the USA. I think China deserves a little more respect. It could be that China has some government functionality we need to look at and consider emulating. Their dealing with financial fraud would be the first to copy.

China is the new world 800 pound tiger. As the US may now be a paper tiger, I suggest we play nice. We have a real tiger looking us in the face and there is no dignity to go with it.

[proLiberty]

All central banks in the world issue air-backed money.  The worry about the dollar must be tempered by the knowledge that the even bigger issue is that all central banks are co-inflating.  If anyone thinks the collapse of the dollar will be bad for our economy, they should ponder a collapse of all major currencies.  There is no air-backed currency of last resort.

[Fred Hayek]

You don't have to want to foment a war with China to note that its government doesn't respect intellectual property rights and that their currency is pegged ridiculously low against the dollar.

[repete]

So China spends the last 30 years building us cheap toasters in order to buy a trillion dollars of our treasuries and Bernanke declares that much into existence in what, 10 minutes.  Now your saying it isn't fair that they bootleg a few copies of Jackass III?  Better call the Wammbulance!

[DukkButt]

How about it Tyler? An open thread for those on current military duty to comment on what they are being told (officially and unofficially) about the world economic/social/political situation. There have to be some active duty military that lurk around here!

[repete]

This might be of interest Dukk.  Wesley Clark and other's thoughts on the beginning of the war on terror. http://patriotsquestion911.com/

[DukkButt]

I spent 14 years in the Air Force. Got out in 1992. Even back then the folks in the military who were responsible for planning for future operations were saying that China would be the next military "threat" for the US. So, planning for the current environment has been going on for at least 20 years. This is definitely not a "surprising new development".

There is an interesting dichotomy in the military, between the "follow orders and get the job done" crowd (the majority and, realistically, the primary need) and the "planners" who try to look at how things actually work and anticipate future needs. The planners always have an uphill battle because, especially as an officer, you advance by conforming, not by fighting the system and the planners often have to fight the system to get it to change in response to a changing environment.

I'd love to hear from current military types what the "official" response is to the current world economic environment. I know the leadership is warning about civilian unrest, but what are the officers being taught these days during their training? How about it? Any active duty types who can comment?

[americanspirit]

Er - has anyone noticed? WW3 began some time ago.  This ain't our grandfathers war, armies clashing in the night and all that. I remember Senator Wayne Morse of Oregon suggesting at the time that the only way we were going to win the Vietnam war was to take all the money we were spending on bombs and bullets and convert it to pennies, then layer Vietnam 6 feet deep in copper, halting all movement and giving the NV the entire world's supply of copper in exchange for our 'victory'. Seems like the Chinese are doing the same with us, except instead of copper we're getting covered six feet deep in shit. For sure we're going to own the world's entire supply soon, if we don't already. Everything is already seeming kind of sluggish.

[blindman]

minute 39 or so.

perfect crime dynamics.

status quo nightmare, ongoing.

nothing to see here???

https://

This year's department- sponsored lecture, The Steinhardt, features Dr. William Black, University of Missouri-Kansas City.
It occurred Thursday, Feb. 18th, 2010, 7:30-9:00 PM, at the Council Chamber.
The title of Dr. Black's talk is: Why Elite Frauds Cause Recurrent, Intensifying Economic, Political and Moral Crises.

william black , The title of Dr. Black's talk is: Why Elite Frauds Cause Recurrent, Intensifying Economic, Political and Moral Crises.

.

on to qe II,  no investigation here  ....  must be a flawed ideology thing. 

market will self correct.  .... when the fed owners move to a global seat.

expect the same globally .... etc. 

thanks to the original poster of this presentation.

control fraud, epic failure,

http://en.wikipedia.org/wiki/Gresham's_law

.

“From Jesse's Cafe Americain:

"Gresham's Dynamic: The least ethically inclined have an advantage in the US financial system (in which regulatory capture nullifies enforcement) driven by perverse incentives of oversized bonuses and the failure to investigate and prosecute criminal activity.

In addition to the overhang of unindicted and undeclared fraud that is still in place, distorting the clearing of the markets, there is the issue of an imbalanced economy in which an oversized financial sector exacts what amounts to a Draconian Tax on the real economy, that is, fees and tariffs and other unproductive drains in excess of anything that the government is levying."

http://jessescros­sroadscafe.blogspot.com/2010/08/william-k-black-on-financial.html”

[Bob]

Nice to see some substantial examination of The Great Yellow Threat, soon to  be upgraded to Menace.  Hudson's discussion of the underlying ambitions of traders and other "speculators" was especially interesting . . . though I found it hard not to laugh when he asserted the cut-back on RE exports was China's nobly sincere effort to do us a favor. 

[Ieetseelmeet]

Congress is pissing into a yellow wind.

U.S. Losing Control of Bombs to China Neodymium Monopoly

http://www.bloomberg.com/video/63400346/

I love the part where they are looking after puppies in what was once a manufacturing plant.

[Ieetseelmeet]

Congress is pissing into a yellow wind.

U.S. Losing Control of Bombs to China Neodymium Monopoly

http://www.bloomberg.com/video/63400346/

[gillimus]

There are only two ways out of the current debt crisis:

1. Inflation.  $30k in debt is cheaper to pay off when your salary has risen from $50k to $75k.

2. Default.

[SWRichmond]

But inflation IS default, isn't it?

[kalum]

Passing a Bill to tell China what to do? Our Congress is a bunch of AH's. Pathetic. And so are we for electing them

[Sudden Debt]

PS: Did anybody notice gold is up to 1320$ and the euro is up to 1,38?!

If this will keep on going up till november 4, we'll have a rally on the DOW to 12500!

[Sudden Debt]

A "currency war" is the most dangerous thing in the world. All they do it decrease the salary costs of the inhabitants to keep on being competitive.

I causes a inflation that makes everybody poor.

And the money they make from that war? They mostly waste it on some stupid government project.

Everybody is looking to the US and says: If they can act like god, SO DO WE! PRINT! PRINT LIKE THERE IS NO TOMORROW!!

[knukles]

Oppps!  Should get the feathers flying!

[knukles]

Amazing.  We gets where we gets primarily as a result of our own policies, but when things go wrong, need a scapegoat.  Human nature, as in denial.

So, WTF;

It's China's fault.
No more MSG for them.

[MarketFox]

Here it is....

In my 32 years in the markets...heavy public weighting proves never to be a winner....

Thus one should be very wary....when public opinion is heavily one sided...generally one has to go the other way...if one is to have a financial advantage...

At the moment...this would relate to the movement from stocks to low yield debt....and to precious metals....

Commods have become investments and money is following performance....no different than at any other time....for any asset class....

The big money game is to find the instruments by which can be broadly distributed by widely publicized public logic....which at the end of the day....will be the losers ....once again....

........................

With regards to currencies....there seems to be a constant....which few seem to grasp....one views something as bad...so this is bad...whereas if there are constants forming in the equation....just remember that constants can be thrown out...as they are not needed....ie bad/bad....good/good....

[Silversem]

@ shamefull    For now the arabs are the scapegoat and al qaida enemy of the state no.1. But i also fear a new cold war and this time with China. The U.S. has too many economic problems which are only growing bigger by the day. They need war (cold or hot) to draw internal attention away.

Silversem

http://www.goudbelegger.com

http://forex.2link.be

[Shameful]

They need a new scapegoat. They cannot blame the economy on the Arabs and magic men in caves. Well they could but it would in effect admit that they were defeated. That with the most powerful military ever assembled in human history and 10 years that a small band of cavemen beat them, not good for them to keep power. Even if this were the case they would not admit it. But China is new. It evokes the old fears of the yellow menace and a mixture of fear and respect for their rapid economic growth.

Hell follow the main policy outlets such as Krugman and he is calling for WW3 as an economic panacea. Also take note that Krugman has been beating the war drum against China for a while.

[Bob]

+1

[americanspirit]

At some point China will simply offer to make us a trade - they give us back our UST markers, and we give them Iowa and Nebraska, complete with slave labor. It will be an offer we literally can't refuse. Other than good land, good water, and lots of Walmart shoppers who won't mind trading one master for another as long as the master keeps the shelves full - we don't really have anything China wants.

[NoVolumeMeltup]

Iowa and Nebraska are out of the question. The New England states, however are negotiable.

[sagerxx]

Ah, the stank stench of Hate on New England.  Such an easy target (lavish welfare progs, etc.) that it doesn't require brains to disrespect it.

If you knew anything about what goes on outside the Cit-Tays...  Ah, but that would require stepping beyond cheapshot land...

Tell you what.  Ya'll come visit me 2 years post-Fan in upstate NY.  We'll feed ya.  

Arable land, forward-thinking people, reskilling galore.  

Yah.  We're your huckleberry.

Kingston, NY:  October '12.  Ya'll come...

Viva -- Sager

[NoVolumeMeltup]

You're James Kunstler, right?

I'm honored.

[chopper read]

no dissing upstate NY here, bud.  NYC disses you enough.  sort of like Chicago vs. south of I-80.  we feel your pain. 

[chopper read]

iowa and nebraska?  these states are actually producing something the world wants.  can't we just give the chinese all the bits in illinois north of I-80 and Manhattan?  haven't those areas of the country cost us enough?

[quasimodo]

Not saying I disagree with this scenario......but we would see unholy hell unfold if this was to happen

[Dollar Bill Hiccup]

State centric mercantilist China must create internal demand. The export economy and SSE's do not want to see this and it's a powerful lobby in China. While the currency manipulation bill will do nothing to actually address this, it will send a message to the Chinese that they need to move faster because once the currency issue has now been addressed publicly it is only a matter of time before tariffs pile up with unknown consequences of a trade war etc. 

Scary for a CCP run central beauracracy because it entails giving 1) the people more political power along with economic power by raising wages etc. and 2) the provincial powers a greater stab at manipulating the wealth / power that will flow to the ordinary Chinese people. Think state sponsored Oligarchs in Russia and the great mafiosa share wars.

China's history is four thousand years of centralizing power and then seeing that power siphoned off to the provinces / war lords etc. So the CCP is accutely aware of the pickle it is in. They have to create internal demand by relinquishing control.

While Hu Jintao stated explicitly that a 20% rise in the RMB would cause social havoc the transition away from exports and mercantilism will ultimately benefit the Chinese people at the expense of the CCP.

[purple]

---China's history is four thousand years of centralizing power and then seeing that power siphoned off to the provinces / war lords etc. So the CCP is accutely aware of the pickle it is in. They have to create internal demand by relinquishing control.---

That's their quandry....China is hooked on a new form of opium, the dollar, that may blow apart their society once again.

[Shameful]

The song and dance with China is about building a new enemy. Anyone who has been watching the past few years will have noticed that the pieces are being moved into place to blame China for all of American's ills, our housing bubble and looming insolvency. Sure China is playing the game to keep exports up, everyone is. The humorous thing is China is actually exiting dollar based assets and buying other things, reports are saying that China has turned into a net seller. China is being set up to be the scapegoat and a new target for a cold or hot war.

Though I still cannot fathom why these other nations would simply not print and then promptly buy gold or other commodities. Or even print, buy dollars, buy commodities. Locking up money in those assets is a sure way to get burned, and if a banker is just going to counterfeit his nations money he should at least get something real for it.