Having covered the issue of “competitive devaluation” and currency-debauchment in considerable depth in recent commentaries, China’s “surprise devaluation” of the renminbi provides a practical, current example to illustrate the economic dynamics at work here.
While making its devaluation announcement, Beijing said that it wanted its currency "to reflect fundamentals" and to no longer simply mirror the movement of the dollar. It acknowledged the fact that its peg to the dollar was problematic and that it wanted a better, more natural mechanism. This is the key to understanding the announcement: The Chinese are preparing for a time in which the financial world does not spin in orbit around the dollar. Such a reality must make us think about the future.
The most pivotal importance of China is that it was the world’s latest financial hope. The yuan devaluation shatters that hope once and for all. The global economy looks a lot more bleak for it, even if many people already didn’t believe official growth numbers anymore. Because we’ve reached the end of the line, the game changes. Of course there will be additional attempts at stimulus, but China’s central bank has de facto conceded that its measures have failed. They just hope you won’t notice, and try to bring it on with a positive spin. Central banks are not “beginning” to lose control, they lost control a long time ago. The age of central bank omnipotence has “left and gone away” like Joltin’ Joe. Omnipotence has been replaced by impotence.
Printing-press money is fertile ground for expanding world crisis. Crisis is excellent cover for national and international chicanery. How can anyone who is paying attention not recognize these tremors for what they are?
A rising interest rate trend would, according to Gibson, encourage prices to rise towards and likely through the Fed's 2% target inflation rate. This is not how financial traders see it, nor does the Fed. They expect the exact opposite, believing that rising interest rates are bad for demand and commodity prices, which is why the decision has been deferred for so long. The evidence tells us this view is mistaken and that rising interest rates will be accompanied by rising commodity prices.
We would like to believe that a period of peace and prosperity lies ahead of us. Unfortunately, the facts do not support this panglossian assertion. If history repeats it is more likely that we see hyperinflation and the sharp devaluation of paper and digital currencies in the coming years, given that no experiment with money printing has ever had a positive outcome.
Together, “Chindia” imported 296.55 tonnes of gold in May. This surpasses current monthly mine supply globally by 14%. Clearly there is an imbalance in the gold market when demand from two countries alone exceeds total mine supply, which must then be supplemented by existing stocks. Yet prices remain in a downward trend as speculative short selling continues to depress prices.
It's time to challenge the notion that the decline of a currency can be measured simply by the rate of price increases. This price-centric view misses the ongoing hyperinflation.
"It's all noise," squeaks Laszlo Birinyi, deflecting concerns about revenues, earnings, Europe, China, commodities, and rates as he unleashes his latest extrapolation. "If we continue to grow at 11bps per day, the S&P will be at 3,200 within 2 years," he warbles as he hopes his ruler - which missed its 2013 projection by 1100 points - is forecasting better this time.
While mocking socialist paradises everywhere is a recurring theme especially once they have completely run out of other people's money to burn through, what always follows next is far less amusing - complete social collapse, with riots, civil war and deaths not far behind. That is precisely what the video shown below has captured. In the clip, a demonstration against Venezuela's poor transportation services quickly turned violent. End result: one person dead from a gunshot wound, more than 80 arrested and four shops looted on the Manuel Piar Avenue in San Felix.
As we recently warned, the hyperinflationary collapse in Venezuala is reaching its terminal phase. With inflation soaring at least 65%, murder rates the 2nd highest in the world, and chronic food (and toilet paper shortages), the following disturbing clip shows what is rapidly becoming major social unrest in the Maduro's socialist paradise... and perhaps more importantly, Venezuela shows us what the end game for every fiat money system looks like (and perhaps Janet and her colleagues should remember that).
Greece has no future, so long as it clings to the euro. The dollar won't servce you much better. A drachma will only harm the Greek people. That leaves one other option.
Some downward risk to the gold price remains due to the momentum of the recent severe correction in price. He points out that GoldCore had suggested on Bloomberg three years ago that a 50% correction in price was not unlikely at that time as is normal in long term bull markets.
Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years. Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. After years of suppression, the forces of reality are threatening to overwhelm our managed global ""markets"'. And it's about damn time.
Venezuela’s hyperinflation is reaching its final stages. It is probably already far too late for the government to stop the complete collapse of its currency. The bolivar is in the process of transforming from a medium of exchange to tinder for wood-stoves. Venezuelans who had the presence of mind to convert their savings into gold or foreign currency in good time are likely to survive the conflagration intact. Governments never seem to learn. They all believe they can somehow overrule economic laws by diktat. This is not only true of Venezuela’s government, but of practically every government in today’s world. Central planning of money has been adopted everywhere. Venezuela merely shows us what the end game for every fiat money system looks like.