Reserve Currency

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1,000 Japanese Officers To Participate In "Island Recapture" Drill In California

More than six months since the Japanese nationalistic escalation over the disputed island chain (that shall not be named) in the East China Sea sent Sino-Japanese foreign relations to a level not seen since a particular territorial dispute over Manchuria, tensions just hit a fever pitch overnight, when an armada of eight Chinese ships entered what Japan claimed were its territorial waters. China's version of the story is that the vessels were there to monitor the activity of a flotilla of boats reportedly carrying members of a Japanese nationalist group (in what it too, naturally, views as its territorial waters). This was the most Chinese ships to enter Japanese waters near the Senkakus since the Japanese government purchased three of them from what it considers their owner last September and effectively nationalized the chain, a move China has quite vocally disputed and which has led to violent anti-Japanese demonstrations in China, as well as a wide-ranging boycott of numerous Japanese exports. Moments ago Kyodo reported that Japan's Defense Ministry said on Tuesday that "about 1,000 officers of the nation's Self-Defense Forces will participate in a U.S. drill to be held in California in June involving recapturing control of an isolated island."

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BitCoin, Or BetaCoin? What The Venture Capitalists Are Thinking

After a disastrous few days in early April, bitcoin is back over $100 and up on the month, the year and its short lifetime.  ConvergEx's Nick Colas is intrigued and continues to believe that this phenomenon is the most provocative economic experiment since the invention of the euro and well worth watching.  The next chapter of the story, he believes, will be the entry of a host of "Smart money" venture capitalists looking to build the currency's infrastructure.  Money and currency are exactly the kind of large, scalable and complex opportunity that gets VCs very, very excited.  Yes, it could all still end in tears, either by regulation or mismanagement.  But bitcoin isn’t dead just yet, and it remains one of the most potentially disruptive forces in modern finance. In summary, bitcoin is what he calls a "Beta currency." How it all shakes out, however, will be both instructive to watch and potentially profitable for those on the right side of this very novel trade.

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According To 'French' Fitch, France Is Now Rated Higher Than The UK

Fitch has just downgraded the UK from AAA to AA+ - now lower than France's.


Fitch doesn't see the UK economy reaching 2007 highs until 2014 - so there's hope?

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The Argument of Bitcoins v. Gold Laid to Rest, Part II

Here is Part 2 of my article “The Argument of Bitcoins v. Gold Laid to Rest, originally released at my blog, on April 9, 2013. Yes, money that is real and tangible is really better than money that is just a digital valuation backed by air.

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Guest Post: How Empires Fall

The imperial tree falls not because the challenges are too great but because the core of the tree has been weakened by the gradual loss of surplus, purpose, institutional effectiveness, intellectual vigor and productive investment. Comparing the American Empire with the Roman Empire in its terminal decline is a popular intellectual parlor game. The comparison is inexact on a number of fronts but despite the apparent difference, the two empires share the key characteristic of all enduring empires: they extract the cost of maintaining the empire from client states and/or allies. The mechanisms differ, but the results are the same: the empire's cost is distributed to those who benefit from its secure trade routes.

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China Takes Another Stab At The Dollar, Launches Currency Swap Line With France

One more domino in the dollar reserve supremacy regime falls. Following the announcement two weeks ago that "Australia And China will Enable Direct Currency Convertibility", which in turn was the culmination of two years of Yuan internationalization efforts as summarized by the following: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees", and "The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap", China has now launched yet another feeler to see what the apetite toward its currency is, this time in the heart of the Eurozone: Paris. According to China Daily, as reported by Reuters, "France intends to set up a currency swap line with China to make Paris a major offshore yuan trading hub in Europe, competing against London." As a reminder the BOE and the PBOC announced a currency swap line back in February, in effect linking up the CNY to the GBP. Now it is the EUR's turn.

Tyler Durden's picture

Guest Post: Bitcoin: Money Of The Future Or Old-Fashioned Bubble?

Bitcoin has been all the rage lately. The stuff, or lack thereof, runs on peer-to-peer technology, is fully decentralized, has no patents, and is open source. Currently, there are almost 11 million bitcoin units in existence and the maximum amount of bitcoin units that will ever be created by the logic of its design are 21 million. While bitcoins are designed so that they cannot be hyperinflated in name, they certainly can be hyperinflated in substance. There is no doubt that bitcoin is a spontaneous answer to the monetary instability that we see all around us today. On one side of the pond people are worried about the glorified currency peg known as the Euro and on the other about the amount of damage that Bernanke is willing to inflict upon the world’s reserve currency. However, let us not become so enamored of an innovative stateless solution that we forget Austrian economics and hitch libertarianism’s wagon to something heading for a crash.

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Guest Post: Will Globalists Use North Korea To Trigger Catastrophe?

Whenever discussion over North Korea arises in Western circles, it always seems to be accompanied by a strange mixture of sensationalism and indifference. The mainstream media consistently presents the communist nation as an immediate threat to U.S. national security, conjuring an endless number of hypothetical scenarios as to how they could join forces with Al-Qaeda and attack with a terroristic strategy. In the midst of the latest tensions with the North Koreans, I have found that most people are barely tracking developments and that, when confronted by the idea of war, they shrug it off as if it is a laughable concept. “Surely” they claim, “The North is just posturing as they always have," creating a social and political atmosphere surrounding our relations with the Asian nation that places both sides of the Pacific in great danger. The skeptics argue that we will never get to this point, though, because North Korea has brandished and blustered many times before, all resulting in nothing. We see recent events being far different and more urgent than in the past. All that is needed to instigate an event on the Korean Peninsula are tightened sanctions.

Tyler Durden's picture

Weimar vs USA: The Fall Of The Second Empire Of Debt

While being distracted by the developments of this insolvent European sovereign or that, coupled with increasingly prevalent episodes of deposit confiscation, is all the rage these days, the fundamental problems summarized by these three simple words, too much debt, remain. And as has been explained over and over, while confiscation of wealth merely shuffles the various dollar (and euro) signs on the table with the spoils going to the wealthiest, there is no resolution of the underlying problems plaguing a world that has tens of trillions of excess debt. As is by now is well-known, there are two ways out of such a conundrum: default, or inflating the debt away. What is also well-known is that as long as the US preserves legacy reserve currency status even by the tiniest of threads, inflation through debt deluge-funded money creation will always be chosen outcome. Just as was the case in Germany in the 1920s. In fact, as the following video shows, the parallels between where the US is now, and where Weimar Germany were just before everything took a turn for the parabolic, are a few too many for comfort. The only major difference so far is that in Weimar, the creation of massive rampant inflation was what economists would call, "successful."

Tyler Durden's picture

Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility

A month ago we pointed out that as a result of Australia's unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip. Over the weekend, Australia appears to have come to the same conclusion, with the Australian reporting that the land down under is set to say goodbye to the world's "reserve currency" in its trade dealings with the world's biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process "slashing costs for thousands of business" and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar's reserve currency status until one day it no longer is.

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Guest Post: The Tailwinds Pushing The U.S. Dollar Higher

If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher. I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. In a very real sense, every currency is a claim not on the issuing central bank's balance sheet but on the entire economy of the issuing nation. All this leads to two powerful tailwinds to the value of the dollar. One is simply supply and demand: as the global economy slides into recession, trade volumes decline, and the U.S. deficit shrinks. (It's already $250 billion less than was "exported" in 2006.) That will leave fewer dollars available on the global market. The second tailwind is the demand for dollars from those exiting the euro and yen. The abandonment of the euro is already visible in these charts.

Tyler Durden's picture

Guest Post: Whom To Believe On Gold: Central Banks Or Bloomberg?

Bloomberg reported recently that Russia is now the world's biggest gold buyer, its central bank having added 570 tonnes (18.3 million troy ounces) over the past decade. At $1,650/ounce, that's $30.1 billion worth of gold. Russia isn't alone, of course. Central banks as a group have been net buyers for at least two years now. But the 2012 data trickling out shows that the amount of tonnage being added is breaking records. Based on current data, the net increase in central bank gold buying for 2012 was 14.8 million troy ounces – and that's before the final 2012 figures are in for all countries. This is a dramatic increase, one bigger than most investors probably realize. To put it in perspective, on a net basis, central banks added more to their reserves last year than since 1964. The net increase – so far – is 17% greater than what was added in 2011, which was itself a year of record buying. The message from central banks is clear: they expect the dollar to move inexorably lower. It doesn't matter that it's been holding up against other currencies or that the economy might be getting better. They're buying gold in record amounts because they see a significant shift coming with the status of the dollar, and they need to protect themselves against that risk. Embrace the messages central bankers are telling us – the ones they tell with their actions, not their words.

Tyler Durden's picture

Cable Slumps As Fitch Places UK On Rating Watch Negative

Based on the the budget, Fitch has placed the United Kingdom's AAA taing on Watch Negative (for future downgrade): The RWN reflect the latest economic and fiscal forecasts published by the Office for Budget Responsibility (OBR) that indicate that UK government debt will peak later and at a higher level than previously expected by Fitch. GBPUSD snapped 50 pips lower but is reverting a little now - US equities shrug (just another piece of AAA collateral nearer biting the dust).

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Guest Post: The Real Reasons Why The Liberty Movement Is Preparing To Fight

Years ago we wrote of a not so far off future in which martial law, economic collapse, and the destruction of civil liberties stood imminent.  We related our views on the propaganda rhetoric of the SPLC, and how they were using false association to tie liberty groups to any deviant organization they could think of, including racists and domestic terrorists, in order to condition the American public to react to our message with immediate contempt. It became clear to us then that the SPLC, which had become the propaganda wing of the widely reviled Department Of Homeland Security, was helping set the stage for a paradigm shift in the U.S.  This shift would obviously include economic and social disruption, as well as political turmoil beyond anything our nation has seen for over 150 years.  But most importantly, it would pave the way for certain elements of the American populace, namely those who are awake, aware, and outspoken, to be labeled “enemy combatants” dangerous to the state. The SPLC, of course, has so far utterly failed in their efforts to stop the rise of Constitutional activists.  By their own admission, “patriot groups” have expanded exponentially since 2008, and continue to develop freely even in the face of wildly absurd character attacks taken from the amoral (immoral) guidebook of Saul Alinsky himself.  The truth, once realized, is difficult if not impossible to stop. Unfortunately, the establishment understands this as well...

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