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Bernanke – I Want To Pick A Fight With China
Ben Bernanke has been “littering” all over the globe for years. Quite a few countries have had to clean up after he has scattered some “trash”. Bernanke acknowledged that he has been littering outside of US borders in a speech in Tokyo on Saturday (Link). Ben defended his global scattering of bits of paper with:
Assessments of the international impact of (QEIII) should give appropriate weight to their beneficial effects on global growth and stability.
So Ben thinks that US trash is good trash.
Ben did not go to Japan to defend US monetary policy. He traveled around the world to deliver a very specific message. He was very pushy about the need for Emerging Market economies to allow their currencies to appreciate versus the dollar. Ben’s words that will, no doubt, raise some eyebrows in Beijing:
"In some emerging markets, policy makers have chosen to systematically resist currency appreciation as a means of promoting exports and domestic growth"
Ben did not mention a specific country that was abusing its currencies value, but it was clear he was talking about China. The WSJ’s Jon Hilsenrath confirmed that China was the target of Ben’s ire (Link). (Note: You can safely assume that Jon confirmed this with Ben before putting it in print)
The passage was an apparent shot at authorities in China
So Ben thinks that China’s trash is bad trash.
Is ‘trash’ the consequence of manipulation of an FX rate, or is ‘trash’ left behind when there is manipulation of long-term interest rates? That’s a pretty fine line. Bernanke has crossed it.
There are some developments in China that come into play regarding Bernanke’s very public challenge to the Chinese:
1) The entire government will change hands in a month. No one really knows what will happen. A rise in Chinese nationalism is a likely outcome.
2) The economy is slowing at rate that justifies those who have argued for a hard landing. What does it mean if China is growing at sub – 3%? No one knows the answer to that either. China will not take any steps that would hurt its economy anytime soon as a result. Bernanke's challenge to allow the CNY to float higher fell on deaf ears.
3) The Chinese government recently fostered/sanctioned a domestic uprising against Japan. The result was the destruction of Japanese products and factories. The destruction of property has ended. But the evidence shows there has been long-term damage to trade. China inc. is no longer buying Japan inc.
No one has the slightest idea what the implications of this are. If China can turn its citizens against Japan, they probably can do the same to America.
I can understand how some in China would read Bernanke’s words and get a bit miffed. After all, it really is unfair for a manipulator to point fingers at manipulators. I would not be surprised to see an official response from China. A speech, or maybe an editorial would seem likely. Who knows? China could respond with a new tariff on Apple products. Maybe they will just burn down the GM plant.
The timing of Bernanke’s speech is interesting. It could be argued that his monetary saber rattling was occasioned by the IMF confab that was going on, and had nothing to do with domestic politics. Maybe there will be no significant consequences that arise as a result of Ben lighting a match three weeks before the big election. But he lit one; we'll find out soon if there is any dry tinder around.
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That f..ktard Bernanke, just wants to buy every damn Treasury note outstanding back! The printing presses are inked and lubed, for another 1.2 Trillion PBoC selloff!
Bernanke. May he RIH
PLUS ONE.
Since all currencies have their value compared to each other... calling for an apreciation of other currencies = depreciation of the dollar.
Since every nation is/ is trying to kill their currency, and every currency is a ratio of all the others, the only possiblity is general inflation with ratios revolving around a tightly bound range. The exception could be the Euro.
why the Euro?
It's my humble opinion that China dosn't care what the US does anymore, as evidenced by their not buying anymore US debt.
The only questions with regards to China are, has China devloped new markets for it's products, has China devloped a middle class to help support internal demand, has China secured supplies of fuel and raw materials, does China have the ability to quell any internal uprising, is China prepared to write off the trillion or so dollars it's invested in the US.
My best guess "Yup"
Actually China is still buying and China is still stimulating
China and Japan Lead Foreign Buying of U.S. Treasury Debt in July
http://247wallst.com/2012/09/18/china-and-japan-lead-foreign-buying-of-u-s-treasury-debt-in-july/
How Stimulus Spending Threatens Social Stability in China
http://blogs.wsj.com/chinarealtime/2012/10/11/evictions-how-stimulus-spending-threatens-social-stability-in-china/
China: Rise in forced evictions fuelling discontent
http://www.amnesty.org/en/news/china-rise-forced-evictions-fuelling-discontent-2012-10-11
Would not be so sure they have any UST's left.
Probably pledged as collateral to pay for a lot of off balance sheet commodities.
Sure as hell what I would have done.My wife says I'm devious,not really,its just good
business sense.
They have also done something else, which was easier for them actually. They made Bernanke, the Fed and the ECB an offer they could not refuse: Give us US and Euro cash loans at 0% real interest or else we sell your worthless bonds and treasuries. Then of course the Chinese proceeded to buy gold, silver and commodities, natural resources, and even African dictators' allegiances, with the funds provided by the moronic elite of the West.
That's exactly what the Chinese have done, in my opinion. I've been saying this for years. It's good to see that there are intelligent people out there, sir.
Well folks, the Nobel Prize in Economics will be announced tomorrow. QE 1, 2, and 3 infinity, was brilliant economic theory. Everyone on that Nobel Committee knows it. Ben saved the planet, that's why he will be recognized tomorrow as the winner of this year's Nobel Economics prize. It's so obvious.
My money's on Bernie Madoff.
Ben Bernanke and Alan Greenspan have murdered over 37,000 people in 2009 alone. The suicide rate during the Great Depression was 22 per 100,000 and today it is 10 per 100,000. 37,000 is more than those killed in automobiles that year.
Unempplyment was 25% then, today during the Second Great Depression it is 23.8%.
Their fix for unemployment and the Second Great Depression is denial, pretending it doesn't exist and Ctrl-P.
I guess after athey murder a few million American's they'll want to start WWIII.
Do some research on the Illuminati. Massive death IS their plan. It is how they "trancend".
Man who leaps off cliff jumps to conclusion.
Man who drives like hell bound to get there.
Apparenty these proverbs were said by a friend of Confucius and Ben Shalom Shithead should be reminded of them in regard to his QEinfinity.
What China remembers - and also Bruce Krasting, as he was a trader back then - is the 'Plaza Accord' of 1985, where the US strong-armed both Japan and Germany into appreciating their currencies, in order to help keep the USA and the US dollar afloat.
What the Chinese may still think - with some justification is that the Plaza Accord was an extortion by the US against both Japan and the Europeans - and though Germany survived the extortion, Japan was devastated by it.
Older folks can remember the talk back in the 1980s, that Japan was going to 'take over the world' economically ... According to some, it was the Plaza Accord extortion by the US against Japan, that basically destroyed that possibility.
After the Plaza Accord destroyed the value of Japanese foreign investments, their forced currency appreciation created a domestic internal Japanese real estate bubble for four years, which then led to the huge Japanese crash starting circa 1990 ... with whose consequences Japan is still suffering more than two decades letter, though it perhaps managed the consequences as well as possible.
Japan's share market stock values never again saw those highs, still marking about one-fourth of the pricing at the market top. And Japan's real estate values declined about 70% as well, also never to recover.
The implications of Bruce's article above are really staggering if you carry them out to their logical end ... The implication of US belligerence toward its Chinese bankers, is that the US is accepting a US Treasury bond market collapse, and is consciously heading toward World War III as the final US hegemony endgame, a nuclear war against China.
God help us all.
Interesting comment, bank guy, and that was my thought--that the US is once-again attempting to use its Plaza Accord option. You seem to be saying in your last paragraph that due to this US monetary aggression, the Chinese will stop buying our Treasury bonds, interest rates in the US will skyrocket and the US economy will thereby collapse, leading to war with China. Interesting scenario, especially when linked with a possible war against Iran which would cut off a significant part of China's energy supplies, in a sort of meeting-of-the-minds Bernanke/Brzezinski strategy. Tell me it's not possible!
Wasn't Brzezinski the one who said that it would take another Pearl Harbor to induce the US population to support going to war in the ME?
Subsequent to the Plaza Accords, there was the (unfunded) US invasion of Iraq in 2003. Banana Republic Bucks are only supposed to move one way against "developed" currencies over the medium and long term. In 2003 this model broke down. The CNY peg may be an artificial construct to gain trade advantage, but there are larger problems underlying USD valuation.
I think this is exactly what Bruce is elluding to. To be expected from a paranoid old baby boomer. Hedge accordingly (learn mandarin and start establishing your business ties around the world, including china- I have). The stupid fuckers keep buying dollars, so why not keep playing the game while establishing realationships with real people and taking possession of all kinds of physical assets of real value? No one is guarranteed to survive as Mother Nature makes no such promises. Quit your fucking whining and fucking do something you stupid sheep.
The "stupid fuckers" are not buying dollars. They are selling us their manufactured crap, and the dollars they accumulate are the unavoidable other side of the trade. Now they could dump those dollars for gold if they wanted to, but someone will still be stuck with the dollars. The USA runs a net trade deficit, so someone has to end up with the dollars. It is a simple matter of math.
Now if the Chinese wanted to stop being mercantilist, they could do this, and they would no longer accumulate dollars. They would also gain legions of unemployed workers. Obviously, they see selling us their manufactured goods as the best thing for them.
many countries, including china, are indeed still buying all kinds of american paper. That is simply a fact, it's one way to competitively devalue your own currency. Wake the fuck up idiot, everyone is trying to devalue their own currency in order to make their own exports competitive. ZH has been covering this since inception.
"The implications of Bruce's article above are really staggering if you carry them out to their logical end ... The implication of US belligerence toward its Chinese bankers, is that the US is accepting a US Treasury bond market collapse"
If you carry this out to it's logical conclusion it is hard default to creditors all over the world and defaulting on entitlements, or massive inflation. There is no getting aorund it.
Great comment.
No need for hysteria and the N-Word.
China's trade surplus with the US will probably come in at or above last year's record trade surplus, aprox. $280bn.
There's a lot of employment in those numbers, considering that Chinese factory workers are paid between $1 and $2 per hour.
The end game for China has been jobs, not profit. To help things along, the peg.
The demand for Chinese goods is supported by Chinese loans (USTs etc.)
US U6 is still close to 15%. That does not work for society, even if you create your own money.
US corporations are riding that labor arbitrage all the way to the bank.
That, my friend, is a globe which is going to rebalance, like it or not.
The US can :
1) Tell people to stop consuming more than they need. That's not going to happen.
2) Enforce trade tariffs. Nope. The great dream of corporate America is to become Apple, the largest company on
Earth, employing Chinese workers for free, to then sell into the largest coming market on Earth, China.
3) Devalue the USD, which will help to inflate away the debt, actually REDUCE CONSUMPTION by casuing rising import
prices (from, you guess where), lower the real wage gradient, and make exports more competitive.Maybe some day, Apple can employ workers at next to no cost right here in the US !
Bernanke picks #3.
@bank guy,
THANK YOU SO MUCH!
This oldman's impression in reading this article was articulated by your words:
"The implications of Bruce's article above are really staggering if you carry them out to their logical end ... The implication of US belligerence toward its Chinese bankers, is that the US is accepting a US Treasury bond market collapse, and is consciously heading toward World War III as the final US hegemony endgame, a nuclear war against China"
Thank you so much for saying this and helping out an oldman who was searching for some awkward way of expressing what you put so succinctly.
I cannot imagine how the US can continue to use anything and everything EXTERNAL to blame anyone and everyone for the complete collapse of the outdated and now broken model that served as an economic system. My first thought was that it was just being stupid again, but then I remembered GW's article on "real-reason-america-used-nuclear-weapons-against-japan" posted earlier----which poses the question:
IS THE US STUPID OR INSANE OR SIMPLY LOST AND OUT-OF -CONTROL?
I do not have an answer, but hopefully, you will be able to supply one om
I'll answer your question. A little of everything, but the most dangerous thing is that the fuckers that have been coming out of our "best" schools really believe that they are somehow closer to God and are really doing the right thing for the world. Any common sense talk from a farmer like me and they immediately get hostile.
Unlike many of my colleagues in farming I have remained debt-free, or at a debt level that could be paid with cash stockpiles. This is what you get when you actually build a business that can expand and contract with the times and work in states that understand how important productive and efficient land use is.
Many people I know have lost everything and/or have leveraged shit to the hilt. They are easily bullied by the Stanford/Harvard busness school fucks. But I digress, that which cannot be sustained, won't be. Only then do we find out precisely what the value of everyone's labor really is. I say, fucking bring it and anyone who isn't ready for that adult conversation is this way because they know the real value of their labor isn't shit.
The US corporate elite/int banksters are in road runner mode...Great Wall of China is going to hurt
So much for holding out the USA as an example that should be followed.
"2) The economy is slowing at rate that justifies those who have argued for a hard landing. What does it mean if China is growing at sub – 3%?"
Quite possibly things like 3):
"3) The Chinese government recently fostered/sanctioned a domestic uprising against Japan."
The Japanese govt buying Diaoyutai/Senkaku was provocative, but in better times perhaps it would've been allowed to slip.
He's desperate now that his shit's not working.!!
and he's full of it!
It is beyond me how the well being of a country is being manipulated by a dipshit academic who's never really done a real job in his life. He's not even a banker and has never worked inside a commercial bank.
Picking a fight with China to "help the US economy" is not unlike walking into your bosses office, telling him you fucked his wife, bitch slapping him and then asking for a raise and a promotion. Good luck with that strategy.
Actually, carefully done (and not so graphic), such behavior could work. It has worked for me.
Bullshit. So long as we are making up make-believe childish shit, let me try another scenario. "Picking a fight with China to "help the US economy" is not unlike secretly planning a completely new and profitable direction for the company prior to inviting your boss over for dinner at a location that "appears" to be your domicile, at which point youtell him you fucked his wife, you bitch slap him and then shot him in the head and take over the fucking company."
When did everyone become such "fantasy cowards". Shit, if you are going to make up fantasy bullshit, don't make yourself out to be such a pussy. No small wonder America is in trouble (I blame the "everybodies a winner" school system. Grow a fucking pair as the strong will survive idiot, they always have.
Communist China is not innocent by any means and the so called non political bernanke is just being political he is doing this for obama
Bernanake: I'm "The Brain"The hubris of this man knows no boundaries...
Riiiight.
Christine Lagarge, on the other hand, said:
But she thinks he should do it anyway.
Of course the empirical evidence is that such "easy money" policies do indeed cause serious structural imbalances and do destabilize these nations. You need only look at the price of food in these developing economies to find a perfect example.
Note carefully that food is a relatively-minor part of your budget, unless you're quite poor in America. This is a core characteristic of developed economies; they tend to have quite-high per-capita GDP and as a percentage of personal income food and energy expenses are relatively small. Food, for exazmple, carries a 14.2% weighting in our CPI -- that is, it is assumed that you spend about 14% of your income in food. Energy has a roughly 10% weighting in the CPI, and housing has a 31.5% weighting.
Add this all up and you find that approximately 56% of your spending is non-discretionary; that is, you must spend it in some form or fashion to remain alive.
Note that this is for the median household; these percentages do not hold for people at the low or high end of the economic ladder. For the poor, they spend much more comparatively, and for the wealthy, much less.
We're pretty much right up the middle in this regard when it comes to developed nations -- the average is about 16%. However, middle income nations spend 35% of their PCE on food and developing countries spend 55%!
Now consider this -- what happens if the cost of food doubles in a developing nation?
That's simple: The people starve, since you cannot spend more than 100% of anything.
And what is most-sensitive to loose monetary policy? The cost of things that have hard limits on their production because they're tangible. Food. Energy. Housing.
Indeed, Bernanke's claim is that he wants to "support housing prices."
And you might think that this is a "good thing" for America, but you'd be wrong. A significant part of America pays 50% or more of their income toward housing costs -- where economists draw the line for being "severely-burdened." I think they're being rather glib in this assessment, for someone who is in that situation is probably also paying 20% or more for both food and energy expenses, leaving them dangerously close to being unable to cover the combined bill.
But while food, energy and housing may go up in our country due to loose monetary policy, in the developing world where they must import a good part of their energy and food they go up even more. Not only do you get the inflationary impact that's local, you also get all of the inflationary impact that comes with a trade imbalance.
Wait -- trade imbalance? How is that connected?
Let's take two nations, both with floating, non-manipulated fiat currencies. One runs a trade imbalance with the other. Capital from the deficit nation therefore flows to the surplus one in payment for the goods and services flowing the other way. This causes the deficit nation's currency to become weaker because its capital is drained, while the surplus nation's currency becomes stronger, as it gains capital. That, in turn, causes the relative price of the exported goods from the surplus nation to rise and the trade imbalance is automatically cut off.
Nobody has to do anything manipulative for this to take place. Indeed, unless someone manipulates currencies or trade policies this happens immediately and automatically. It is as simple as arithmetic.
So why hasn't it happened with the United States and China, for example?
It is precisely because both China and the United States fraudulently manipulate their currencies via both central bank and fiscal policy that this imbalance has been maintained. By emitting credit via deficit spending into the economy the United States intentionally replaces the drained capital with credit money, which spends exactly the same.
Keep this clearly in mind folks: Bernanke's QE would be literally impossible without Federal deficit spending as there would be no net bond issuance to buy! When you hear Bernanke talking about wanting to see deficits shrink he is lying as it is mathematically impossible for him to engage in his policies without them.
And the Chinese, for their part, recycle the imported capital, lock it up (via "purchasing" Treasury bonds) and engage in crazy GDP-manipulating acts (like building cities where nobody lives.)
The trade imbalance we have with China could not exist over any material period of time but for these intentional manipulations.
But the rest of the world has no meaningful way to play this game. They are forced to sit and spin, so to speak, and deal with the impact of grossly inflated credit and money metrics in our economy should they need to buy anything that we produce. And they do -- they need to buy food, which we have a net surplus of and they have a net deficit!
This, my friends, is how Bernanke literally starves the world. We are 330 million people, more or less. We play financialization games and abuse our position as a global reserve currency to force others to subsidize us with their lives.
Does this destabilize developing nations? You bet it does. Hungry bellies breed riots.
They always have and always will; well-sated people have little reason to revolt. Hungry people have 1,001 reasons, starting with the growl in their stomach.
Behind a huge percentage of those hungry bellies is both Ben Bernanke and our Congress.
http://market-ticker.org/akcs-www?post=212687
More confused Denninger nonsense from a man who deeply believes he understands economics with his head buried deeply in his ass.
Emerging market currencies will rise, not fall.
How's that bearish call on gold working out for you, pal?
Well some day the Chinese will get pissed and demand their $1.1 trillion back and Ben will be happy to print $1.1 trillion for them.
The way the Chinese use to look at the trade was replacing American manufacturing jobs and placing those jobs in China. The Chinese looked at is as “buying jobs and capacity for the future.”
This stopped in July 2011.
Since 2005 the Yuan has dropped 24% and recently since 2011 3%. Inflation forced China's hand.
And the game goes on...
"If China can turn its citizens against Japan, they probably can do the same to America."
The Chinese hate the Japanese with a burning passion. Ordinary Chinese love the idea of smashing Japan. There is a television show that is always running over and over (no exageration) on Chinese TV about the little Chinese boy who keeps thwarting the Japanese army who is occupying his village during WWII.
China does not need to turn what is already turned.