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China Just Threatened a Currency War if the Fed Doesn't Stop Printing

Phoenix Capital Research's picture




 

 

The tension between Central Banks that we noted yesterday continues to worsen. This time it was China and the EU, not just Germany, that fired warning shots at the US Fed.

A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."

 

"There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place," Li said.

 

Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations' central banks.

 

"Certainly, the level of the euro is high and creates some problem," he said, attributing the single currency's recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe's debt crisis.

 

http://www.reuters.com/article/2013/01/25/us-davos-currencies-idUSBRE90O10620130125

 

So first Germany begins pulling its Gold reserves from the US, and now China and the EU are saying publicly that the Fed’s policies are damaging confidence in the US Dollar.

 

This does not bode well for the financial system. The primary role of Central Banks is to maintain confidence in the system. If the Central Banks begin to turn on one another it is only a matter of time before the system breaks down.

 

Remember, every time the Fed debases the US Dollar it forces the Euro and other currencies higher, hurting those countries’ exports. The Fed has recently announced it will be printing $85 billion every month until employment reaches 6.5% (obviously the Fed is ignoring the mountains of data that indicate QE doesn’t create jobs).

 

How long will the other Central Banks tolerate this before they initiate a currency war? Both Germany and China have fired warning shots at the Fed. And we all know that just beneath the veneer of goodwill, tensions are building between the primary players of the global financial system.

 

We offer several FREE Special Reports to help investors navigate this risks and others in the financial system. They include:

 

Preparing Your Portfolio For Obama’s Economic Nightmare

 

How to Protect Yourself From Inflation

 

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Bullion 101: Everything You Need to Know About Investing in Gold and Silver Bullion…

 

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Tue, 01/29/2013 - 15:17 | 3195736 KidHorn
KidHorn's picture

Traslation, The chinese and europeans are finding it more difficult to devalue their currencies against a depreciating currency.

Tue, 01/29/2013 - 15:52 | 3195921 LawsofPhysics
LawsofPhysics's picture

Well put, this isn't a case of devaluation so much as the death of a fiat.

Tue, 01/29/2013 - 17:11 | 3196239 SamAdams
SamAdams's picture

The world will have to settle for gold-backed Yuan and cheap gadgets made by mulhattos in Fema camps? Sounds lovely, can I leverage my position?

Tue, 01/29/2013 - 14:31 | 3195518 geno-econ
geno-econ's picture

Headline misleading.  China did not threaten Currency War.  China is worried their export financing by purchasing US Treasuries may not be as effective in the future if Fed keeps on printing.  When Fed tappers off printing, China will again be in market for US Treasuries because all that printing float will be available for buying chinese imports. We are hooked

Tue, 01/29/2013 - 14:56 | 3195627 trav777
trav777's picture

this is the SAME China that has been in a currency war via PEG to the dollar for decades?

they can gfy

Tue, 01/29/2013 - 15:09 | 3195711 fourchan
fourchan's picture

usa to china "fuck you."

Tue, 01/29/2013 - 17:20 | 3196263 SamAdams
SamAdams's picture

Unfortunately, China has played the game well while the US was sold out by the bankers and their minions. It is clearly not "china, fuck you", but "usa is fucked". After a generation or two, the children will think it's normal (and healthy).

Wed, 01/30/2013 - 00:41 | 3197786 Seer
Seer's picture

Perhaps in appearance, but we're talking the most powerful country, the greatest deceivers that this planet has ever seen.  I think that people underestimate the game.

I posted above (http://www.zerohedge.com/contributed/2013-01-29/china-just-threatened-cu...) why China is more so fucked.

Tue, 01/29/2013 - 17:40 | 3196374 fourchan
fourchan's picture

your point and mine are equally true.

Tue, 01/29/2013 - 18:12 | 3196496 lasvegaspersona
lasvegaspersona's picture

remember

the main beneficiary of the trade deficit is the US government. When China has excess cash it buys treasuries which has, until lately, funded the government. Now that they have cut back there is a trillion dollar a year hole in the budget. Coincidently the Fed will be purchasing that same amount in various paper via QE x and x+1. 

Tue, 01/29/2013 - 14:18 | 3195455 Never One Roach
Never One Roach's picture

Mohr Ghost cities, malls:

 

The Ghost Malls of China: Inside a Commercial Real Estate Bubble

 

"As you can see, that expectation is not at all borne out by the eerily empty corridors and vacant stores inside."

 

http://www.dailyfinance.com/2012/04/17/china-ghost-malls-commercial-real...

 

You gotta see these photos of empty gigantic malls....deserted.

 

Tue, 01/29/2013 - 23:26 | 3197627 michael_engineer
michael_engineer's picture

Ghost cities sound like the biggest fuckin scam. I just don't believe it. Just look at the example of squatters here taking over anything that looks unlived in. Those guys panhandling all of the intersections need someplace to go at night.

Anybody near a ghost city would have some giant WTF questions they'd be asking and any builder or developer who built one would surely catch hell and a trip to the mental ward. Talk about malinvestment and malfeasance and malarkey.

Now "Ghost Monies", now there's an idea I firmly believe in.

Lets coin that term. "Ghost Monies"

Wed, 01/30/2013 - 00:44 | 3197791 sitenine
sitenine's picture

+1 I have many business clients and friends in China, and I share your view. It is propaganda without understanding to say that these cities are 'ghost' or 'abandoned' or any other clever meme of the moment. China plans ahead without question. They have THE best rail system on the planet, and they have big things planned for China. What does the West have planned past next week? Seriously, thank you for the logical and thoughtful comment.

Wed, 01/30/2013 - 06:58 | 3198085 michael_engineer
michael_engineer's picture

So what I am wondering now is just who are they trying to mindfuck with stories about "ghost cities" and just who is trying to do the mindfucking? Is it our western media who are the mindfuckers or is it the Chinese media/government mindfuckers? Are the mindfuckees the US and western citizens or the Chinese people? Is there anything in Chinese culture that explains or somehow gives logic to this mindfuck? Is it kind of like an April fools joke from one country to another? Is it more the equivalent to Santa Claus? Can anyone shed some light on this? Maybe it's an attempt to get all of the ghosts concentrated in one place so they can send in Bill Murray and the Ghostbusters.

Wed, 01/30/2013 - 00:58 | 3197815 Joe moneybags
Joe moneybags's picture
What does the west have planned for after next week?

We've got a football game, with a really big cheesy halftime show, planned for next week. After that, it's college basketball.

Wed, 01/30/2013 - 00:36 | 3197778 Seer
Seer's picture

The "plan" has been to move people from the country into the cities, to "work."  The question that some miss is: Where is the work there (in these ghost cities)?

Why would people who are pretty self-sufficient out in the country want to rush in and occupy some place that is, for all practical purposes, foreign to them?  And with no job prospect?

This is the pickle that the Chinese govt is in.  They required a booming global economy in order to continue ramping up growth that would provide work for those shifted from the countryside to the cities.  That boom is now dead; AND, it's now declining.

Chinese officials are sitting on a powder keg.  Hundreds of millions of people soon to be disillusioned.  Factories that produce trinkets.  And holding a bunch of (soon to be) worthless US Treasuries.  Oh!  And energy contracts that'll be ripped up as the US military takes over yet more oil installations around the globe.

I feel somewhat bad for the Chinese.  One of the few countries that has pretty much avoided colonization and exploitation.  It failed to build a military juggernaut...

Tue, 01/29/2013 - 21:03 | 3197134 Stuck on Zero
Stuck on Zero's picture

At least the Chinese get huge, beautiful malls for their money.  In the US all we get is welfare kids, $350M fighter planes, richer rich, and more bureaucrats.

 

Tue, 01/29/2013 - 18:53 | 3196630 sitenine
sitenine's picture

No, not deserted - they were never occupied in the first place. China is not like the West. China plans ahead. Maybe you remember articles 5 to 10 years back on how approximately 100M citizens are expected to migrate from rural to urban China? These 'ghost cities' are not abandoned! They are simply yet to be occupied, and anyone with ANY actual knowledge of China can tell you that they WILL be occupied soon. It is a combination of arrogance and ignorance to speculate otherwise.

Tue, 01/29/2013 - 22:09 | 3197380 lakecity55
lakecity55's picture

I thought they were replacement cities fro the ones that get blown up in the next Red Shield War.

Wed, 01/30/2013 - 00:35 | 3197751 sitenine
sitenine's picture

hmm, yes. Delusional optimism for some, and to hell with the rest.. It's not really the way I intend to live though. I'd like to believe that we can all make our own choices, as societies or individuals depending on our fundamental belief systems or level of national identity. You can't really say that individualism has worked in the West all that well though, can you? The tyranny of the majority is no less tyranny than that of a totalitarian government. Actually, I think it can be worse.. Just something to think about..

Tue, 01/29/2013 - 22:07 | 3197370 Vendetta
Vendetta's picture

Indeed.  The bankers are busy sucking America dry before they move to china and set up the next world's reserve currency... the US politicians for the last 40 years have been helping them

Tue, 01/29/2013 - 14:14 | 3195437 Clesthenes
Clesthenes's picture

It’s all theater; and complex.

A controlling factor in these observations about China and Japan is that they are the two largest “holders” of US Treasuries.  Well, actually, they don’t “hold” them at all; they just “own” them, theoretically.

When US Treasuries, instead of gold, are used to settle international accounts, the paper securities never leave US soil.  They are held in custody by the New York Fed on behalf of foreign central banks.

In other words, most foreign nations have no collateral for the US Treasuries they “own”; except China.

It appears that before China agreed to accept such large amounts of US Treasuries (now totaling over $1 trillion) in exchange for cheap consumer goods, it demanded and received more substantial collateral than simple trust in US bureaucrats.  Accordingly, China was given possession of the Panama Canal in 1999.  When China took possession, it promptly set to work to establish an ALLIANCE among Mexican and Columbian drug cartels, Chinese Triads, and the Communist Party of China.  It also smuggled some 150 Chinese Triad (crime) bosses into the United States thru the Panama Canal; all this was revealed in testimony before a Congressional subcommittee.

So, now you’re probably wondering who will staff all those NDAA offices when China – actually, the ALLIANCE – forecloses on the US Treasury.

There are other factors that no one has even noticed… even tho such data was released by the Federal Reserve.

Tue, 01/29/2013 - 15:14 | 3195729 Bicycle Repairman
Bicycle Repairman's picture

"It also smuggled some 150 Chinese Triad (crime) bosses into the United States thru the Panama Canal; all this was revealed in testimony before a Congressional subcommittee."

Son of a bitch!!  We'd better put a fence around that canal!!

Tue, 01/29/2013 - 18:07 | 3196477 lasvegaspersona
lasvegaspersona's picture

No!

Just surrender all firearms. The Chinese criminals do not know how to work with armed victims. Their 'management style' requires greater compliance than we currently have here in the USA.

This 'China will own the USA' is a new meme. Previouly it was 'the USA will just fuck all creditors'. Various doom sites are now pushing it.   Some are saying China will be given US corps as partial payment for the debt they hold. I do not buy it. I believe the old meme. It has always been the way debt is handled....default...either by outright (too embarrassing) or by inflation (a fine fine tradition.)

Tue, 01/29/2013 - 14:14 | 3195432 OhBaldOne
OhBaldOne's picture

Kyle Bass said that his contacts in the Obama Admin told him, point blank, that they want to bring down the US dollar…as the only way around the debt and insolvency crisis…google his video clip. very interesting…

Tue, 01/29/2013 - 15:26 | 3195792 1100-TACTICAL-12
1100-TACTICAL-12's picture

Where does all this end War...

Tue, 01/29/2013 - 22:10 | 3197383 lakecity55
lakecity55's picture

No, it ends with "we welcome our new ChiCom Overlords."

Wed, 01/30/2013 - 00:24 | 3197759 Seer
Seer's picture

Sorry, but that's based on just what?  That China holds a bunch of (ever-depreciating) US IOUs?

China has no substantial resources to do much of anything in this modern era.  That's why they're so active in Africa.  And day by day the US is infiltrating Africa with it's military forces.  Iraq was a great training ground for the US empire on how to wipe out existing oil controllers and gain control.

China doesn't have the means of really controlling its people, not like the US.  When things go to turn ugly, which will be in the form of "rationing," the US will be able to do it, China, with all the hundreds of millions who have been promised (suckered into) the "new way," won't.  The US has enough resources to hold its (smaller) civilian population at bay and still mount the most lethal military force in the world.  China?  No.

I don't say these things because I find them positive, I just state them because they're fact.  ALL empires are ugly.

So, the probability of a ChiCom Overlord is far smaller than you might think (and for the reasons I've given).

Tue, 01/29/2013 - 14:09 | 3195419 sitenine
sitenine's picture

No shit.

Congrats on climbing out from underneath your rock.

Tue, 01/29/2013 - 14:10 | 3195418 Room 101
Room 101's picture

I'm thinking that these Phoenix Capital Research articles are a fundraising gimmick: contribute to ZH or we publish MOAR of them! 

 

 

Tue, 01/29/2013 - 13:58 | 3195383 metastar
metastar's picture

Fire at will and burn the paper for warmth.

Tue, 01/29/2013 - 13:55 | 3195373 MFLTucson
MFLTucson's picture

Doesnt matter, this group in DC will do whatever the fuck they please and the American people will pay for their arrogance!

Tue, 01/29/2013 - 16:45 | 3196120 The Heart
The Heart's picture

"Doesnt matter, this group in DC will do whatever the fuck they please and the American people will pay for their arrogance!"

Doesn't matter, this (arrogant) group in DC will do whatever the fuck they please and the American people will pay for their (ignorance)!

Kindly gently fixed.

:)

Tue, 01/29/2013 - 13:52 | 3195358 TPTB_r_TBTF
TPTB_r_TBTF's picture

Sounds like the Chinese are "a little bit worried."

Tue, 01/29/2013 - 13:38 | 3195316 dumpster
dumpster's picture

minus 25 on a scale of 1 to 10

Drivel in Drivel out

Tue, 01/29/2013 - 12:40 | 3195130 DUNTHAT
DUNTHAT's picture

Check out the extensive deconstruction, analysis, and forecasts of 40 CFTC COT contracts at www.CommitmentsOfTraders.com

Tue, 01/29/2013 - 16:59 | 3196189 SAT 800
SAT 800's picture

Thank you; I bookmarked this site. You can short the Euro, now; at 1.35; according to a major Danish Bank; who points out that all math. models for the Eur/usd indicate reversion to the mean is now; or as near as now as matters, the most probable movement. It would be very unllikely for the Euro to continue rising, and very likely it'll head back downwards; now-three days from now, whatever; soon enough to go short now.

Tue, 01/29/2013 - 12:23 | 3195049 President Palin
President Palin's picture

"The primary role of Central Banks is to maintain confidence in the system."

 

BS.  The only role of Central Banks is to steal wealth through inflation.

Tyler - why do you publish this garbage?

Tue, 01/29/2013 - 14:54 | 3195605 jayman21
jayman21's picture

This is not from Tyler - It is from Phoenix Capital  Like your comment.  +1

 

**edit - note to self refresh page before replying

Tue, 01/29/2013 - 13:57 | 3195380 Ghordius
Ghordius's picture

it's not Tyler, it's Phoenix Capital Management. I presume you are probably welcome to pay ZH for not publishing it

stealing? yes, though I'd call it a different kind of tax - for some it's the same, of course - and yet not all thiefs have the same appetites

Tue, 01/29/2013 - 14:12 | 3195427 sessinpo
sessinpo's picture

Ghordius:  "it's not Tyler, it's Phoenix Capital Management."

 

Exucese me. Are you saying TD, does not have final say so on what gets published on his own website?

 

I say let Phoenix Capital publish what they want and let TD allow whatever material TD wants to get published on ZH. That is their choice. Do I have to teach you both the BASICS of free markets?

 

Now having said that. There are also problems with the article that President Palin didn't mention.

Let me introduce you to the idea of competition - yes another free market principle. You see, with competition, the best product or service wins. Unfortunately, through manipulation, that discovery of the best product or service can be delayed. In this instance it would be currency manipulation through various means.

 

To get to my point is that China and the EU have competing products, their own currencies. What you guys missed and why the article is bunk is this. China and the EU DO NOT GIVE A DAMN ABOUT THE US DOLLAR. They would love to see the US dollar collapse so that their currency gains stature and so that they have the control.

 

 

 

 

 

Tue, 01/29/2013 - 14:33 | 3195514 Ghordius
Ghordius's picture

buhuuu. pardon this old european for being anti-business and anti-free-market. you see, we get indoctrinated when young, the muscular ones in fascist boot camps and the spindly ones in communist reeducation centers

feel free to teach me the basics of free markets: they self regulate, right? everytime, wherever, yes?

btw, who is "President Palin"? (Edit: now I got it)

now, seriously: "China and the EU have competing products, their own currencies" - eh, no. It's the US that has a global product, the mighty dollar, the Global Reserve Currency. The others get dollarized if they don't take care. Point in case: up a very short while ago the FED held no FX-Reserves at all

second, "China and the EU DO NOT GIVE A DAMN ABOUT THE US DOLLAR" also wrong. we both give a big, big damn about it. President Tricky Dick Nixon famously said: "it's our currency and your problem". It's just that common Americans don't realize how much of a problem it is for the others

third, "They would love to see the US dollar collapse" also wrong. It's more proper to say that we are terrified by it, particularly we europeans

fourth, "so that their currency gains stature" like the USD has? so you are accusing us to want to "win a game" that the US is "winning" since decades? And what has this "winning" brought you, exactly?

fifth, "and so that they have the control" of what? The world? Ourselves? Please explain the upside before you accuse us to try to gain it... from you

Tue, 01/29/2013 - 17:58 | 3196442 lasvegaspersona
lasvegaspersona's picture

"it's our currency and your problem"

"I believe that was John Connaly Sec Treas under Nixon...to the French if I'm not mistaken

Tue, 01/29/2013 - 14:48 | 3195566 sessinpo
sessinpo's picture

Ghordius:  "now, seriously: "China and the EU have competing products, their own currencies" - eh, no. It's the US that has a global product, the mighty dollar, the Global Reserve Currency. The others get dollarized if they don't take care. Point in case: up a very short while ago the FED held no FX-Reserves at all"

 

Comment: Okay, then if what you say is true, why introduce the Euro?  Why even introduce a competing product? You miss the point that I made in my last post and I will state it again and refresh it, hopefully in a way you will understand.  China and the EU DO NOT GIVE A DAMN ABOUT THE US DOLLAR.

How does that apply to your comment. You said: "It's the US that has a global product, the mighty dollar, the Global Reserve Currency. The others get dollarized if they don't take care. Point in case: up a very short while ago the FED held no FX-Reserves at all."

What you miss is the end game. They want the dollar destruction. In other words, if the dollar was printed into stratosphere and it made their currencies better, then good for them.

There are two parts to a currency war:

1) devaluing your currency or increasing the value of your currency relative to other countries for import/export reasons.

2) Ultimately, having the strongest, most trusted currency in the end for currency reserve purposes. That is the point you miss. Don't you think the EU and China would LOVE for the US to have to give up currency reserve status.

3) FED held no fx-reserves at all? How ridculous is this statement. No reason for them to hold reserves in other currencies when they (FED) are the reserve currency. And wouldn't it be redudant to hold fx-reserves in your own currency?

 

If I have to explain to you about how fiat currency controls and manipulates our lives on a daily basis, I'm done with you and quite frankly, everyone here should also be done with you. Unless one of you want to take you through all the 101 classes.

Tue, 01/29/2013 - 16:40 | 3196104 Whiner
Whiner's picture

Don't leave us Sesspool. Your insights (basic knowledge) are invalueable to us s dat jes rolled offs' the turnip truck.

Thu, 01/31/2013 - 10:52 | 3202299 sessinpo
sessinpo's picture

Whiner, you are just that.

 

And you don't even the ingredients to make a lifeform out of any pool.

Tue, 01/29/2013 - 16:22 | 3196033 Ghordius
Ghordius's picture

Then only two questions: who destroys the USD?
And who holds them (in trillions, as FX reserves)?

Tue, 01/29/2013 - 17:30 | 3196311 rhinoblitzing
rhinoblitzing's picture

Hey - If you think your currency is overvalued - lower your rates... and STFU !!!

Your borrowing our USD anyway via the SWAP Lines - If we didn't forgive your POS, ungrateful  country of it's debt back in the day, when the US had a heart and a pocketfull of dollar$ to defend your A$$ - So you didn't have to pay for a military, or for emergency disaster help and supplies - or food to feed your non stop breeding ike rats.

Now... Who ya gonna call - if the USS goes down, China? Russia, FRANCE... HAaaaaa !!!

STFU .... and print - so we can all get paid $6.3 Million$ a year - that will pay back the banks for their NINJA loans and make em solvent...

 Bitchez! Yeah.. just STFU.... and stop whinning... and lower ya rates and print -

Ohhh yeah - It;s all the Juice fault! - the Grapefruit and the Orange Juice... Allways the Juice - Blame it on the Juice -

FOAD...   Bitcez.... <sarc>...

 

 

 

Wed, 01/30/2013 - 03:55 | 3198007 Ghordius
Ghordius's picture

can't follow you - perhaps because I'm looking it from the side of policy and you from the point of view of markets

you see, I'd say a CB has to set it's rates according to the needs of it's currency zone - and the market should do the rest and "clear" the over- or under-valuation

ok, sure, we are in an incipient currency war and this a too simple view, and yet this is the principle I defend

what have the US NINJA loans exactly to do in all this?

Tue, 01/29/2013 - 16:19 | 3196011 Colonial Intent
Colonial Intent's picture

No reason for them to hold reserves in other currencies when they (FED) are the reserve currency.

American exceptionalism or just plain old cognitive dissonance?

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