Guest Post: Currency Wars: Trading The Driver$

Tyler Durden's picture

Submitted by Gordon T. Long of,

Since September, the Currency Wars have escalated. It isn't just because of the seminal monetary events of the Federal Reserve's QE III "unlimited" and the ECB's OMT "Uncapped". It is more likely about the fact that China announced its eleventh agreement that effectively bypasses using the US dollar with China's strategic trading partners. The latest agreement with Russia places trading oil, in non-US dollars, into the spotlight. The infamous petrodollar has had its destructive profile raised.

The Petrodollar has long been the cornerstone that solidified the US dollar as the key currency reserve holding. The Petrodollar strategy is arguably more important that the Bretton Woods agreement which officially made the US dollar the world's reserve currency at the end of WW II. This is now being called into question. Minimally, it suggests a weakened requirement for holdings of the current levels of US dollars in sovereign reserve accounts.

For the sake of space I won't lay out all the details of this but instead refer you to two recent video releases I have produced and participated in on the subject.

Currency Wars: The Failing Petro$$ Strategy

Triffin's Paradox & the Rule of Law

What is important to Traders is what it means to your trading strategy in the short to intermediate term. To Investors it has profound longer term consequences.

To determine short term effects, we first need to understand the relationship of the drivers involved. The three critical currency relationships near term are the US$, the € and the ¥. Then we need to understand how they will effect US Treasury yields.

First however it is important to understand the controlling mechanism of global fiat currencies.

THE $67 TRILLION SHADOW BANKING SYSTEM (The Fiat Currency Control Block)

Full Report below:

Article - Currency Wars - Trading the Driver$

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ebworthen's picture

"$67 Trillion Shadow Banking" with 68% between the U.S. and Europe, the two biggest central banking financial repression hegemonies.


NotApplicable's picture

LOL, someone thinks there's a market out there to trade.

Fuckin' Squidbait, I tell ya.

CPL's picture

You picked that up as well?


Two guys talking about 2007 when it's 2012 now.  My favorite quote on the first Youtube piece is the assumption that governments of the world aren't already buying the markets directly through bond sales.


I assume if people are still trading Euro/US/Yen/Pounds then every year will be 2007.  Who would hold any of it?  They play the red herring of what will happen to gold and silver in fiat prices...who cares about fiat if everyone recognizes silver and gold as the cash required for a trade.


Listen to these two clowns at your wallet's peril.  Stick to gold, silver and oil.  Safe.  Moderate.  And most importantly, limited.

economics9698's picture

I second that.  Yep, yep, and yes.

Skateboarder's picture

You watched the videos? I only watch videos posted in articles written Tylers, or CHS or any of the other sensical folk.

2007 is like the Triassic period compared to now, at least in financial news.

CPL's picture

I'll give a listen to anything posted.  Sometimes I learn a couple of things.  In this case I will not be contacting these gentlemen.  They are shell shocked and shouldn't be trusted with money right now.  They did have a good track record though.  They won't open to the idea of a world without a reserve currency, they dare not.


They are still under a misguided belief that it still can be fixed and there is great demand for USD, until someone removes all the transactions from US business to US businesses. 

How is that a risk?  Easy.  The local country just has to throw a couple of laws around to force all transactions to act on behalf of their currencies.  Once it was annoying to process so many currencies, the reserve currency helped keep that cost effective.  now all you need are blade servers, a team of developers, a PM, a place to operate and the machines handle all the internal transactions at TeraFLOP speeds.  Tech is the equalizer to any national sovereign currency because it's removed the legion overhead that goes with a currency.


First person to deploy a currency brake system wins.  Well until their currency falls flat.  Look at Greece and Argentina. 

Greece, is in the middle of starting the fourth reich and building concentration camps for West Africans, Jews and Arabs...well, anyone working and not Greek at this point. 

Versus Argentina, they mention they will be late on a payment and would like to resettle AND they have capital, suddenly the world is ending with a modest request.


Ask yourself why Greece is allowed to turn into a shithole with money being thrown hand over fist at it.  Then Argentina, work hard, play hard, resource rich, cash in bank, gold in bank (they called over their gold a couple of years ago).  The agency, the IMF, are the same people handling both accounts.  Yet nobody seems to see the disconnect.  Very strange.

Skateboarder's picture

All currencies are pulled from thin air, but production by sector is an important thing to keep in mind. Argentina is agriculturally heavy with fruit and legumes. Greece makes metals, cotton, and olive oil. It's clear which nation will starve first. But as for the disconnect in the strange experiment, it is clear that Greece is the guinea pig in testing austerity measures, endless can-kicking, and the general 'educated-people' response to the exposure of the ponzi scheme. Argentina, I'm not sure of. If Greece stops getting money, the can-kicking ends.

Skateboarder's picture

This was a nice report - a good recap of Yen vs. Euro vs. Dollar. The 10yr Treasury graph (page 8) struck me as the most important. The author says "is zero a limiting factor?". With the timing of this whole thing, I'm inclined to think that it is the limiting factor. Negative yield = time for upheaval.

CPL's picture

ZIRP is already happening in PIIGS plus France, Turkey is getting prepared to be financially destroyed with it's hopeful gold play (cough...tungsten...cough). Lots of links on Bloomberg and many on here.

Sweden is moving money around strangely, directly allowing investment from public pensions into private companies (go look at Ikea and the dead phone maker Nokia, weird ass shit).


Be careful listening to these two, they have been drinking too much MSM.  The idea of failure is so far from their discussion that it's bordering on delusional.  "we'll beat up the X and things will go back to normal."


What's normal now?  What is normal in a manipulated market?  They are baffling themselves with items that are years old.  I do like the fact they are waking up.  But they have five more years to catch up on.  Geopolitical sways that would never have been allowed five years ago.

Dr. Richard Head's picture

That explains QE infiniti.  Beofre, the Fed could only gobble up 70% of the debt issuance of the US.  Now it can get it all.  We are saved.  I can't wait to see Paul Krugman's smile when this shit all comes up roses.  It will be awesome.

buzzsaw99's picture

1) yellowcake iraq (twice)

2) bomb iran

oil for euro, then oil for gold. bomb. bomb. coincidence?

yogibear's picture

"more likely about the fact that China announced its eleventh agreement that effectively bypasses using the US dollar"

More countries need to join in and not accept the US dollar anymore!

In the mean time Bernanke and the Fed can print and devalue the currency all they want.

Bernanke and the Fed doves will not protect the value of the currency. They cannot raise interest rates. Especially since there is a push to eliminate the debt ceiling and have infinite debt.


Ghordius's picture

careful what you wish for, yogibear

would you really like to live in a fundamentally different country of the first world (my assumption) from what we know since the 60's?

for a lot of people it would be a transition from a world of warm feelings plenty to one of cold rational austerity

not everyone's cup of cake

Urban Redneck's picture


The treaty/MOU/contract doohickeys that preceded the September announcement were signed well over three years ago, it was only a rude awakening for those who suffer an anal-cranial co-location disorder.

Moreover China is only an understudy in the Death of the Petrodollar drama.  The current leading roles involve residents of Geneva, Frankfurt/Berlin, and Moscow.  The volume of worthless fiat that trades hands for physical oil is dwarfed by the volume of worthless fiat that trades hands for fiat oil.

mc_LDN's picture

Yeah but in the end does it matter? ZH itself posted the below articles days ago -

So it would seem that the US et al already have a back up plan in the making that relegates a biting at the heels China back in its place.

jimijon's picture

It seems to me that the US has become divided at the very top too. What I mean is that there is now a power struggle between the shadow and open governments. The tension is building and I am sure both sides have gamed out the issues. 

However, the one wildcard is the unknown unknown emerging. Gold vs. Fiat. Known. Red vs Blue. Known. Dollar vs. Remnibi. Known.

On and on really. Since we at ZH know about fiat collapse, etc., so do the people at the "top." Many a scenario has been mapped and in implemented. The question is which side wins. But, these are man made realities. And these realities can changes like smoke in the wind when a reality from the unknown show up.



Ghordius's picture

what you call "scenario mapping" started in 1968 with the realization that all USD outside the US were exactly worth the amount of gold of the US Treasury and that it was still time - for foreigners - to exchange those dollars for gold, at the tune of one metric ton of metal for one million bucks

Tricky Dick folded his bluff in 1971 (for many unexpectedly, btw), and since then it's waiting and knowing

the EUR is the child of some of those "mappings", for example, just to remember how long those movements take, enough to go through decades of politicking

the question is more about when -  "very soon!" is/was often the wrong assumption

TraderTimm's picture

Time to move to a decentralized currency. Tired of these greedy bastards.

LawsofPhysics's picture

Fiat is fiat is fiat. In the absence of any rule of laws and contracts fiat is nothing more than a paper fucking promise that isn't worth the paper it is printed on.

youngman's picture

Funny but if you want Christmas gifts for your kids next year...better by them might be double the cost next year...or triple

q99x2's picture

Time is not your friend.

Pretorian's picture

What trading the driver? FX market is huge casino. House casino is made of FED discount window borrowers. They can find any excuse to wipe out your account. So stop ply FX and save some money. 

Jacks Cold Sweat's picture

(....patiently waiting for Bitcoins to enter FX market....)

orangegeek's picture

US Dollar is backed by an army.  Bitcoins are a nice idea, but it lacks in guns and ammo and other things like air craft carriers and drones.

orangegeek's picture

The US is running things with the US dollar and one massive high tech army. 


Any country threatening this, including China and Russia, have a big hill to climb. 


I do see China invading Russia to confiscate some of that Siberian oil and gas.

alentia's picture

Chinese are not aggressive by nature, the chances of invasion are zero to none.

Russians are aggressive, but while they have oil and gas, there is no reason for them to expand beyond their current borders. The Russians can not even control what they have.

Ctrl_P's picture


Chinese are not aggressive by nature, the chances of invasion are zero to none.


You WHAT?!

Are you talking about the same china that is expantionist for as long as memory serves, the China that is paranoid about the "encirclement" issue - ask Russia, India, Tibet, Japan, The Philipines, Korea, Vietnam...

Or the same chinese people that regugitate state rhetoric when living as expats in other asian countries. How about the documented "Little Emperor Syndrome" that is now problematic with an over abundance of males in the younger demographic.


Maybe you are referring to the chinese people that are bullied and harrassed by their overlord/leaders. They seem docile and placid, just like sheep.


Oh and one more thing,

Central Planning cannot control what it has.

There fixed it for you.


headadoor's picture

Negative interest rates are already a fact of life. Compare with real CPI Fiscal cliff, Basel III, what's the third horseman for Americas, sun flares? earthquake or major assasination? It is coming to a market near you soon. We will all have to become preppers to survive. Be prepared!!!!!!!!!!!!!!!!!!!!!!!!!!