Currency Wars For Dummies

Tyler Durden's picture

When it comes to global currency warfare, one can read countless books (all of which professing to be the definitive reference guide for a process that started in the... 1930s), or one can fast forward, save lots of time, skip all the repetitive verbiage and simply observe the following charts which summarize the key things "one needs to know" about the dead-end that the globalized monetary system has found itself in since 2008, when the entire world decided that the only way to "fix" all of the world's problems is simply to print a countless amount of paper money.

What Is A Currency War?


What's Actually Strong/Weak?



Who Uses What Currency Tools? (click image for full-size legible chart)


And Just How Big Are The Interventions?


Not all currencies can depreciate at the same time. At least one currency has to appreciate if all others depreciate. But everyone is trying it - as global rates have the lowest standard deviation on record (i.e. everyone is lowering rates and keeping them there).


On a global scale, competitive devaluations are therefore impossible and may even pose a risk of escalation towards protectionism.


Maintaining a non-cooperative equilibrium is a challenging exercise. Not only will every individual partly have to constantly monitor what everyone else is doing, but in addition, there is a constant risk of escalation into protectionist policies. Trade disputes are already on the rise. The number of WTO dispute cases in 2012 was the highest in 10 years.

Finally, the extensive use of macro prudential policies and capital controls as observed in recent years poses the longer-term risk of misallocation of resources.


Source: Goldman Sachs

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eigenvalue's picture

Silver-Go to Hell!

Silverbugs-Die! Die! Die!

Orly's picture

Now that's thread-jacking...

with style!


Stackers's picture

"Central banks stand ready to take cooridinate action should the price of gold increase"

~Alan Greenspan

Boris Alatovkrap's picture

Boris confuse... Gold increase because Central bank is coordinate action to print and devalue fiat currency. Banksters is psychopath and is bad to understand causality?!

fomcy's picture

None stop Gold f*cking going on..  GOLD Acting like Pink sheet stock..

Manipulators in complete control, nothing changing for month now..

Complete disconnect, More Bernank Prints lower GOLD goes..


RSBriggs's picture

Doesn't matter to me.  Every time gold goes down by $100 I buy a couple more ounces.   Every time silver goes sub-$30, I buy a few hundred more ounces....

You should be thanking him for keeping it on sale for so long....

dunce's picture

Sometimes i wonder if those talking down PM are just trying to buy low, if they are and it works you might as well piggy back on the scam.

JustObserving's picture

In a currency war, always attack gold and silver.  Otherwise, you cannot print all the money you want without people worrying about inflation.

You also lease out your gold to put a lid on gold.  So much so, it takes 7 years to return just 300 tons of gold.

PS World gold production in 7 years is 18,000 tons.

Bastiat's picture

Yeah and that's after you steal it from Sadam and Qaddafi.

TBT or not TBT's picture

And WMD. Assad and Iran ended up with those, so a Good War is in order to get the people rallied around their prresident/parliament/armies, working hard for the greater good.

James's picture

What is Silver production worldwide in that same time period?

funthea's picture

Times ten, that of gold. But I think his number was off. I show about 15, 000 tonnes for gold in seven years, and therefor 150, 000 tonnes for silver.

The Heart's picture

They say...currency wars lead to real wars.

They also say...history repeats itself.

They will say...monkey see monkey do and never learns from historic mistakes.

Is America destined to be destroyed in this next world war she is being set up to lose?

Cry for a nation asleep that watches not for the thief in the night any more.

Take a listen:


(Thank you Tyler(s) for your tireless good works)

OutLookingIn's picture

When goods and trade are prevented from crossing borders, then armies often do!

palmereldritch's picture

Some of Colin Farrell's best work!

newengland's picture

Do yourself a favor, Tylers. Go to and scroll down to his comment ref: 'bill', and the detailed summary of how the 2010 Dodd Frank Bill allows confiscation of U.S. deposits...a theft coming to you soon, traders.

A detailed summary for serious people; an executive summary for dummies.

You have been had, and better men die because your sort are too busy counting your pennies and too venal to value life, liberty and the pursuit of happiness.


Tyler Durden's picture

For the last time: confiscation of deposits, aka bank liabilities IS NOTHING NEW! When a bank is insolvent, its liabilities are impaired until its balance sheet is viable. This is Bankruptcy process 101, and has been like this since time immemorial.

The fact that people are shocked by this is a testament to just how deep the bailout mantra of the Bernanke put has penetrated the broader population.

Here is the truth: in a normal world, depositors can and will get impaired. Period. There is nothing sacred about bank funding of any variety, be it deposits, senior debt, secured debt, equity, etc, etc. In fact, when banks fail you should expect deposits to be confiscated.

The only reason this did not happen in bulk before, is because the global central banking put demanded bail OUTs which added liquidity to the asset side, thus preventing liability impairment, instead of bail INS, which impaired liabilities.

Well, guess what: the free lunch is ending, whether it is due to assorted political decisions, or simply because the central planners are finally realizing it is not a liquidity, but a solvency problem, and bank liabilities have to be impaired.

Bottom line: if you have deposits in a bank, ask yourself do you really need to have the risk of having such exposure in a broke system, when any bank can liquidity overnight (yes, there is a quadrilliion or so in an OTC derivative house of cards out there, which when it collapses will take down every financial firm with it). And yes, traditionally deposits were paid an interest because they were a bank liability. Now, that is no longer the case thanks to Bernanke, but they are still liabilities. In other words, depositors have all the risk and none of the benefits of having money "parked in a bank."

This is all you need to know about deposits and banks, period.

Taint Boil's picture



Good stuff – I worship the ground you walk on. This is the reason I can’t kick the Zero Hedge habit - and I have tried.

Bastiat's picture


"Well, guess what: the free lunch is ending"

For the big boyz?  I believe when I see it.

Harbanger's picture

The centrally planned free lunch "systems" are ending.  But not before taking everything they can.

css1971's picture


"For the last time:"

Really? You think so?

Personally I reckon it'll have to be explained again and again every time a bank goes down and takes the depositors with it, with much wailing and gnashing of teeth. How could this possibly have happened? Who could ever have known? etc etc. You have to remember the average IQ is 100, and 50% of the population are below that. I just keep repeting the meme "bankers and politicians" to get it into the popular consciousness. Maybe, just maybe when it all kicks off they'll be pointed in the right direction.

Long torches, pitchforks and guillotines. Or is that AR15s these days?

TBT or not TBT's picture

Scuba gear, to get to all that gold, ammo, and guns ZHers have reported losing in boating accidents. Probably find some 7.62 weaponry in there, not just 5.56.

Cabreado's picture

You seem to be weeping in a contradictory way.

virgilcaine's picture

Bottom line.... QE didn't work. The Economy is headed down as Austerity kicks in!  A slow down let alone a decline in spending is... austerity. The Stk Mkt is going to be destroyed from decline in Corp earnings and overpriced PE. Corps are hoarding cash since they know what's coming. The Corp earnings to Gdp is something like 70% over valued mostly from debt/.gov spending. It's going to be brutal the unwind.


Mix in some Bank and Sovereign defaults, growing tensions in the  NK and ME..doesnt make you want to run out and buy stocks now does it?

One of We's picture

Bullish bitcoins.....just bought a couple at their peak price so far. Might have just pissed away a couple hundred soon to be useless greenbacks to buy into a scam but at least there is some blue sky with the Bitcoin as opposed to nothing but dark clouds on the fiat horizon....

Cabreado's picture

I suspect that efforts to circumvent the fundamental brokenness may pay well for a short time.

Ain't nobody escaping the lies, in the long term.

Prisoners_dilemna's picture

I agree with Cabreado, no one will escape the fall out. And the short term may be shorter than we think...
BTC may end as most manias do for those who speculate rather than grow the BTC economy. I've been wondering if the recent run up in BTC is due to speculation, or in fact due to its use as a medium of exchange that also allows for instantaneous, no fees, transactions in a currency that is scarce...among other benefits of its adoption.

I want blue skies like you but.... according to the prisoners dilemna I will only come out ahead if I pull my own weight.
So I am trying to help grow the bitcoin economy;
You can stay with us, buy pottery, and home made ice cream with BTC now. We will probably even offer a BTC discount as it's so deflationary.

In my own simple head what I think I know is... If BTC is to become the currency we want it to be, then we all can't speculate and cause a mania.
What are you doing to earn bitcoin and who are you buying services from with BTC?

CheapBastard's picture

Thank you for the article. My skull is very very thick.

besnook's picture

the bottom of the flowchart that explains what a currency war is is chopped off.  the bottom box should be the answer to the question, "how does a currency war end?" the answer is a people killing shooting war whether as a domestic revolution or an intercontinental capacity destruction event featuring lots of splattered human blood and starvation.

awakening's picture

I think the reason for that is very obvious...

'Source: Goldman Sachs'

AustriAnnie's picture

I'm sick of hearing that Mantega invented the term "currency war," which existed long before 2010.  Seriously?  Do people just repeat that "fact" without a simple google search? 


Just one of many uses of the term, this one from 1939.

Kirk2NCC1701's picture

Note the source data:  Goldman Sachs (GS)!  Yeah, well, they're doing a GREAT (sarc) job of orchestrating the sequential turn of inflating/debauching, and "circling the drain in unison". 

As a result they are trying to mess with those not in the CB Club, i.e. the Emerging Markets and BRIC+.  It's an "us vs. them", a "if you're not with us, you're against us" thing.

R_J's picture

Currency War = a Firing a Circle.

Urban Redneck's picture

Not to whoever winds up with the equity at the end of the war... but certainly to anyone who attaches value to money,

Quinvarius's picture

There is a 90% chance that messing around with currencies like this will implode your economy.

Cacete de Ouro's picture

I would have thought central bank reciprocal swap lines should be listed as a mechanism that can devalue a country's currency since for example if one central bank is continually activating a swap line to get dollar funding and not reversing this down the line, then this will devalue its currency? No?