Are Covert Operations Underway In The Global Currency Wars?

Tyler Durden's picture

In an age of economic policy activism, including widespread quantitative easing and associated purchases of bonds and other assets, Amphora's John Butler reminds us that it is perhaps easy to forget that foreign exchange intervention has always been and remains an important economic policy tool. Recently, for example, Japan, Switzerland and New Zealand have openly intervened to weaken their currencies and several other countries have expressed a desire for some degree of currency weakness. In this report, Butler summarizes the goals and methods of foreign exchange intervention and places today’s policies in their historical context; but moreover he discusses the evidence of where covert intervention - quite common historically - might possibly be taking place: perhaps where you would least expect it... And if the currency wars continue to escalate as they have of late, it seems reasonable to expect that covert interventions will grow in size, scope and frequency.

Via John Butler's The Amphora Report:

Back in 2001, some prominent economists wrote a paper, published in the American Economic Association’s prestigious Journal of Economic Literature, titled “Official Intervention in the Foreign Exchange Market.” In this paper, the authors discuss the efficacy of foreign exchange intervention and, perhaps surprisingly, they include a brief section on covert intervention specifically, of which the following is an excerpt:

Most actual intervention operations in the foreign exchange market have been—and still are—largely secret, not publicly announced by monetary authorities…




A further explanation may be that although monetary authorities intervene in order to target the value of a foreign currency, since the fundamentals of the foreign currency are not necessarily equal to this objective, the monetary authorities do not have an incentive to reveal their intervention operations as no announcement on their activities will be credible … [S]ecrecy of intervention may be an attempt to affect the exchange rate … without triggering a self-fulfilling attack on the currency.


Looking around various FX rates, there is some evidence that covert intervention has been taking place in Asia. Occasional, sharp overnight moves on unusually high volume have taken place in the Korean won, Taiwan dollar, Indonesian rupiah, Malaysian ringitt and Vietnamese dong. This is of course only circumstantial evidence but it would be odd were profit-maximising economic agents to behave in this way. Given that the authorities in question have the means and quite possibly the motive, and the price action is suggestive, it is entirely reasonable to surmise that some covert intervention has been taking place in the region.


If the currency wars continue to escalate as they have of late, it seems reasonable to expect that covert interventions will grow in size, scope and frequency.


Desperate policymakers sometimes do desperate things. And history is sometimes stranger than fiction.


Full report below:


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Pinto Currency's picture


They may be secretly rigging the gold price. Hot dang.

NotApplicable's picture

OT: Tesla, who we recently saw suing the US for more subsidies is now bragging about paying off their loan early.

Gee, I wonder just who bought all of those shares in their secondary offering setup by GS?

I need a beer. Or twenty.

q99x2's picture

A long walk or jog works as well as twenty beers. With a short 30 minute nap afterwards you could, not that you would want to, check out the latest on CNBC without getting sick.

kaiserhoff's picture

One more reason not to trade forex.  And...

  once more, for the record, stop losses should be called stop profits.

  If you don't understand that the big boys are out hunting stops, pull your money out of the market and just watch the blinking lights until you see it.


MeelionDollerBogus's picture

The way fx moves in correlation with so much else that doesn't require giant account sizes or margin amounts, people have to be nuts to play forex. Seriously. There's an ETF for damn near everything & options for most of them. Using margin to play forex directly on that is just nonsense.

12ToothAssassin's picture

The Dong is being devalued? I doubt it.

knukles's picture

No, he's running for mayor of NYC

nmewn's picture

Things are looking UP for New Yawkah' more of this bashing cabbies for not having the proper lighting & vintage in the more salt/sugar-free touchy feely stuff!

He's got the real thing and the pictures to prove it ;-)

Supernova Born's picture

In the age of fiat, war isn't diplomacy by other means, it is currency manipulation.

Tick tock.

anonnn's picture

 Re: Covert operations. All INSIDER activity is covert action.

Arguably, all covert operations are INSIDER actions.

And both Covert Ops and INSIDER actions are kissin' cousins of PRIVILEGE.

blindman's picture

that is bullish for pms
that is bearish for pms
so what (what for)-- comments ....

blindman's picture

" you must not let up, even after having come so far." he continued.
" you must love the desert but never trust it completely, because the
desert test all men; it challenges every step, and kills those who
become distracted." Paulo Coelho (The Alchemist)
comment: it comes down to time, do you have the time and access
to execute your will ... in time; or has something or someone else
commanded control of your time? only one person can fix that if it
is a problem.

chump666's picture

I love that book.

Great quote

Tinky's picture


I contacted the author via email to question him about his assertion in the final paragraph that the U.S. has "a huge pile" of gold reserves. He replied, in essence, that he has no direct knowledge either way.

I don't know about others, but I tend to be convinced by mountains of circumstantial evidence, even though I admittedly lack "proof".

NotApplicable's picture

Well, it appears that you obviously know nothing about journalism, now huh?

Did I lay it on thick enough, or do I still need to add a /sarc tag?

Sabibaby's picture

Maybe by reserves he means in the mountains? There is a lot of gold in these here mountains!

Axenolith's picture

Oh, we have a huge pile of gold "reserves", it just hasn't undergone the Merrill-Crowe or similar process yet...

Peter Pan's picture

Currencies being consciously devalued is just an admission that they are worthless pieces of paper whose only purpose is to jockey for position at the expense of the poor bastards that have their savings in paper.

espirit's picture

..."a huge pile" of gold reserves.

Might also mean a "huge pile" of gold plated reserves.

12ToothAssassin's picture

"Huge pile" is description enough by itself.

blindman's picture

if the fat lady sings in the forest but there
is no one there to hear it , is it all over?

espirit's picture

No doubt they will spin this as "Purchasers of PM's are Covert Operations in the Global Currency Wars, thus we are Enemy Combatants.

To Be Droned in 3...2...1...

Killer the Buzzard's picture


lesamourai's picture

"If the currency wars continue to escalate as they have of late, it seems reasonable to expect that"... they will result in other types of wars.

22winmag's picture

Is the title and premise of this article a joke?


Financial and political murder, assassinations, and covert warfare are at all time highs.

CrashisOptimistic's picture

Gold is not important or relevant to this matter.  What is relevant is the Yen's fall threatening to make Camrys priced at 1/2 that of a Taurus.  Oreven a Chevrolet Cavalier.

If THAT happens, the administration showcase auto industry is threatened.  So . . . the Fed buying yen to drive up its price, and then parking it in a vault and not allowing it to participate in the Japanese money supply, would be ugly stuff and would undercut any possibility of the Japanese move working.

The yen strengthened from 103 to 101 last night.  Hmmm.

FranSix's picture

The best available method for circumventing international agreements on currency valuation is to act within your own constituency by selling gold into the market.

blindman's picture

[KR448] Keiser Report: Narcissists’ Rally
"Posted on May 23, 2013 by Stacy Herbert
We have a look at the narcissists’ rally as we drown in central banking their currency wars and their quantitative easing without wealth creation. In the second half, Max talks to Jim Rickards, author of Currency Wars, about why we don’t need to worry about a recession – because we’re in a depression! They discuss US Federal Chairman, Ben Bernanke’s, plan to not Beggar Thy Neighbor, but Enrich They Neighbor by jumping out of the printing plane together with simultaneous devaluations. And, in terms of gold, Keiser and Rickards suggest maybe it’s the Chinese manipulating the price of gold . . . and not the US Federal Reserve


Divine Wind's picture




..."a huge pile" of gold reserves.


Instead of HAS, it could actually be that it HAD.... a huge pile of gold reserves.

Now China and Russia have it.



ghostfaceinvestah's picture

Bretton Woods 2 is coming, to be announced in August, that is why Bernanke cancelled on Jackson Hole.

1C3-N1N3's picture

Nikkei about to open.

Bastiat's picture

Nikki ticky?  No access to a real time feed at the moment.

1C3-N1N3's picture

DoChen and PoolShark linked to this site last night.

Someone said it wasn't live. Idk, I'm just a kid who's interested in watching.

Bastiat's picture

Everything about FIAT money is covert, with respect to the vast majority of people, from it's creation to its true value.

Monedas's picture

Economic Policy Autism