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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Thu, 05/23/2013 - 18:47 | 3593934 Pinto Currency
Pinto Currency's picture


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

Thu, 05/23/2013 - 18:48 | 3593962 NotApplicable
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.

Thu, 05/23/2013 - 19:07 | 3593997 q99x2
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.

Thu, 05/23/2013 - 19:30 | 3594053 kaiserhoff
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.


Thu, 05/23/2013 - 20:05 | 3594147 MeelionDollerBogus
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.

Thu, 05/23/2013 - 20:35 | 3594227 12ToothAssassin
12ToothAssassin's picture

The Dong is being devalued? I doubt it.

Thu, 05/23/2013 - 20:43 | 3594247 knukles
knukles's picture

No, he's running for mayor of NYC

Thu, 05/23/2013 - 20:51 | 3594266 nmewn
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 ;-)

Thu, 05/23/2013 - 18:51 | 3593963 Supernova Born
Supernova Born's picture

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

Tick tock.

Fri, 05/24/2013 - 02:48 | 3595095 anonnn
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.

Thu, 05/23/2013 - 20:17 | 3594176 MeelionDollerBogus
MeelionDollerBogus's picture


Thu, 05/23/2013 - 21:25 | 3594327 mickeyman
mickeyman's picture

You mean "hot dong"

Thu, 05/23/2013 - 18:40 | 3593941 blindman
blindman's picture

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

Thu, 05/23/2013 - 19:19 | 3594026 blindman
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.

Thu, 05/23/2013 - 19:45 | 3594102 chump666
chump666's picture

I love that book.

Great quote

Thu, 05/23/2013 - 18:41 | 3593945 Tinky
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".

Thu, 05/23/2013 - 18:50 | 3593966 NotApplicable
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?

Thu, 05/23/2013 - 20:19 | 3594184 Sabibaby
Sabibaby's picture

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

Thu, 05/23/2013 - 20:37 | 3594230 Axenolith
Axenolith's picture

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

Thu, 05/23/2013 - 21:31 | 3594350 Gypsyducks
Gypsyducks's picture

Ah HA! Colin Powell!

Thu, 05/23/2013 - 18:43 | 3593950 Peter Pan
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.

Thu, 05/23/2013 - 18:46 | 3593953 espirit
espirit's picture

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

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

Thu, 05/23/2013 - 20:35 | 3594226 12ToothAssassin
12ToothAssassin's picture

"Huge pile" is description enough by itself.

Thu, 05/23/2013 - 18:47 | 3593958 NipponMarketBlog
NipponMarketBlog's picture



There are no currency wars (actually).

Thu, 05/23/2013 - 19:36 | 3594074 blindman
blindman's picture

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

Thu, 05/23/2013 - 18:53 | 3593970 espirit
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...

Thu, 05/23/2013 - 18:53 | 3593971 Killer the Buzzard
Killer the Buzzard's picture


Thu, 05/23/2013 - 19:26 | 3594045 lesamourai
lesamourai's picture

Long Dong?

Thu, 05/23/2013 - 19:50 | 3594120 optionsman
optionsman's picture

just hedged dong ;)

Thu, 05/23/2013 - 20:53 | 3594272 MyBrothersKeeper
MyBrothersKeeper's picture

There is a "Sixteen Candles" reference in there somewhere

Thu, 05/23/2013 - 19:25 | 3594041 lesamourai
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.

Thu, 05/23/2013 - 19:26 | 3594044 22winmag
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.

Thu, 05/23/2013 - 19:31 | 3594055 CrashisOptimistic
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.

Thu, 05/23/2013 - 19:31 | 3594058 FranSix
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.

Thu, 05/23/2013 - 19:37 | 3594081 blindman
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


Thu, 05/23/2013 - 19:38 | 3594083 Divine Wind
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.



Thu, 05/23/2013 - 19:45 | 3594105 ghostfaceinvestah
ghostfaceinvestah's picture

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

Thu, 05/23/2013 - 20:00 | 3594135 1C3-N1N3
1C3-N1N3's picture

Nikkei about to open.

Thu, 05/23/2013 - 20:06 | 3594151 Bastiat
Bastiat's picture

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

Thu, 05/23/2013 - 20:22 | 3594194 1C3-N1N3
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.

Thu, 05/23/2013 - 20:04 | 3594145 Bastiat
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.

Thu, 05/23/2013 - 23:58 | 3594805 Monedas
Monedas's picture

Economic Policy Autism

Do NOT follow this link or you will be banned from the site!