This Is The Greatest Financial Market And Currency Manipulation Of All Times

Tyler Durden's picture

Submitted by,

In a week that has been marked by astonishing mainstream headlines, BFI Capital’s CEO Frank Suess happened to give an outstanding interview about the outlook for global currencies, gold and manipulation in the markets.


Consider the following headlines. They may have come at an unexpected timing, in the light of the economic recovery story, but they were for sure unavoidable:

  • Federal Reserve Said to Probe Banks Over Forex Fixing (Bloomberg)
  • Deutsche, Citi feel the heat of widening FX investigation (Reuters)
  • HSBC, Citi suspend traders as FX probe deepens (Reuters)
  • Metals, Currency Rigging Is Worse Than Libor, Bafin Says (Bloomberg)

The most remarkable event of the past week was the Federal Reserve investigating whether traders at the world’s biggest banks have been rigging currency rates. According to Bloomberg, the Fed is probing whether traders shared information that may have let them manipulate prices in the $5.3 trillion-a-day foreign-exchange market for profit maximization (source).

Also during the past week, US Regulators have been examining traders at Deutsche Bank, Citigroup, and HSBC. On top of that, Germany’s top financial regulator Bafin made a public statement, warning the manipulation of currency rates and precious metals prices could be worse than the Libor-rigging scandal. Bafin confirmed its firm is investigating currency trading, joining regulators in the UK, US and Switzerland (source).

These developments are significant and could mark a tipping point. Up until now, the currency and precious metals manipulation has been a topic associated with conspiracy theorists in the corners of the blogosphere. With regard to the signs of manipulation, Bafin’s president Elke Koenig said that “It is understandable that the issue is causing such a public reaction. The financial sector is dependent on the common trust that it is efficient and at the same time, honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated.”

The interesting fact is that this news breaks out exactly at the time when most people are being trapped into the “economic recovery” news. With the markets hanging at the lips of the central bankers, it is fair to say that “the central banks are the markets.” Frank Suess points out that, for several decades now, central banks around the world, with the US Federal Reserve in the lead, haven’t allowed business and credit cycles to happen anymore. In fact, they have been fighting consistently every sign of recession with more money, resulting in a race to the bottom of world currencies.

The effect of this on world currencies is that they are shuffling each other down in a see-saw pattern, a phenomenon that has become visible in the US dollar, the euro, the yen and the British Pound. With the US dollar in the lead, all other currencies can only follow the same path. The yen, as a text book example, has lost more than 20% against the dollar over the past year, and this is putting a lot of pressure on currencies across Asia. “We are now seeing huge capital outflows due to that from many countries in Asia. That creates investment opportunities, you can invest in the Japanese stock markets going up nicely right now as long as you hedge against the yen on the downside.”

But, in reality, we are really witnessing the greatest financial market and currency manipulation of all times, observes Frank Suess. “Central banks are just suppressing interest rates across the yield curve with the seemingly endless money supply. If you ask me which currencies are going to be devalued most considerably, I guess it is hard to find currencies that are not being devalued considerably. If you want to take advantage of currencies, you must protect yourself or benefit in that “see-saw” pattern.”

Even the Swiss franc or the Norwegian krone are pulled into this, even though fundamentally those economies are still quite strong (both economies have budget surpluses and Switzerland was again voted number one in terms of economic competitiveness by the World Economic Forum, facing only 3% unemployment). There is clearly a delinkage between fundamental and fiscal strength, even in the fundamentally strongest currencies. Therefore the large currencies with their debt problems and monetary expansion are pulling everyone down.

More specifically in Europe, where Frank Suess’ BFI Capital is based, the struggle over the euro could well reignite into a “fragmentation Europe.” At some point, it will not take that much for the debt crisis in Europe to kick back in. Investors around the world are hoping that the recovery story, which is being repeated like a mantra by central bankers, politicians, mainstream media, is going to hold. However, fundamentally, in terms of fiscal health, Europe and most other Western nations are not really in better shape than they were a few years back. “The future of the Euro could maybe be destroyed to some degree by the political tensions that you can expect to rise. Once that recovery story ends and reality kicks back in, I think the euro is anything but a blessing for the European Union.”

In that respect, it is interesting to observe the peg of the Swiss franc against the euro. In reality, the peg is actually a floor, set at 1.20. At this point the Swiss franc to Euro is about a 1.23. Policy makers have been successfully defending that floor. “I think what they will do is exactly what we just discussed. While everyone keeps on depreciating their currency, the Swiss central bank will go along with that, except if the Euro really went into a steep fall (crisis). At a certain point, the floor will break and the Swiss franc, together with some other currencies, will rapidly appreciate.”

Speaking of financial crises, shouldn’t the new regulations by the Bank for International Settlements in their Basel III initiative prevent another crisis? Frank Suess considers the new regulations more as a farce, explaining that some of the accounting rules that have been put in place really do not add too much value in that respect. For example, looking at the risk-adjusted valuation of assets on the balance sheets of banks, it appears that some of the banks today say they have a 10% capital ratio where, in fact, they are still very similar to what they had back in 2008. “The more you look into the details, the more you really see that it is a fake leaf. I wouldn’t depend on Basel III for being able to prevent a crisis”

The outlook of the ongoing currency devaluations and the signs of a failing financial system bring up the question how people can protect themselves. There is one currency that is not expected to go down, just by the mere fact that it is limited in supply. It is obviously gold. “You need to protect yourself with real assets. If you are going into gold or silver, you must be doing that with the allocated or segregated approach, not with the paper money approach. You don’t have to follow the mainstream too much, and have a hedge in place. That is where gold can play a role.”

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ArrestBobRubin's picture

Sam I am. I love my Gold eggs and ham.

NoDebt's picture

I'm with Dr. Seuss.  I do not like greenbacks and debt.  

I do not like them in a house.  I do not like them with a mouse.  I do not like them in a box.  I do not like them with a fox.  I do not like them here or there.  I do not like them anywhere.


Sudden Debt's picture

who doesn't love ham right?

thick slice... baked in a pan... with a egg...


Leonardo Fibonacci2's picture

and hate my green bucks!!!!!

Australian Economist's picture

Gold above $1260


Prepare for the 08:30 Eastern slamdown to get it below 1250

Greenskeeper_Carl's picture

its gotta happen some time tomorrow. Its friday, cant have gold closing that high going into the weekend

seek's picture

I don't think they do it at the open, but at the close. The interesting thing is that someone banged the close higher last friday.

Could be competiing interests at work, so we may see a spike in volatility tomorrow.

eddiebe's picture

Maybe, but I think the manipulation is heading the other way now.

The_Ungrateful_Yid's picture

I'm thinkin 1240 ish, sounds about right. Stocks and S&P back up to 1% or close. Going according to plan in the asylum. 

Kirk2NCC1701's picture

Give 'em the... Gold Finger.

Kirk2NCC1701's picture

Right now the Western currency that is being manipulated downward more than any other is the Canadian Loony: CAD is waaaay down from a couple of months ago. WTF!?

Ignatius's picture

Who are we -- mere mortals -- to question these Lords of Finance, these Wizards of Wall Street?

I repeat:  WTF!?

Whalley World's picture

I met a prospect today, blueberry exporter, I said lets lock in these higher rates for your exports this year.  he said the USD  is going to 1.35 vs CAD by March so why hedge?  I said how do you know where its going, and he said, i can feel it.

i asked, don't you consider true 37% unemployment and fake CPI numbers, he said no, i consider my feelings.

he could be right!

eclectic syncretist's picture

If you can say something obvious in a long-winded fashion, wrapped in pretty bows and flattering euphimisms, you too can be an investment advisor letter writer.  Too bad so many people who know better will still be late to the party, if they every show up at all.

OC Sure's picture
  • "Federal Reserve Said to Probe Banks Over Forex Fixing (Bloomberg)
  • Deutsche, Citi feel the heat of widening FX investigation (Reuters)
  • HSBC, Citi suspend traders as FX probe deepens (Reuters)
  • Metals, Currency Rigging Is Worse Than Libor, Bafin Says (Bloomberg)"


    "The [bureaucrats] doth protest too much, methinks!"

    Greenskeeper_Carl's picture

    Of course it is. The central banks of the world have all but admitted that our markets cannot survive without perpetual stimulas in the form of QE. They keep injecting money into the market to keep it alive. And yet with all this new currency being created out of thin air, gold finished down 30% on the year, despite massive physical demand. Just wait until the ECB starts direct QE. what a shitshow

    OC Sure's picture

    World markets are dying, pillaged and plundered, because of money printing; world markets would come back to life without the stimulas.

    Laissez-nous faire.

    Hayabusa's picture

    Why would any of you invest in ANY currency that can be manipulated down? 

    The more time, resources and labor it takes to produce, the more stable

    of an investment it is.  Hint: that's not fiat.

    eddiebe's picture

    "The most remarkable event of the past week was the Federal Reserve investigating whether traders at the world’s biggest banks have been rigging currency rates."

    Two points to make here: The pot calling the kettle black and

                                            I thought the biggest banks were the Fed..

    Kirk2NCC1701's picture

    When I listen to these guys, all I hear is a repeating pattern of Middlemen and Fees, Middlemen and Fees, Middlemen and Fees.  Complexity --> need for Middlemen --> Fees.

    If these guys truly earn their keep, then by all means, but laws of averages and the 80/20 rule says that 80% are to be avoided.  The real challenge then, is to find the Top 20% of advisers, and if you're rich enough, to find the Top 20% of that.

    OC Sure's picture

    I hear them saying "currency manipulation by central banks" and "devaluation."

    What I don't hear them saying is theft, hypocrisy, and "Central banks do not create anything of value but instead aid and abet thieves to steal from those who do."

    Now, THAT would be a headline!

    Atomizer's picture

    Phone call to US Hedge Fund Enterpise: Wring, Wring, wring, wring


    • Hello?
    • Man with one chopstick go hungry, Dum Dum Wa King. Click.
    medium giraffe's picture

    The FX market is what?....   Rigged you say?  The other chap bald, beard, eyes like Gimlets?  So, not the new chap...   A woman? Well I'll be...   Anyway, so the bald one?  He's been doing what?  Every month? HOW MUCH?!!

    Why the hell didn't I know about this before?!

    kurt's picture

    George Bush Senior said the problem with stealing wealth is the simultaneous destruction of wealth. He's right and they are applying that lesson now. You keep the currency alive to provide an avenue for the conversion of wealth into another form like, say, exporting your gold for your new boss, China. Who do you think those empty cities are for? That's where you go after riding the pony to death, there and Dubai. You can also go to south america.

    Problem with their plan: these fuckin pirates won't be safe from their own security service who won't be happy, for long, on room and board. Soon their own goons will just take all their shit and dump them in a hole. Richey Rich ends up slapped like the bitch that he is.

    It's better with civilization, laws, and a middle class. Eventually we'll get back to that.

    JR's picture

    We are witnessing, in full, the aftermath of eliminating gold from world finance and the hidden agenda of the IMF/World Bank – the building of world socialism

    Prior to the international meeting of financiers in July of 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire, officially called the United Nations Monetary and Financial Conference, G. Edward Griffin explains that “currencies were exchanged in terms of their gold value, and the arrangement was called the ‘gold-exchange standard.’…

    “Politicians and bankers hated the arrangement, because it was beyond their ability to manipulate. In the past, it had served as a remarkably efficient mechanism but it was a strict disciplinarian.”

    And, so…two agencies were created.

    “The World Bank was to make loans to war-torn and underdeveloped nations so they could build stronger economies. The International Monetary Fund (IMF) was to promote monetary cooperation between nations by maintaining fixed exchange rates between their currencies. But the method by which these goals were to be achieved was less admirable. It was to terminate the use of gold as the basis of international currency exchange and replace it was a politically manipulated paper standard. In other words, it was to allow governments to escape the discipline of gold so they could create money out of nothing without paying the penalty of having their currencies drop in value on world markets."

    SUMMARY : Chapter 5, NEARER TO THE HEART’S DESIRE, The Creature from Jekyll Island: A Secnd Look at the Federal Reserve, by G. Edward Griffin


    The IMF and the World Bank, were created at a meeting of

    global financiers and politicians held at Bretton Woods, New

    Hampshire, in 1944. Their announced goals were to facilitate

    international trade and to stabilize the exchange rates of national

    currencies. The unannounced goals were quite different. They were

    the elimination of the gold-exchange standard as the basis of

    currency valuation and the establishment of world socialism.


    The method by which gold was to be eliminated in interna-

    tional trade was to replace it with a world currency which the IMF,

    acting as a world central bank, would create out of nothing. The

    method by which world socialism was to be established was to use

    the World Bank to transfer money — disguised as loans — to the

    governments of the underdeveloped countries and to do so in such

    a way as to insure the demise of free enterprise. The money was to

    be delivered from the hands of politicians and bureaucrats into the

    hands of other politicians and bureaucrats. When the money comes

    from government, goes to government, and is administered by

    government, the result will be the expansion of government.


    The theoreticians who dominated the conference at Bretton

    Woods were the well-known Fabian Socialist from England, John

    Maynard Keynes, and the Assistant Secretary of the U.S. Treasury,

    Harry Dexter White. White became the first Executive Director for

    the United States at the IMF.


    The Fabians were an elite group of intellectuals who agreed

    with Communists as to the goal of socialism but disagreed over

    tactics. Whereas Communists advocated revolution by force and

    violence, Fabians advocated gradualism and the transformation of

    society through legislation.


    It was learned in later years that Harry Dexter White was a

    Member of a Communist espionage ring. Thus, hidden from view,

    there was a complex drama taking place in which the two intellec-

    tual founders of the Bretton- Woods accords were a Fabian Socialist

    and a Communist, working together to bring about their mutual

    goal; world socialism. pp. 105-06

    RaceToTheBottom's picture

    Accounting debasement has always been the silent, but important, part of QE.

    Basell III has always been an important part of the debasement of Accounting.

    kill switch's picture

    Again I'm shocked!!!