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Stab, er... I Mean... Beggar Thy Neighbor - It's ALL OUT (Currency) WAR! Pt 2
Here Comes The Boom!
By now, everybody who cares knows about the Swiss National Bank's removal of its EUR floor, and the havoc that it caused to FX brokerages around the world (Currency Brokers Fighting Insolvency Are Learning the Value of Our Blockchain Technologies - the Hard Way). I explained to clients that what seemed like a stupid move by the SNB was actually a strategic move borne out of fear. Days later, the ECB came out with the QE package from hell (or heaven, depending on how you view perpetual bailouts), and my explanation gained lucidity for many.A single country devaluing, even if it's a significant global economy such as the US, will result in a rise throughout other major currencies. This rise will easily be absorbed. The problem is when the major economies of the world have a singular problem - the problem that the world has now, that was started back in 2008. That problem is a structural recession and slow growth. Now when the US, or more accurately from a chronological perspective, the EU/ECB devalue, they export unemployment/deflation to neighboring states who not only do not want it but are actively pursuing their own policies to eradicate it. What do these states do when unemployment is sent over to their countries? They retaliate by doing the same. Enter... War!
Of course, the story doesn't and there. This is a macro trader's nirvana, provided he/she has at least a modicum of insight.
It's All Out War!
As stated above, ECB President Mario Draghi, announced the deflation export attack on all nations who didn't have the central banking chutzpah to defend themselves, and the throwing down of the gauntlet even to those who do, self-preservation concerns prompted preemptive strikes from the northern Europeans and Asians. The Swiss National Bank would have had to expand a balance sheet that had already grown 3x in 2yrs to an exponentially larger size, and that growth would have been fueled by Pumping continuously depreciating euros onto it. While the Fed doesn't have to worry about mark to market losses like the average Joe, the SNB simply cannot continuously replace 1 value unit with .8 value units at an increasing rate without cracking the country. It's abandoning the Swiss franc’s cap to the euro marked a mini-Lehman moment (the maxi-moment I warned about clearly 8 years ago, see Is Lehman really a lemming in disguise? Thursday, February 21st, 2008). Since the SNB simply can't afford to outprint the ECB (only the Fed can do that) they decided to use negative interest rates (actually, they decided to make their rates negative-er, #NIRP4EVA, if you know what I mean) to go "BOO!" and frighten potential buyers of its currency. Sveriges Riksbank, or simply Riksbanken, is the central bank of Sweden. It is the world's oldest central bank and the world's 4th oldest bank still in operation. You would think they'd know what they're doing. Well, they say "Swedish central bank: Deflation isn't a concern". They worked very hard to find inflation as well:
- Swedish Krona Sinks to Four-Year Low Wall Street Journal - Oct 28, 2014
- Swedish krona rallies as monthly inflation rate rebounds to positive International Business Times UK - Jan 13, 2015
- Of course, right after the SNB move, NFA Raises Margin Requirements for Swiss Franc, Swedish Krona
The Danish Central Bank, Danmarks Nationalbank cut its benchmark rates deeper into negative territory as well, all (actually, they did it twice) in a bid to protect the Danish krone’s peg to the euro without burning its balance sheet. Did the people up north succeed in defending against Draghi's deflationary war move? Let's see...
Expect to see practically all of the nordic countries to do what Switzerland did, of course they will be rather late to the party... Then again, better late than never.
Central & Eastern Europe, had problems that they've worked through to the point they have been thought of as a safehaven. They have successfully weakened their currencies but the ECB has reversed those efforts. It's hard to believe, current rhetoric to the contrary aside, that they wouldn't not act to defend against this imported deflation. Poland: PLNEUR, Czech Republic: CZKEUR
North America, ran by the most powerful currency manipulator in the world and the central bank who taught the world how QE is done. The US has allowed its dollar to rise slowly, but this sudden spike will crash earnings (not to mention the plethora of faux economic activity which crashes them even more) which risks throwing the deflationary mud back where the Fed doesn't want it. See the USD climb to much and the Fed will once again show the world how its done! Canada, through the Bank of Canada’s untelegraphed quarter-point cut in its overnight rate, after nearly 5 years of inaction, is also looking to join the CW (currency war) fray. Canada's economy is highly susceptible to oil prices, and we all know that those North Americans have been clamoring to ignite some inflation for years. Has oil cooperated as of late?
Although Canada's issues can be tightly correlated with falling oil prices, the last thing it needs is for the Canadian dollar to move higher, or even just to remain static. It, like everybody else, needs its currency to fall! But how can that be when everyone is running from the newly donned, low-yielding eurozone currencies and fixed-income assets. Canada: CADEUR, US Reserve Currency status and current king of manipulation: USDEUR
Asian economic engines, namely China, Korea, India and the inventor of QE and the one suspected of causing the ECB to act in defense of euro to fight back the unemployment exported over to the EU - Japan, are big exporters to the EU. As a matter of fact, that's likely their second biggest market behind the US. In other words, losing pricing power and traction there relative to the EU is a very, very big deal. China even had the balls to go at it with the big daddy, the US. Remember?
- ·US says China 'manipulating' renminbi - FT.com
- ·China currency manipulation: How does it harm the U.S. ...Slate
- ·China: Currency Manipulator No More - Forbes
- ·Senators renew push against China currency 'manipulation ...
If you remember from part 1 of this series and the impossible Triangle, or the trilemma...
The Impossible Trinity or "The Trilemma", in which three policy positions are possible. If a nation were to adopt positiona, for example, then it would maintain a fixed exchange rate and allow free capital flows, the consequence of which would be loss of monetary sovereignty.
Well, China uses monetary controls with a banded peg to the USD. that peg is bursting at the seems since the ECB did its thing. It has also cut its rates, like everybody else...
- ·Economists React: Will China's Interest-Rate Cut Make a ...blogs.wsj.com/chinarealtime/.../economists-react-wil...Nov 24, 2014 - Economists React: Will China's Interest-Rate Cut Make a Difference? ...According to the statement, the move “does not signal that the direction ...
- ·China Central Bank PBOC Cuts Interest Rates - WSJ www.wsj.com/.../china-central-bank-pboc-cuts-inter... Nov 23, 2014 - In a surprise move, China cuts interest rates for the first time in more .... on an economy of about the same size) the government did nothing.
- ·China's interest rates: The right call | The Economist www.economist.com/blogs/.../2014/.../chinas-interest-rate... Nov 21, 2014 - CHINA has cut interest rates for the first time in more than two years, ...be surprising if China did not follow up with more rate cuts and more ...
- ·China cuts interest rates to spur growth, ease debt pressure ... www.reuters.com/.../us-china-economy-rates-idUSKCN0J511020... Nov 21, 2014 - BEIJING (Reuters) - China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy as it ...
- ·China's Surprise Rate Cut Signals Desperation, Bad News ... www.forbes.com/.../chinas-surprise-rate-cut-signals-desperation-b... Nov 23, 2014 - What does the PBOC's out-of-the-blue rate cut suggest? ... Harrison Hu and Ning Zhang of UBS predict interest rates will fall by 50 basis points ...
So, China has tried the fixed rates and monetary policy, but wait a minute.. China has capital controls as well! If the trilemma holds true, then capital controls are to be broken (like in nearly every totalitarian state that attempts to be part time capitalist), interest rates are going to sprawl out of control (as I have cautioned in the past), or the fixed rate peg will be broken (ala Switzerland) on the horizon or there will be a distinct failure of a combination of the efforts. I'd choose the latter if I were a wagering man.
Very recently, China injected liquidity into its banking system - both in response to its slowing economy and concern of stresses in the banking system surround the Lunar New Year holiday which is retail nirvana for the country.’s biggest shopping season. The People’s Bank of China tied the yuan to the dollar via a trading band, and the dollar has appreciated significantly - particularly in relation ot the euro and just about everyone else's currency. This is bad news for an export nation that's been running on faux activity for some time now, and China's southern manufacturing centers are vulnerable. So what does China do? Check the headlines:
- China's Yuan Slides on ECB Stimulus Wall Street Journal - Jan 23, 2015
- China's Bid for Global Yuan Gains Momentum Wall Street Journal - Jan 21, 2015
- China's yuan slumps to near 8-month low, flirts with daily limit Economic Times - 11 hours ago
- ?Chinese yuan eases in line with central bank's midpoint Economic Times - Jan 21, 2015
- Chinese yuan growing rapidly in South Korea CCTV-America - Jan 3, 2015
- Chinese Yuan Declines To 3-week Low Against U.S. Dollar RTT News - Jan 23, 2015
- China's yuan posts biggest 1-day loss in 7 weeks after ECB's QE move Economic Times - Jan 23, 2015
China has taken another page out of the Japanese, American and ECB handbook and declared war on its neighbors by exporting unemployment to those who are economically proximal.
Anyone who wants to get their practice in BEFORE we implement 10,000:1 leverage should feel free to download the trading client, the tutorial and related research here.
In the next two installments we wil surgically dissect the banking domiciles (I think these countries are in much more trouble than any of these bank analysts are saying) and even more forensically, the banks themselves. Since this research is sort of expensive, I will not go too deep, but I will put a sample "armageddon" trade out and explicitly illustrate it.
Quick note: The research that was originally disseminated through BoomBustBlog is now being offered through Veritaseum, my new venture, as well as transaction services to assist in monetizing said research. Anyone interested in the services or the software should feel free to email me.
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Reggie, your ultracoin stuff sounds really interesting even though I have the feeling that you are very complacent regarding the bitcoin price crash. You see it as a non-event but since the infrastructure gets financed by awarding new bitcoins to the service providers a low bitcoin price could indeed pose a serious threat to the ehtire bitcoin ecosystem. How would that affect your ultracoin system, btw?
Then, no counterparty risk? how come? When I initiate a position via your ultracoin, I do run the risk of not being able to close it any time I want at a fair price. I m,ay be able to do, but there is no guarantee. let's keep it simple. say, I do buy some common stock (XYZ corp) and the market starts to unravel. If your ultracoin system is down at that point or isn't able to quote me a fir price (say, due to high market volatility) - what am I going to do? Worse, your system may be down for a day or two due to whatever reason - then what? I can't even take any recourse because your stuff obviously doesn't fall under any investment regulation at all. Effectively, you/your systems reliability are my counterparty risk even if it is not 'counterparty' in the traditional meaning of the term. So how can you guarantee me a fair execution/ permanent availability?
third qestion: If I buy a stock via ultracoin, say on saturday evening? How can you execute that? There is no market open where to trade the stock. So if you execute the deal, someone must by edfinition hold an unhedged position in the stock at least till Monday (when a regular market opens where to square it off or hedge). Who absorbs that risk for those 36 hours? And how can it be that this one then isn't somehow able to blow up - meaning that all my ultracoin contracts are there - but not worth much because nobody would be there so that I can close them (cash out) ?
If you have answered these questions (or some of them) somewhere else, a link would be appreciated.
Hell I will vote democrat 5 times but I want more than a phone for my 5 votes.
Reg, I read you man. You rock way over their heads. Don't ever change.
10000 to one leverage. No counterparty risk. There's a name for this kind of advertising; but i'm not going to print it here. I'm long the Ruble on the CME; The CME has no counterparty risk; and their payment system isn't going to vanish into digital mumbo jumbo. NIce try. Do you have any bridges for sale in Brooklyn./ ?
How does the CME have no counterparty risk? If a bomb was dropped on the CME the day that your actual counterparty reneged on their margin calls would you be at risk of not getting your capital back and/or your trade fulfilled?
Here's a tip, ANY centralized entity has inherent counterparty risk because it can be targeted.
I can show, step by step, the advantages of my system over any fully centralized system. Go ahead, dare me!!!!!
The problem that you have is that you are presented with something that you don't understand and you respond by calling it a scam versus asking someone to explain it to you. I'm more than willing to explain but am short in patience for trolls.
Oh, and by t he way; ETF's are not appropriate instruments for retail investors. They were certainly created for retail investors, (actually speculators; but I don't want to up set you, I'm trying to help you), by the brokerage industry and marketed successfully; but they stink. If you want to trade Forex. Put up the margin for a contract on the CME. All the material in this article about the currrency wars is correct; it's also obvious and well known to all actual players in this field, but it's just the set up for the scam. do as you wish. don't bother replying to me; I have nothing further to say.
Point well made in corelating the N. American impacts to earnings. Jolly Jeff Immelt, at GE bragged about his portable manufacturing base in his last Earnings Call.
If it's Tuesday, this must be Indonesia.
Someone tell me how to buy any digital currency without it being stolen by the exchanges or hackers. Until then, no deal.
Keep your currency in a multi-signature wallet with a mininum of 2 of 3, or better yet 3 of 5 configuration. See, simple as that. I can tell that you have never spent a lot of time dealing this stuff. Do NOT believe everthing you have heard in the media. 95% of the media doesn't even know what Bitcoin is yet that seems to be where most of you guys are getting your information.
So what is Bitcoin? Here's a clue, it's NOT digital currency. Digital currency is an application that was written on the Bitcoin platform, like email is an app that was written for the Internent. Now that I likely have dashed your concept of what this new tech is, I challenge you to tell me what it actually is. Go ahead... Your turn.
Thanks for the tip, but I'll have to research what it actually means. What would be useful is a user's guide starting from the basics and building up to your system. Maybe you have one. I am not a financier.
Read the bitcoin whitepaper. Don't take anyone's opinion for what it is when you can just read the stuff directly. And don't worry about not being a financier most financiers don't know what it is either.
Or you can watch my videos :-)
China is getting squeezed by US invasion (renters can't buy or store China shit)
This all sounds like a big load of b.s. to me.
The US recovery still stinks...the price gougers are in big trouble if we get a flood of cheap imports (especially energy), why are we at war with Russia again?
I'm gonna start my own digital currency. I'm gonna name it Epic Coin. When I get it up and running all users will get a million "dollars" worth of "money" if they promise to sport a Mullet hair cut for the next 5 years.
Once again, all major currencies are digital. The value behind Bitcoin is the blockchain technology which the sovereign backed digital currencies do not have. With the blockchain you can do things such as what I have done with UltraCoin (which is not a coin, but a system in which one can create their own smart contracts, in this case derivative contracts that can't be broken and are used to trade value as if one had a schwab, eTrade or Merrill Lynch account). The difference? All trades settle as agreed. No counterparty/credit/default risk. You can trace any trade and all funds at all times from any connected computer. You can trade the entire universeo of securities, well over 45,000 tickers in all asset classes, and all exchanges and countries.
You can do micro trades for as little as 15 cents (think of buying 25 cents worth of BRK.A which trades at over $250k per share) to hundreds of millions of dollars (think of buying exposure to $100M of stock traded on the pink sheets). You don't have any bid/ask spreads, slippage and you can't move the markets no matter how much you trade. Perfect for thinly traded markets.
You don't need an account, you don't need to register, you don't even need a bank. Now, go ahead and make some more digital currency jokes, or would you rather start learning about how this new technology works.
Reggie,
Cheers.
Reggie,
Cheers.
Reggie, with all due respect I have been reading your stuff for years. Call me a Luddite. Pooters / OS's / Firewalls/ Encryption can be hacked given enough horsepower and money, of which TPTB get to print for "free" and hire the best in the bidness.
What every you are rolling out has already been gamed by the best of the best for nearly 20 years. Sometimes you have to dig deep and look back 10-20 years to see what the deep powers have had at their fingertips.
I wish you and your efforts success but I get by now with the Shitbag fiat money and phys.
they will label you a extreme terrorist and make you a bank CEO for starting some shit like that. I wish the war would start
Five more years of this tamed but extremely styled mullet mane, puh count me in brotha.
harsh terms
Mine will be the six minute abs Ultracoin. 60,000:1 leverage!
How about Obamabucks™®. You get EBT, Medicare, and a phone FOREVER as long as you vote Democrat.