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2015 Currency Wars Year-To-Date Summary: 13 Rate Cuts, 5 Rate Hikes

Tyler Durden's picture




 

For those keeping track of currency wars around the globe, 2015 - a year in which two central banks, those of Switzerland and Singapore have already admitted defeat, is shaping up as nothing short of historic. As DB's summarizes: just about 31 countries have, in less than a month, eased in the form of 13 mostly "surprise" rate cuts, while just 5 have tightened monetary policy.

From DB:

Yesterday we highlighted that 9 Central Bank have eased policy this year. However we've subsequently learnt there are actually 13. Here is the full list: Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan. Given that the ECB covers 19 countries you could actually say its 31 countries. On the other hand we think 5 countries have tightened monetary policy including Brazil, Armenia, Krygyzstan, Mongolia and Belarus. Overnight the RBNZ kept rates on hold although attention in the Asia-Pacific region will move to the RBA decision next week.

As DB concludes, "who is next is the big question, and can the Fed continue to try to prime the market for rate hikes when the rest of the world is easing?" Judging by yesterday's market reaction, the answer for now is year.

 

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Thu, 01/29/2015 - 08:55 | 5719235 GetZeeGold
GetZeeGold's picture

 

 

All bankers are required to sign up for the draft.

 

All tribe members....report to bootcamp.

Thu, 01/29/2015 - 08:57 | 5719245 Romney Wordsworth
Romney Wordsworth's picture

A bunch of southpaws there on the AmeriKan side... #FOARward Soviet!

Thu, 01/29/2015 - 09:25 | 5719300 ...out of space
...out of space's picture

russia rase rate to

and it it looks like all east side rasing rates and west side keep them down

who will fall first??

Thu, 01/29/2015 - 09:35 | 5719332 CitizenPete
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Most of their young relatives serve in the IDF, killing Semite families in GAZA. What more do you want?

Thu, 01/29/2015 - 09:38 | 5719346 Refuse-Resist
Refuse-Resist's picture

"We" want them, at the end of their heroic military service, to obtain US citizenship, then run our government.

Rahm Emmaneul Scholarship Program/Career Track

 

FTMFW

Thu, 01/29/2015 - 08:53 | 5719239 TideFighter
TideFighter's picture

Get hit by money, it will not hurt. Gold will knock you out.

Thu, 01/29/2015 - 10:09 | 5719451 linniepar
linniepar's picture

Get hit by currency,  it will not hurt. Money will knock you out. Fify.

Thu, 01/29/2015 - 08:56 | 5719246 Cannon Fodder
Cannon Fodder's picture

Can anyone recommend a good primer for understanding the dynamics and effects of currency wars? Something for the common Joe out here. I'm still trying to understand the impacts other than one countries currency is more expensive causing imports to cost more.

Thu, 01/29/2015 - 08:59 | 5719250 Romney Wordsworth
Romney Wordsworth's picture

 "on a long enough timeline the survival rate for everyone drops to zero"

 

That about sums it up.

Thu, 01/29/2015 - 09:06 | 5719252 Headbanger
Headbanger's picture

No.

Just stayed tuned here for further instructions.

Oh yeah... And shelter in place.

That is all.

Thu, 01/29/2015 - 09:02 | 5719256 Central Wanker
Central Wanker's picture

Can anyone recommend a good primer for understanding the dynamics and effects of currency wars?

 

Jim Rickards' book "Currency Wars" is a decent start.

Thu, 01/29/2015 - 09:42 | 5719357 Ghordius
Ghordius's picture

+1 WilliamBanzai7 in his new ZH Article when-plunder-becomes-way-life

has posted in a comment this quite big book http://www.soilandhealth.org/03sov/0303critic/030317hudson/superimperial...

it's free for download, and if you really read it through (over 333 pages), then you already know more then 99,9999% of all people around you

Thu, 01/29/2015 - 13:38 | 5720731 jefferson32
jefferson32's picture

I'd add Gold Wars by Ferdinand Lips.

Thu, 01/29/2015 - 09:09 | 5719263 jbv629
jbv629's picture

Yes. Either of Jim Rickards' books: Currency Wars or The Death of Money. Also, Peter Treadway's Investing in the Age of Sovereign Defaults.

Thu, 01/29/2015 - 09:00 | 5719248 jbv629
jbv629's picture

The answer for now is year??? What does that mean?

Thu, 01/29/2015 - 09:41 | 5719352 Wild Theories
Wild Theories's picture

means Tyler's a messy typer

Thu, 01/29/2015 - 09:00 | 5719254 Spungo
Spungo's picture

It means you should buy gold!

Thu, 01/29/2015 - 09:03 | 5719258 wrs1
wrs1's picture

Gold is doing nothing.

Thu, 01/29/2015 - 09:11 | 5719266 Infinite QE
Infinite QE's picture

Unless you live in euroville then it's done quite a bit.

Gold is always confusing to people in times like this.

But is always the last man standing as one paper fiat machination after another goes its full course and reaches zero.

 

Thu, 01/29/2015 - 09:23 | 5719276 GetZeeGold
GetZeeGold's picture

 

 

Gold is doing nothing.

 

If you want a thrill ride....buy bitcoins. Go reap the wind.

Thu, 01/29/2015 - 09:37 | 5719339 Ghordius
Ghordius's picture

"Unless you live in euroville then it's done quite a bit. " which, interestingly, is a key point of one of my dearest friends (and a "gold bug")

he maintains that the same people that are keeping gold down are acutely aware that if "euroville" tastes blood in the murky waters of gold... that game has no chance anymore

and so he shows me nearly every quarter how little gold prices move... in EUR. both in daily as in yearly terms

Thu, 01/29/2015 - 09:04 | 5719259 ClassicCommodity
ClassicCommodity's picture

Fuck, but where is yield?

Thu, 01/29/2015 - 09:17 | 5719278 Never One Roach
Never One Roach's picture

According to a recent report by KeyBanc analyst Edward Yruma, weakness in the global economy, a strong U.S. dollar and ongoing geopolitical issues are contributing to a slowdown among consumers who live overseas.

 

But it isn't just international companies that are vulnerable to the shift. As a result of these trends, analysts have recently lowered their ratings on U.S.-based retailers Tiffany (TIF) and Ralph Lauren (RL)—which pull in a high percentage of their sales abroad—and lowered earnings expectations for Coach (COH).

 

http://www.msn.com/en-us/money/companies/the-biggest-threat-to-luxury-brands-rapid-growth/ar-AA8H0IW?ocid=mailsignout

 

Robust!

Thu, 01/29/2015 - 09:17 | 5719281 Brazen Heist
Brazen Heist's picture

What about Russia? They hiked massively recently in December. Also technically NZ was the first Western country to hike rates since the shitstorm.

Thu, 01/29/2015 - 09:32 | 5719320 Ghordius
Ghordius's picture

the Ruble went down, didn't it? rates are means, in terms of currency wars, not ends

Thu, 01/29/2015 - 09:29 | 5719313 AgeOfJefferson
AgeOfJefferson's picture

Love that cartoon. Says it all!

Thu, 01/29/2015 - 09:43 | 5719363 Seasmoke
Seasmoke's picture

A picture is currently worth 1270 words. 

Thu, 01/29/2015 - 10:57 | 5719702 polo007
polo007's picture

http://www.telegraph.co.uk/finance/economics/11358316/Central-bank-prophet-fears-QE-warfare-pushing-world-financial-system-out-of-control.html

Mr. William White said Quantitative Easing (QE) is a disguised form of competitive devaluation. "The Japanese are now doing it as well but nobody can complain because the US started it," he said.

"There is a significant risk that this is going to end badly because the Bank of Japan is funding 40pc of all government spending. This could end in high inflation, perhaps even hyperinflation.

"The emerging markets got on the bandwagon by resisting upward pressure on their currencies and building up enormous foreign exchange reserves. The wrinkle this time is that corporations in these countries - especially in Asia and Latin America - have borrowed $6 trillion in US dollars, often through offshore centres. That is going to create a huge currency mismatch problem as US rates rise and the dollar goes back up."

Mr. White's warnings are ominous. He acquired great authority in his long years at the BIS arguing that global central banks were falling into a trap by holding real rates too low in the 1990s, effectively stealing growth from the future through "intertemporal" effects.

He argues that this created a treacherous dynamic. The authorities kept having to push rates lower with the trough of each cycle, building up ever greater imbalances, in an ineluctable descent to the "zero bound", where monetary levers stop working properly.

Under his guidance, the BIS annual reports over the three years before the Lehman crisis were a rising crescendo of alarm calls at a time when other global watchdogs were asleep. His legendary report in June 2008 openly discussed whether the world was on the cusp of events that might prove as dangerous and intractable as the Great Depression, as it indeed it was.

Mr White said central banks have been put in an invidious position, compelled to respond to a deep economic disorder that is beyond their power. The latest victim is the Swiss National Bank, which was effectively crushed last week by greater global forces as it tried to repel safe-haven flows into the franc. The SNB was damned whatever it tried to do. "The only choice they had was to take a blow to the left cheek, or to the right cheek," he said.

He deplores the rush to QE as an "unthinking fashion". Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing "correlation with causality". The Anglo-Saxon pioneers have yet to pay the price. "It ain't over until the fat lady sings. There are serious side-effects building up and we don't know what will happen when they try to reverse what they have done."

The painful irony is that central banks may have brought about exactly what they most feared by trying to keep growth buoyant at all costs, he argues, and not allowing productivity gains to drive down prices gently as occurred in episodes of the 19th century. "They have created so much debt that they may have turned a good deflation into a bad deflation after all."

Thu, 01/29/2015 - 11:57 | 5720103 toadold
toadold's picture

"Merchantilism"  It's been going on for centuries.

Thu, 01/29/2015 - 12:33 | 5720321 polo007
polo007's picture

http://www.project-syndicate.org/commentary/eurozone-needs-more-than-qe-by-martin-feldstein-2015-01

First, though, consider why QE’s ability to stimulate growth and employment in the US does not imply that it will succeed in the eurozone. QE’s effect on demand in the US reflected the financial-market conditions that prevailed when the Federal Reserve began its large-scale asset purchases in 2008. At that time, the interest rate on ten-year Treasury bonds was close to 4%. The Fed’s aggressive program of bond-buying and its commitment to keep short-term interest rates low for a prolonged period drove the long-term rate down to about 1.5%.

The sharp fall in long-term rates induced investors to buy equities, driving up share prices. Low mortgage interest rates also spurred a recovery in house prices. In 2013, the broad Standard and Poor’s index of equity prices rose by 30%. The combination of higher equity and house prices raised households’ net worth in 2013 by $10 trillion, equivalent to about 60% of that year’s GDP.

That, in turn, led to a rise in consumer spending, prompting businesses to increase production and hiring, which meant more incomes and therefore even more consumer spending. As a result, real (inflation-adjusted) GDP growth accelerated to 4% in the second half of 2013. After a weather-related pause in the first quarter of 2014, GDP continued to grow at an annual rate of more than 4%.

Thus, QE’s success in the US reflected the Fed’s ability to drive down long-term interest rates. In contrast, long-term interest rates in the eurozone are already extremely low, with ten-year bond rates at about 50 basis points in Germany and France and only 150 basis points in Italy and Spain.

So the key mechanism that worked in the US will not work in the eurozone. Driving down the euro’s dollar exchange rate from its $1.15 level (where it was before the adoption of QE) to parity or even lower will help, but it probably will not be enough.

Thu, 01/29/2015 - 13:25 | 5720613 22winmag
22winmag's picture

I'm glad I bought a little at $1,175.

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