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Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom Rhetoric

Tyler Durden's picture




 

The "one-off" adjustment has now reached its 3rd day as The PBOC has now devalued the Yuan fix by 4.65% back to July 2011 lows.

The PBOC seeks to reassure...

  • *CHINA PBOC SAYS YUAN REMAINS STRONG CURRENCY IN LONG-TERM
  • *PBOC SAYS THERE IS DEMAND FOR DEVALUATION OF YUAN VS USD
  • *PBOC CHANGE OF YUAN MECHANISM RELATED TO JULY CREDIT: ZHANG
  • *PBOC SAYS YUAN CHANGE IS BENEFICIAL TO LONG TERM STABILITY
  • *PBOC SAYS YUAN EXCHANGE RATE ADJUSTMENT ALMOST COMPLETED
  • *YUAN RATE ADJUSTMENT POSITIVE TO CONFIDENCE IN YUAN: PBOC'S YI
  • *NEW YUAN MECHANISM `POSITIVE' TO INTERNATIONALIZATION: PBOC YI
  • *PBOC SAYS NO BASIS FOR YUAN'S CONSTANT DEVALUATION: ZHANG

Even before this evening's date with debasement history, Japan felt the need to step up the currency war rhetoric. Following disappointing Machine Orders data, Abe advisors Hamada warned that "Japan can offset Yuan devaluation by monetary easing," and so the race to the bottom escalates. China has its own problems as BofAML's leading economic indicator showed "the foundation for a growth recovery is not solid, facing more downward pressure," and while confusion reigns over why The PBOC would intervene at the close to strengthen the Yuan last night, the reality is the commitment isn’t to a devaluation for China’s exports, but undoubtedly its actions are directed toward trying to keep the wholesale finance interfaces somewhat orderly.  Finally, China’s devaluation couldn’t come at a worse time for Argentina - about a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.

Having devalued the (onshore) Yuan fix by 3.5% in the last 2 days, China did it again... shifting Yuan to 4 year lows

  • *CHINA SETS YUAN REFERENCE RATE AT 6.4010 AGAINST U.S. DOLLAR

 

Offshore Yuan dropped back to 6.50...

 

And China Stocks have opened lower...

  • *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 1% TO 3,975.2

S&P  Futures are fading...

Some more liquidity needed...

  • *PBOC TO INJECT 40B YUAN WITH 7-DAY REVERSE REPOS: TRADER

And sure enough, not be outdone, Japan threatens to re-escalate the currency war...

  • *ABE ADVISER HAMADA SAYS CHINA'S FX MOVE WILL TEND TO BOOST YEN
  • *HAMADA: JAPAN CAN OFFSET YUAN DEVALUATION BY MONETARY EASING
  • *HAMADA:BOJ MAY EASE IF CHINA MOVE HITS EXTERNAL DEMAND TOO MUCH

But China has it's own problems, as BofAML notes, China LEAP (leading economic activity pulse) fell to-3.9% YoY in July from -2.6% in June, as five of the seven LEAP components weakened.

Similarly, other macro activity data released in July worsened from a surprisingly strong June and disappointed the market. It suggests the foundation for a growth recovery is not solid, and economic growth faces more downward pressure as financial sector activity has slowed after the recent stock market slump.

 

 

On the demand side, housing starts further declined to 16.4% yoy in July after dropping 14.3% in June. We think destocking could still be ongoing in tier 3-4 cities and the housing market recovery has yet to drive acceleration in housing starts. Auto sales growth slumped to -7.1% YoY from -2.3%, likely due to weakening consumer demand for some big-ticket items amid stock market turmoil while staple good sales remained resilient.

 

Production-side components were mixed, with weaker power and steel output growth but slightly better cement output growth. Power and steel output growth was particularly poor in July, likely due to plummet in commodity and raw material prices on a bearish growth outlook amid stock market turmoil.

 

Medium- to long-term loan growth edged down by 0.8pp, but if taking into account local government debt swap, the decline would be 0.3pp instead.

*  *  *

The fallout from China's decision is going global...

China’s devaluation couldn’t come at a worse time for Argentina.

 

About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.

*  *  *

And finally, here is Jeffrey Snider of Alhambra Investment Partners discussing the other reality of what is occurring in China - as opposed to the paint-by-numbers version spun on TV - explaining why the PBOC would seemingly “allow” devaluation one day and then act against it the very next. They are just trying to hold on for dear life, managing imbalances that are beyond their grasp.

While everyone remains sure that the PBOC is actively trying to “allow” the yuan to depreciate as some kind of export catalyst, the “dollar” continues to show (not suggest) otherwise. Liquidity and “dollar” markets are still roiled rather than soothed, especially the US treasury market where the bid right at the open (what look very much like continued collateral calls) pushes more like a combination of October 15 and January 15.

 

ABOOK Aug 2015 Yuan USt

 

As if to underscore the runaway nature, the PBOC apparently intervened against this “devaluation” just last night. From the Wall Street Journal:

 

Tuesday, the People’s Bank of China surprised global markets with what looked like a win-win currency depreciation for the country—appearing to cede more control of its exchange rate to market forces, which the International Monetary Fund and others have long urged it to do, while also helping Chinese exporters.

 

Its intervention only one day later raised questions about its commitment to an exchange rate driven more by supply and demand and less by government direction.

 

The Journal’s confusion here is demonstrated by what is a mistaken assumption in the first paragraph leading to the mystery of the second. The PBOC’s commitment isn’t to a devaluation for China’s exports, but undoubtedly its actions are directed toward trying to keep the wholesale finance interfaces somewhat orderly. When the yuan was trading exactly sideways for nearly five months, that was the same setup; the PBOC was keeping the yuan stable so that it wouldn’t devalue and thus signal the depth of the “dollar” financing strain.

 

That is the problem orthodox commentary and theory has with wholesale finance, they just don’t get it. Devaluation of currency doesn’t mean that in this context just as a “strong dollar” isn’t anything like the term. Both are forms of internal disruption, the direction of that is just an expression of what manner of wholesale finance is becoming most unruly. Credit-based “money” systems do not operate like the currency systems from before 1971. Floating currencies aren’t really that, so much as they are just another form of traded liabilities in global banking.

 

ABOOK Aug 2015 Yuan Again

 

The Chinese have a “dollar” problem just the same as the Swiss, Brazilians and the rest (including the dollar). There is a global retreat in eurodollar funding that is wreaking havoc, expectedly, globally. And in China that is particularly true as the Chinese banks through external corporates joined the “dollar short” several years back. Joined now under PBOC “reform”, there has been an almost hostility if not at least disfavor over the “dollar” intrusion as it has been taken as one primary element of the bubbles (what mainstream mistakes for “hot money”). As a result, the PBOC has been almost chasing “dollars” out of the system in an attempted orderly purge.

 

That led to what looked like historic “outflows” in 2015 as “dollar” conditions for the Chinese “short”, so it is absolutely no surprise to see this occurring now. The only mystery has been, as I have been writing for some time, what the PBOC was doing to counteract it during those five months. That would tell us both how serious the turmoil was and how ineffective whatever intervention would ultimately be.

 

From July 22:

The yuan has suddenly, right at the March FOMC meeting, gone limp. Trading has been confined, except for very brief, intraday outbursts, to an increasingly narrow range. Given its behavior particularly as a full part of the reform agenda to that point, this amounts to what can only be hidden and inorganic factors. Whether that means PBOC intervention is unclear, though suggested by even TIC, but this is the most important and unexplained dynamic in the “dollar” world at present.

 

Perhaps the June TIC updates will help shed some light on what has been going on with China’s “dollar short”, but I doubt it. The nature and especially the scale of what might be happening in the money markets has global implications, and may (conjecture on my part) start to explain the reversal in the Chinese stock bubble and ultimately even relate to the “dollar’s” renewed disruption in July so far.

 

Earlier July 8:

It’s not enough to notice how this [zero yuan volatility] is odd, as it appears, given wider circumstances, to be almost odd with a purpose. Whenever uncertainties grew about China’s reform, especially “allowing” defaults, “dollar” supplies tightened significantly and the yuan devalued. Given the fragility of the current situation, you can understand why, possibly, the PBOC might not want too much to get so far out of hand and so they may be supplying “dollars” to maintain orderly money markets both onshore and off. Given the plunge in import activity they may not really need to supply all that much, particularly in combination with prior and intended outflows as they effectively tried to chase speculators out of the country. Perhaps they did too much?

 

Whatever the case may ultimately be, it bears close scrutiny for several reasons. First, if this is correct (a very big “if”) then the financial system in China is worse, far worse, than it appears. Second, central bank attempts such as this are extremely finite as they are, over time, hugely inefficient. The PBOC might just be throwing everything in its arsenal at the financial system short of open “flood” declarations (which are themselves destabilizing; declaring an open emergency is as much confirmation of how bad everything is) trying to calm everything down in order to reassess. [emphasis added]

 

That is why the PBOC would seemingly “allow” devaluation one day and then act against it the very next. They are just trying to hold on for dear life, managing imbalances that are beyond their grasp. That is what occurred last night, as the Wall Street Journal confirms that Chinese banks were “selling” dollars on the PBOC’s behalf; which is, in the wholesale context, supplying “dollars.” The currency translation is just the recognition of that imbalance, which is in many forms like this kind of convertibility almost a “run.”

 

The PBOC then instructed state-owned Chinese banks to sell dollars on its behalf in the last 15 minutes of Wednesday’s trading, according to people close to the state banks.

 

The central bank took it as far as it could and then the “dollar” dam just burst on really bad economic data that was expected instead to confirm the bottom. At this point, it looks like they are left only to try to mitigate the damage they had been for five months hoping would never occur as the global economy was supposed to have healed on its own long before then (which was nothing more than FOMC and orthodox pipe dreams).

Another central bank has fallen prey to the decomposing “dollar”, as the global tremors of such central bank upsets ripple further and further.

 

 

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Wed, 08/12/2015 - 21:27 | 6420667 cowdiddly
cowdiddly's picture

I thought they said this was a one and done event? What one week. month.

Wed, 08/12/2015 - 21:31 | 6420678 TeamDepends
TeamDepends's picture

We're on an express elevator to hell, goin' down!

Wed, 08/12/2015 - 21:36 | 6420706 knukles
knukles's picture

It's just another one day one off unique experience in a long string of one day one off experiences that are all temporary and will not matter to the rest of the world because its all contained and the Fed is the tail that wags the China dog, Bitchez.

Wed, 08/12/2015 - 22:00 | 6420810 BurningFuld
BurningFuld's picture

Wait til day 14....

Wed, 08/12/2015 - 22:10 | 6420849 Save_America1st
Save_America1st's picture

I can't wait to see what kinda shit-storm occurs when China un-pegs the yuan from the dollar...they're basically doing it right now as it is but just not "officially" I guess...yet. 

Wed, 08/12/2015 - 22:11 | 6420856 38BWD22
38BWD22's picture

 

 

It's about time that Korea & Japan join in the devaluations.  We would benefit from lower bearing prices.

Wed, 08/12/2015 - 22:16 | 6420874 rsnoble
rsnoble's picture

No, they want to blow each other up instead. LOL.

Wed, 08/12/2015 - 23:23 | 6421070 ThaBigPerm
ThaBigPerm's picture

Was the EPA investigating a dangerous leak in the FX markets?

Wed, 08/12/2015 - 23:50 | 6421118 Inzidious
Inzidious's picture

You're overusing that joke =[

Thu, 08/13/2015 - 00:32 | 6421199 TeamDepends
TeamDepends's picture

Carter Burke: How about we make a campfire, sing a couple of songs ?

Thu, 08/13/2015 - 01:59 | 6421260 Haus-Targaryen
Haus-Targaryen's picture

Ok Mr. Yellen, raise that rate.  Do it!  

Thu, 08/13/2015 - 09:12 | 6421817 TheFutureReset
TheFutureReset's picture

This was a master stroke by China in timing. The yuan being pegged the the dollar has risen by a ton over the last year, it's completely understandable that they would want to devalue a bit. The timing, right before the long awaited rate hike by the Fed, will probably ensure that the Fed can't raise rates, which make the Fed admit the US economy is total shit, and that they aren't in control all at the same time. 

Thu, 08/13/2015 - 04:45 | 6421430 Latitude25
Latitude25's picture

Is that you DoChen?

Wed, 08/12/2015 - 22:57 | 6421008 tdogg
tdogg's picture

China to US:  I will not be IGNORED!

 

https://www.youtube.com/watch?v=DM64Y8ndyG4

Wed, 08/12/2015 - 22:12 | 6420859 Oldwood
Oldwood's picture

Is this like a one time non recurring expense as claimed in non GAAP corporate reports that tend to recur quiet often?

I'm sure all of this can be straightened up with some revision in the life/death/seasonal adjustments.

Wed, 08/12/2015 - 22:17 | 6420875 NoDebt
NoDebt's picture

You're making the classic mistake of mixing economics and global fiat finance.  People who do that typically end up very surprised and very broke.

 

Wed, 08/12/2015 - 22:23 | 6420900 TeamDepends
TeamDepends's picture

Ripley: They cut the power.
Hudson: What do you mean, "*They* cut the power"? How could they cut the power, man? They're animals!

Wed, 08/12/2015 - 22:12 | 6420861 38BWD22
38BWD22's picture

 

 

Well said, knukles.

+ 1.3 billion

Wed, 08/12/2015 - 22:07 | 6420838 NoDebt
NoDebt's picture

"We're on an express elevator to hell, goin' down!"

Somebody wake up Hicks.

 

Wed, 08/12/2015 - 22:15 | 6420871 TeamDepends
TeamDepends's picture

[pulling out his pump-action shotgun]
Hicks: I like to keep this handy... for close encounters.
Frost: I heard *that.*

Wed, 08/12/2015 - 23:15 | 6420993 Alexandre Stavisky
Alexandre Stavisky's picture

?

Thu, 08/13/2015 - 01:11 | 6421252 SSRI Junkie
SSRI Junkie's picture

"Aliens" you dolt

Thu, 08/13/2015 - 06:08 | 6421486 new game
new game's picture

hoillywood looooooser; fuck you. so if somebody doesn't know the quote from a film their an idiot? fuck you, cause i don't sit hours in front of the big screen simulating life. i go live it you fucking loooooooser. i dont do movies fucken hollywood looooooosers. get a life. might as well be watchin idol or mericas got tallent, same fuckin difference. your not experiencing the real thing, ha ironic.

lots of loooooosers here, hollywoood loooooooooooooosers...

quote that line-fuck off looooooooooooooooser.

Thu, 08/13/2015 - 06:30 | 6421504 SSRI Junkie
SSRI Junkie's picture

waaaa waaaaa

Wed, 08/12/2015 - 22:53 | 6420996 rubiconsolutions
rubiconsolutions's picture

Remember, it's not the fall that kills you, it is the sudden stop.

Wed, 08/12/2015 - 21:52 | 6420776 TeamDepends
TeamDepends's picture

Ripley: These people are here to protect you. They're soldiers.
Newt: It won't make any difference.

Wed, 08/12/2015 - 22:05 | 6420829 old naughty
old naughty's picture

Oh 'sh't ing',

alien predators are here...

Wed, 08/12/2015 - 22:08 | 6420842 NoDebt
NoDebt's picture

We need to nuke 'em from orbit.  It's the only way to be sure.

Wed, 08/12/2015 - 23:22 | 6421067 mygameon
mygameon's picture

Hicks: that's it game over man, game over. We're in some real furry shit.

.......

Hicks: I don't know if you've been keeping up with current events but we just got our asses kicked!

Thu, 08/13/2015 - 01:20 | 6421262 mayhem_korner
mayhem_korner's picture

 

 

That wasn't Hicks (Michael Biehn), it was Hudson (Bill Paxton).

Wed, 08/12/2015 - 23:55 | 6421129 Uber Vandal
Uber Vandal's picture

Newt: They mostly come out at night. Mostly.

Alternate Version: The Algo's mostly come out to smash metals, or at the closing ramp up. Mostly.

 

 

 

Wed, 08/12/2015 - 22:03 | 6420825 Mentaliusanything
Mentaliusanything's picture

He who panics first panics best!

Wed, 08/12/2015 - 22:28 | 6420913 Ness.
Ness.'s picture

I'd rather be two years too early than two days too late.

Thu, 08/13/2015 - 00:14 | 6421177 TeethVillage88s
TeethVillage88s's picture

Question: Your Icon is suggestive.

Is there panic sex?

- I'm just screwing around

Wed, 08/12/2015 - 21:39 | 6420714 El Oregonian
El Oregonian's picture

Confetti money in the streets! Let's have a parade... on the road to ruin!

Wed, 08/12/2015 - 22:30 | 6420918 Moar-ey Greedman
Moar-ey Greedman's picture

Beggar thy neighbor? More like fucketh thy neighbor before ye get fucketh over first.

Wed, 08/12/2015 - 22:34 | 6420928 Jumbotron
Jumbotron's picture

" YEEE HAHHHhh......We're on a express elevator to hell, going' down ! "

"Somebody wake up, Hicks ! "

https://www.youtube.com/watch?v=uDLQg8ZKBS8

Wed, 08/12/2015 - 22:37 | 6420935 Jumbotron
Jumbotron's picture

Damn,  Nodebt.  I didn't know you beat me to it.  LOL !   Sorry about that.

I guess great minds think alike.  ;)

Thu, 08/13/2015 - 00:11 | 6421171 TeethVillage88s
TeethVillage88s's picture

Polergeist: "Your all gon-na Dieeeeeeee!"

Wed, 08/12/2015 - 21:27 | 6420671 ZippyBananaPants
ZippyBananaPants's picture

Three time a charm, bitchez

Thu, 08/13/2015 - 00:49 | 6421223 38BWD22
38BWD22's picture

 

 

Does that mean SIX devaluations is a double-charm?  I can see this kind of thing going on for awhile...

Wed, 08/12/2015 - 21:29 | 6420674 kliguy38
kliguy38's picture

should provide the cover for the Fed for QE 4,5,and 6......wait till the dollar hits 50.....we'll all be green glass

Wed, 08/12/2015 - 22:09 | 6420848 NoDebt
NoDebt's picture

Absolutely correct.

Wed, 08/12/2015 - 22:51 | 6420991 TeamDepends
TeamDepends's picture

Frost: Hot as hell in here.
Hudson: Yeah man, but it's a dry heat!

Wed, 08/12/2015 - 21:31 | 6420682 arbwhore
arbwhore's picture

PMs have a much more muted reaction tonight.

Wed, 08/12/2015 - 21:31 | 6420683 shitco.in
shitco.in's picture

Wonder what the announcement will be??

 

https://twitter.com/george_chen/status/631611284421607424

Wed, 08/12/2015 - 21:34 | 6420696 Karlus
Karlus's picture

Fruck You America!

Wed, 08/12/2015 - 22:02 | 6420817 BurningFuld
BurningFuld's picture

That's a great link but the analysis is from retards

 

Wed, 08/12/2015 - 21:43 | 6420686 JoWazzoo
JoWazzoo's picture

Just means Stawks will open weak and close up.  Repear of roday.  Eff it - Just BUY!

And S & P Futures are just shrugging it off:

 

http://finviz.com/futures_charts.ashx?t=ES&p=m5

Wed, 08/12/2015 - 21:34 | 6420688 SillySalesmanQu...
SillySalesmanQuestion's picture

I can devalue better than you can Abe, Ms. Debtfire, Kevin....and I'll keep doing it every day, until you get it through your pointy little heads.

Wed, 08/12/2015 - 21:33 | 6420691 Triple A
Triple A's picture

Ruh roe

Wed, 08/12/2015 - 22:03 | 6420824 BurningFuld
BurningFuld's picture

Wee Two Hi

Wed, 08/12/2015 - 21:33 | 6420692 CHC
CHC's picture

I'm sooooo confused.

Wed, 08/12/2015 - 22:38 | 6420938 trulz4lulz
trulz4lulz's picture

BTFD?

Wed, 08/12/2015 - 21:34 | 6420698 Tsar Pointless
Tsar Pointless's picture

So it's going to be another Groundhog Day tomorrow here in the States. Dow plummets 300 only to stage a miraculous recovery and end up flat.

Good to know ahead of time. 

Wed, 08/12/2015 - 21:34 | 6420701 commishbob
commishbob's picture

They decided on a threesome instead.

Wed, 08/12/2015 - 21:45 | 6420705 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

 

 

OK,  I'm so tired of China screwing with 'Merika.  It's time to ramp this currency war up a notch. 

I propose we retrofit some Howitzers to fire gold ingots at China, that'll teach those bastards to mess with us!!

Wed, 08/12/2015 - 22:56 | 6421003 Stormtrooper
Stormtrooper's picture

Great idea, but.....where will we get the gold ingots (they already got them all!)???

Thu, 08/13/2015 - 00:41 | 6421213 romario
romario's picture

The dollar is America's big gun now and Americans feel they can shoot any country down with it... Be careful for it might be a grenade exploding on your own ground.

Wed, 08/12/2015 - 21:38 | 6420716 holdbuysell
holdbuysell's picture

Recent Raoul Pal tweet:

"Why would the RMB deval NOT lead to the unwind of the massive China carry trade or capital flight? I cant see a single reason so far..."

Totally agree. This is gonna blow. We just won't know when...until it does.

Wed, 08/12/2015 - 22:10 | 6420852 NoDebt
NoDebt's picture

The 'when' is now.  In fact, it's already been happening.  This will accelerate it.

Thu, 08/13/2015 - 00:08 | 6421164 TeethVillage88s
TeethVillage88s's picture

So if I am in the USA or UK and bet a loan from China, don't I exchange the RMB to USD or British Pounds to invest?

Obviously I don't understand the problem, but now I remember this came up each time Japan devalued.

If my US or UK Investment pays off, then I pay off the Chinese Bank with higher valued Currency.

Hm.

Thu, 08/13/2015 - 08:37 | 6421702 holdbuysell
holdbuysell's picture

A USD carry trade involves borrowing dollars, then selling those dollars in exchange for a foreign currency, in this case Yuan, so that you can use the Yuan to invest somewhere in China that accepts Yuan.

This transaction makes you long Yuan/Yuan assets and short the USD. If the Yuan starts depreciating, it would take more of them to cover the USD short. Thus whatever gain may have been had by investing in Yuan/Yuan assets starts declining, potentially into losses.

Add leverage to this scenario and realizing that there are trillions of USD shorts in such a carry trade out there suggests there may at some point be a massive margin call where everyone needs to cover their USD short by selling Yuan/Yuan assets and buying back USD at the same time (unwinding the carry trade).

It could end up looking like the mother of all short squeezes as people pile back into the USD. This also exacerbates the strong dollar/weak foreign currency situation currently being played out.

Thu, 08/13/2015 - 10:30 | 6422053 TeethVillage88s
TeethVillage88s's picture

Thanks.

Wed, 08/12/2015 - 21:41 | 6420724 Xatos
Xatos's picture

Things are beginning to seem a bit more steady for those looking to September for the, "event."

Wed, 08/12/2015 - 21:44 | 6420736 yrad
yrad's picture

Race ya!!

Who won?

Wed, 08/12/2015 - 21:45 | 6420743 fed_depression
fed_depression's picture

For those that don't realize China is crashing after the very first devaluation you need your head examined. Which means there isn't demand for China goods.

All the stats are lies.

Wed, 08/12/2015 - 22:13 | 6420865 NoDebt
NoDebt's picture

I don't recall seeing you comment before, but I already like you.  That's been my contention for a LONG time.  China is the biggest fraud of the 21st century.  Unfortunely, I've typically been down-voted to oblivion here saying so.

Wed, 08/12/2015 - 23:59 | 6421140 TeethVillage88s
TeethVillage88s's picture

I go along with you here.

But the PRC leadership stays in power by a power base.

- What Threatens Power in China?
- Would the USA benefit from a change in Power in China
- Is the situation in China bad enough that there are Protests, Riots, Shortages, Liquidity Problems, Credit Problems, Cash Problems?

Government Change might go a long, long way, in relieving problems with China's Neighbors and clashes with the USA.

The Chinese people may not be interested in political problems with the USA, but there will be Wealthy powers, and Political Powers that have big feelings about Foreign Policy and Financial Policy.

Thu, 08/13/2015 - 00:35 | 6421206 Surveyor4Pres
Surveyor4Pres's picture

I somewhat concur.  However, the biggest criminal enterprise of the 21st Century is not China, it is the US government.

To a degree, criminal behavior is EXPECTED of a Communist nation (however, that's not an excuse for their nation).  In America, We The People allowed progressives, communists, and traitors to take over our government, hence our current status.  And worse, we have let our leaders (especially the Obama administration) negatively impact the status of every other nation on Earth.  As in the words of the Fabian Socialists--setting the world on fire in order to remold the world to their desires.

Wed, 08/12/2015 - 22:28 | 6420899 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

All the stats here are real however, the world has a ton of demand for our manufactured products....oh wait...nm. You do realize that the only reason China is going down is because we are broke as shit here and are not buying thier products, which means if China is "collapsing" so are we.  It's gonna be a fun ride. 

Wed, 08/12/2015 - 22:43 | 6420963 trulz4lulz
trulz4lulz's picture

Devalue and repegg to the ruble. Sell higher quality durable goods to Russia and Europe. Increase wealth to Chinese citizens and increase their consumption of Chinese made goods. Create a middle class across Asia and Europe. II'm guessing. Please explain why I'm wrong.

 

 

Thu, 08/13/2015 - 00:45 | 6421215 Terminus C
Terminus C's picture

The fault in your assumption lies in the fact that you think tptb in China are looking out for the best interest of the people of China, rather than their own, individual, short term gain.  I can't say any of the current crop of leadership around the world is "looking out for the interests of their people".

 

Thu, 08/13/2015 - 06:11 | 6421489 trulz4lulz
trulz4lulz's picture

The Chinese dont seem like "short term" goals oriented to me. There is a long term play here. I wonder what its going to be. My gut tells me they are feigning death.

Wed, 08/12/2015 - 23:10 | 6421038 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

What's our trade defict each month with these manipulators?? That will tell you who's really in trouble

Wed, 08/12/2015 - 21:46 | 6420744 Apostate2
Apostate2's picture


Rumour is that some (not all) very powerful voices in the top policy junta want the devaluation to be 10%.

We shall see.

Thu, 08/13/2015 - 00:56 | 6421233 Inzidious
Inzidious's picture

What would that mean? Are there % thresholds which would trigger significant events? Or are they already triggered and would accelerate?

Thu, 08/13/2015 - 04:40 | 6421422 Apostate2
Apostate2's picture

The short answer is no, unless you have a seat at the table. There is a difference of opinion amongst the factions as to what needs to be done. In other words, various interpretations as to what should be done; economic considerations or political considerations. Each choice is weighted and intertwined except if ideology is the deciding factor. Interest rates or FX exchange. Short-term goals or long-term strategy.

On the one side is the rapid drop in GDP growth, unfavourable demographics,mis-alined investment, over-capacity, unsustainable local government debt (a failure to report accurate stats--a 99% miss as estimated), the usual suspects of rehypothecation and the bubbles in housing and stocks all without a reliable baseline.

The 'reformers' want to open capital accounts, free-float the RMB, get the yuan in the SDR game and convince the US and EU that the currency is valued correctly. There are others who wish to boost exports and stabilise the labour market to quell an increasing chorus of discontent and to control, through various means, all sources of communication and information in order to manage threats to the Party. There are elements of both in all factions.

 

Wed, 08/12/2015 - 21:46 | 6420745 thamnosma
thamnosma's picture

Do we have liftoff yet?

Wed, 08/12/2015 - 21:46 | 6420746 Seasmoke
Seasmoke's picture

HA HA. A one time event. Now does anyone still believe the Chinese lowball Gold Figure ....... Got physical Gold. Get physical Gold. Good. 

Wed, 08/12/2015 - 21:46 | 6420747 BudFox2012
BudFox2012's picture

Thank god I pulled out of China two months ago and put it in something safe, like these Greek bonds (since that problem is fixed).

Wed, 08/12/2015 - 21:51 | 6420769 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

I pulled out of China also, then I remembered I had a rubber on, so I went back in.  She love you long time.

Wed, 08/12/2015 - 23:55 | 6421130 Sages wife
Sages wife's picture

Greece!? That's so last month.

Wed, 08/12/2015 - 21:48 | 6420750 redd_green
redd_green's picture

re  

China’s devaluation couldn’t come at a worse time for Argentina.

 

About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday.

what are they idiots?

Wed, 08/12/2015 - 22:12 | 6420863 Mentaliusanything
Mentaliusanything's picture

Phew, I thought I read

"China’s devaluation couldn’t come at a worse time for Australia.

About a quarter of the country’s income is now denominated in yuan, which suffered its biggest loss since 1994 on Tuesday."

They are safe as ..... Ow.... F@#K this is going to leave a stain
 

Wed, 08/12/2015 - 23:09 | 6421034 Oh regional Indian
Oh regional Indian's picture

Not idiots. No one else would give them a burger today....

Plus, it's all all thalers and yen floating around in dark pools that pop up as needed...

Wed, 08/12/2015 - 21:51 | 6420774 nmewn
nmewn's picture

Go man go!...lmao!

Wed, 08/12/2015 - 21:57 | 6420783 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

"Senators Schumer, Casey, Grassley, and Graham have all lined up to accuse Beijing of currency manipulation, a term that implies retaliatory sanctions under US trade law."

                    (From The Telegraph)

 

Retaliatory sanctions! That ALWAYS works out well. Good luck with that.

 

Wed, 08/12/2015 - 22:02 | 6420822 wendigo
wendigo's picture

I always found it funny that any US official could accuse another country of currency manipulation, with a straight face.

Wed, 08/12/2015 - 23:16 | 6420917 Alexandre Stavisky
Alexandre Stavisky's picture

Again, again, again.

Wed, 08/12/2015 - 22:00 | 6420814 wet_nurse
wet_nurse's picture

The intrinsic value of the RMB is moving closer to reality. Soon all the other fiat will also.

Wed, 08/12/2015 - 22:04 | 6420826 Goldilocks
Goldilocks's picture

Fear and Loathing in Las Vegas dinosaur reptile bar scene
http://www.youtube.com/watch?v=Ib_5nnWbb_4 (2:55)

Wed, 08/12/2015 - 22:06 | 6420832 Jack Burton
Jack Burton's picture

Japan and China currency race to the bottom! Now the real currency wars are breaking out. This is just a beginning before all hell breaks loose in capital markets.

Some people have claimed a major crisis and collapse was coming, and in 2015. I doubted them, as all claims of crisis have been beaten back by central bank printing. Now I sense Printing is no longer the magic bullet. It has played out, now the currency wars begin.

Also, the US market was being hammered, and then, as usual, the magic gods appeared at it came roaring back. How many times have we seen it. How many believe it is real_

Wed, 08/12/2015 - 22:23 | 6420897 wains
wains's picture

Count me in for some shit going down this fall.  Wouldn't shock me if some kind of banking/hacking wipeout of accounts happens.  Of course, who gets the blame will be the most important part.  China asserting itself as no.1 false flag contender now.

To your point about today's "turnaround" and the reality of it.  Actually, it lets me know that they still have control.  Might be by a thread but they still have it....for now.

Wed, 08/12/2015 - 23:17 | 6421053 TeethVillage88s
TeethVillage88s's picture

I wonder if the Plaza Accord is still important and in effect. I would think that Free Trade Agreements and Treaties... like TPP, TPA, TISA, TAA replaced it. Besides it was to devalue the USD.

Still the Accord is the basis maybe for anti-protectionism (quasi) that seems to secure Globalism.

https://en.wikipedia.org/wiki/Plaza_Accord

"The prospect of trade restrictions spurred the White House to begin the negotiations that led to the Plaza Accord.[2][3]"

- Just screwing around with the concept since I don't know trade policies.

"After 30 years in power, President Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah."

"Thailand triggered the crisis on 2 July and on 3 July, the Philippine Central Bank intervened to defend the peso, raising the overnight rate from 15% to 32% at the onset of the Asian crisis in mid-July 1997. The peso dropped from 26 pesos per dollar at the start of the crisis to 46.50 pesos in early 1998 to 53 pesos as in July 2001."

"In July 1997, within days of the Thai baht devaluation, the Malaysian ringgit was heavily traded by speculators. The overnight rate jumped from under 8% to over 40%. This led to rating downgrades and a general sell off on the stock and currency markets. By end of 1997, ratings had fallen many notches from investment grade to junk, the KLSE had lost more than 50% from above 1,200 to under 600, and the ringgit had lost 50% of its value, falling from above 2.50 to under 4.57 on (23 January 1998) to the dollar. "

Wed, 08/12/2015 - 23:49 | 6421111 Rock On Roger
Rock On Roger's picture

First time I read the phrase 'currency war' was in 2011.

 

Today was the first time I heard the same phrase via CBC.

 

In Canada our "national" msm is really on the ball.

Wed, 08/12/2015 - 22:11 | 6420854 fed_depression
fed_depression's picture

Japan is full of crap they can't QE. It doesn't work. Corporations' managers sold out the US and Japan to get rich for themselves. Even if they devalued 50% it would take too long in time to rebuild everything that went elsewhere. Which should be why the JPY will ride right on back down to 100 area.

Wed, 08/12/2015 - 22:14 | 6420869 Herdee
Herdee's picture

Is this is going to be a regular nightly event on the Asian Session for the foreseeable future?

Wed, 08/12/2015 - 22:18 | 6420880 homiegot
homiegot's picture

Sum ting wong

Wed, 08/12/2015 - 22:28 | 6420910 Baby Eating Dingo22
Baby Eating Dingo22's picture

Su dwi worree?

Wed, 08/12/2015 - 22:24 | 6420901 fowlerja
fowlerja's picture

Whoa guys...China is not devaluing the yuan...they are "right sizing" the currency for the market...please give them the benefit of the doubt..they are trying to do the right thing...in a world that doesn't care... :(

Wed, 08/12/2015 - 22:24 | 6420902 fowlerja
fowlerja's picture

Whoa guys...China is not devaluing the yuan...they are "right sizing" the currency for the market...please give them the benefit of the doubt..they are trying to do the right thing...in a world that doesn't care... :(

Wed, 08/12/2015 - 22:28 | 6420909 jonjon831983
jonjon831983's picture

Buddy working in HK said he's been calling his China clients - all of them have loans in USD.  A bit of an ouch, but better than them CHFEURs

Wed, 08/12/2015 - 22:31 | 6420923 wains
wains's picture

What else is he saying? What are his thoughts on the whole thing, from someone in Asia?

Wed, 08/12/2015 - 23:39 | 6421097 jonjon831983
jonjon831983's picture

Sales opportunity for hedges/other products.  Which makes sense from sales perspective.

Wed, 08/12/2015 - 22:28 | 6420912 devo
devo's picture

I still haven't encountered anyone in day to day life who knows anything about this. I guess that's how and why they get away with it.

Wed, 08/12/2015 - 22:36 | 6420930 wains
wains's picture

I've only encountered 1 or 2 who have vaguely heard of it.  Most don't understand (even in a rudimentary way) but primarily most don't give a shit.  Football season is about to start in America.  Motto for most Americans is, you can steal anything you want but please don't take my teevee.  Disgusting really. 

Wed, 08/12/2015 - 22:38 | 6420934 devo
devo's picture

That's very true -- football season, everyone IS talking about that. Gladiator sports -- didn't the Romans use this to appease the masses?

Wed, 08/12/2015 - 22:49 | 6420987 gezley
gezley's picture

Panem et circenses is the phrase you were looking for.

Wed, 08/12/2015 - 22:50 | 6420990 devo
devo's picture

That's it.

Wed, 08/12/2015 - 23:41 | 6421100 Rock On Roger
Rock On Roger's picture

Latin phrase for distraction?

Thu, 08/13/2015 - 04:15 | 6421403 Zwelgje
Zwelgje's picture

bread and circus.

Wed, 08/12/2015 - 22:39 | 6420944 fed_depression
fed_depression's picture

LOL at the market. China devaluing means all stocks are worth more EVERYWHERE. You just can't make this shit up. Obviously the US corps will make more when they devalue. The make believe market just looks at one side as usual and not the inverse balance which always exists.

Wed, 08/12/2015 - 23:51 | 6421122 TeethVillage88s
TeethVillage88s's picture

A New Plaza Accord? No, you didn't mean that.

You know it is played fast and loose by this FED and this Treasury. But the World Depends on World Reserve Currency Stewardship. There are limits. There won't be a new Plaza Accord in this era for the USA.

But US & EU & Asia will enter a crisis and the question is whether there can be a new Global Accord on Currency Values... and an agreement that currency wars are ill conceived.

That is it.

Wed, 08/12/2015 - 22:42 | 6420959 Make_Mine_A_Double
Make_Mine_A_Double's picture

LOL @ Argentina and their plastic surgery disaster Christina and her boy toy dime store Bolshevik Econ advisor.

What a bunch of asstards.

Thu, 08/13/2015 - 00:15 | 6421181 Latitude25
Latitude25's picture

Was just down there.  Believe me they are well loved.

Thu, 08/13/2015 - 01:47 | 6421294 scaleindependent
scaleindependent's picture

Actually, Argentina got big loans from China, Yuan denominated.  

Therefore, if the Yuan devalues it should be easier to pay. 

Wed, 08/12/2015 - 22:48 | 6420981 arbwhore
arbwhore's picture

So what I get from the press conf is that China wants onshore/offshore to eventually be the same and is liberalizing their FX market to achieve that.

Wed, 08/12/2015 - 22:49 | 6420984 holdbuysell
holdbuysell's picture

The linked article in the last paragraph is an excellent read: http://www.alhambrapartners.com/2015/08/10/still-no-going-back-eighth-an...

Echoing Ford's quote a century ago, if the people knew how screwed over they are due to this statist broken monetary system, there would be a revolution by tomorrow morning.

Wed, 08/12/2015 - 23:04 | 6421024 pragmatic hobo
pragmatic hobo's picture

shit ... and they want yuan to be a global reserve currency? at least give a fucking warning before you turn on the fucking switch!

Wed, 08/12/2015 - 23:05 | 6421025 jacship
jacship's picture

were so fuked

 

how many moar

treasurys can they dump?

 

wegobloom

vs

yougobloom

 

this is not your fathers socialism

Wed, 08/12/2015 - 23:08 | 6421030 starman
starman's picture

Ho Lee Fukk

Wed, 08/12/2015 - 23:17 | 6421049 RagnarDanneskjold
RagnarDanneskjold's picture
China doesn't control the offshore rate, it's the market price. If the PBOC means what it says, it could be forced to spend a lot of reserves trying to prop up the offshore yuan. Mainland Chinese also take the CNH as a cue because they believe (rightly) that it's the real price. Or in other words, if PBOC is telling us the truth, the yuan is now effectively floating. China has $3.6 trillion in reserves; daily forex turnover is more than $5 trillion.

 

 PBOC Playing With Fire; Informational Power of CNH Magnified Greatly
Wed, 08/12/2015 - 23:22 | 6421068 yogibear
yogibear's picture

Means no US rate hikes.

Chinese covering for the Fed.

Wed, 08/12/2015 - 23:32 | 6421088 Rock On Roger
Rock On Roger's picture

China man wily.

 

Pay attention to sun tzu.

Wed, 08/12/2015 - 23:44 | 6421108 D-Fens
D-Fens's picture

Sum Ding Wong

Wed, 08/12/2015 - 23:50 | 6421116 Sages wife
Sages wife's picture

The Tianjin blast occurring in the midst of the Chinese currency situation is not a coincidence.

Thu, 08/13/2015 - 00:02 | 6421150 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

Please do explain in detail

Thu, 08/13/2015 - 00:08 | 6421162 Surveyor4Pres
Surveyor4Pres's picture

China's Lusitania.

Get it now?

Thu, 08/13/2015 - 01:52 | 6421303 MSimon
MSimon's picture

Germans torpedo the Chinese economy?

Thu, 08/13/2015 - 06:41 | 6421514 Wahooo
Wahooo's picture

Was it over when the Germans bombed Tianjin?

Thu, 08/13/2015 - 00:07 | 6421160 Surveyor4Pres
Surveyor4Pres's picture

To all those Trump-lovers out there, tonight on Hannity, Trump called Abe a great man.

And here I thought that Abe was the Keynesian economists' wet dream and purveyor of all things false in the economic realm.

Trump may not be Obama, but he's no Presidential Savior, either.  He would, however, make a good Secretary of State.

How about ME for President and a 0% Federal Income tax with a 3% Capital Gains tax.

Thu, 08/13/2015 - 00:10 | 6421168 thunderchief
thunderchief's picture

On top of getting hammered in realestate and stocks,  Chinese just lost 4-5% of their money, and more to come...

Thu, 08/13/2015 - 00:12 | 6421174 The Duke of New...
The Duke of New York A No.1's picture

Paging Larry Silverstein .... paging Larry Silverstien .... your servcies required in China immediately.

Thu, 08/13/2015 - 03:53 | 6421384 dreadnaught
dreadnaught's picture

looks like he already owns at least one huge building in China, which 'exploded' yesterday

Thu, 08/13/2015 - 00:33 | 6421203 Redart
Redart's picture

A great reason to buy us stock indexes. Tomorrow retail sales and auto. Gotta be a good day

Thu, 08/13/2015 - 01:10 | 6421250 Karaio
Karaio's picture

Currency war was an expression quoted by the Brazilian Minister Mantega.

Three years ago...

He warned the shit that would ...

Kkkkkkkkkkkkkkkkkkkkkkkkkk!

President Lula went to Iran, made a deal, all signed, was rejected.

Today Obama made the same agreement.

China, the BRICs (a pornographic word on MSN) will do the following:

"- Our commodities exchanged between us without US $.

The $ that we have paid our dues in US $.

We sell worthless paper to buy assets.

The more fiat US $ value, less US $ cost gold and buy gold with paper US $.

When all green paper US $ return home and start spinning insanely, gold ballast other currencies.

End.

Thu, 08/13/2015 - 02:01 | 6421253 HardlyZero
HardlyZero's picture

Chinabet: they actively devalue to 2009 level, all the while roiling and destabilizing markets back to 2008/2009.

Then  BAM! they let Yuan float.

 

1st destabilize your opponent.

2nd pivot and take down with his own weight.

 

Friggin' Fiat.

japan - the art of parties

https://www.youtube.com/watch?v=yhworXIkXX0


Japan — Sons of Pioneers

https://www.youtube.com/watch?v=suQyFBx1ilY

Thu, 08/13/2015 - 01:13 | 6421255 DontFollowMyAdv...
DontFollowMyAdviceImaDummy's picture

China Announcement:

yuan tu lo so wi make new gold-backed guan.

 

too bad that won't happen

Thu, 08/13/2015 - 02:09 | 6421316 scatha
scatha's picture

So it finally happened. China finally broke the peg to Dollar after Swiss broke the peg to euro declaring monetary policies dead.

They will keep devaluating at least until S. Korea, Australia drop interest rates and Japan increase QE even more. Vietnam already responded by widening trading range. What Chinese want is to export bubbles to its neighbors. EU thinks it is still safe for Euro but when Yuan drops 30% vs. dollar they will panic. Already stocks of German manufacturers of cars and industrial equipment have been shattered. Globalism requires: TO LIVE IS TO EXPORT;

ECB and Japanese CB are printing like crazy in order to stop inflows of capital to Europe and Japan forcing dollar up since capital has nowhere to go for yield. Look soon for FED swap lines to its friends to help pay dollar liabilities as it was in 2008.

The PBOC saw futility of attempts of monetary "deflation" of the real estate bubble by blowing stock market bubble which they failed deflate in organized way even by buying half of the stock market in Shanghai. they are in panic and loss so they resorted to three things what they did 1994 devaluate, devaluate, devaluate. But they are already late to the party after a year of massive devaluation of other EM countries including BRICS without C.

Below there is a comment I wrote several months ago warning after ZH about massive demand collapse and over-leveraging of small to moderate businesses and households not to mention big corporations and scarcity of dollars for trade due to opening multiple swap lines and repatriation of yield hungry wolrd's capital to US and dollar after FED noise and utterances about raising rates.

Hence we have export craze everywhere and devaluation everywhere or Greek alternative of slavery, the only thing that allows for governments and economies to fund themselves by printing trash.

Sorry for it is little too long, here we go:

 

 

What so-called economists are trying hard to overlook is severe “real” inflation of commodities required for basic human subsistence such as food, transportation, education, healthcare, home rent or lease, etc., not as much due to nominal prices increase but due to massive aggregated income collapse of working people all over the world. 

The so-called economists also trying hard to overlook severe deflation and depreciation of assets own by majority of working people, such as labor power, skills and education, conservative retirement assets, savings, value of work benefits, value of social programs, consumer services, land lease value, furniture, electronics, used cars mobile, phones and gadgets, computers and software, used clothes, memorabilia, low brow art and antics, etc. not as much due to loss of value of these assets but because of massive aggregated “real” income collapse due to “real” inflation and over-leverage affecting working people all over the world. In other words money circulation in second tier economy of 99% almost came to standstill. Almost all income was distributed up to 1% or rather 0.1%.

This is double whammy of “real” income and asset deflation and hence working people “net worth” spiraled down, accelerating toward collapse. The process of pauperization of western societies not only affected middle class but working class people when it initiated in US over three decades ago.

Very few emphasize enough that core of the issue is utter collapse of demand (due to collapse of income and value of assets) for anything throughout the world due to massive over-leveraging of business of all sizes and households often in US dollars/Euro/Yen not in domestic currencies leaving CBs helpless.

People simply paying off their loans and obligations and have nothing left for consumption or investment. This catastrophic collapse of world demand (pointed out by Russia and China) for most goods including food and oil causes, continuing for almost a decade now, dramatic flight of capital resulting in recalling massive amounts of speculative capital back to US. Japan and Europe refused to accept returning yen and euro assets desperately seeking shelter in panic. They are trying to accomplish it via QEs and NegIRP. They are trying to erect barrier to capital inflows in order to avoid surging of their currencies and killing their economies, meaning reminder of industries capable to export since domestic income and demand is dead.

This leaves, commodity driven, emerging markets in conundrum. Their currency is weak vs. dollar but they do not trade that much with US to take any significant advantage (US is a significant exporter of commodities itself), but if currency of a country to which they sell is weaker than their currency vs. dollar, their sales collapse. And that’s really the case throughout the world. So they fight a currency war indirectly among themselves, through FX dollar, by collapsing their CB interest rates while facing collapse of their own currencies vs. dollar due to capital flight. All that against common wisdom, which would suggest rate hikes instead.

That’s why while 75% of world currencies lost to dollar, 75% of all worlds CBs lowered interest rate within in last 12 months and they keep lowering to out-export each other giving up on domestic demand and growth or even preventing any significant growth in first place to avoid their currency surge. Even China accepts much lower growth, to talk yuan down, and Russia lowered the interest rates twice while was under FX attack and massive capital outflows, and was happy with rubel about half of its value 12 months ago. And with Rubel gains this year so far, there is talk of further easing to keep it correlated with price of oil at 60 Rb level.

More recently Central Bank of Vietnam and RBA were other CBs to devalue their currencies, the only remedy possible for tens of central banks in the world, which already drop their interest rates within last 12 months in order to prevent further collapse of their export driven economies. More to follow.

To defend themselves many countries, also in the west, abandon FX market monopoly and set up huge currency swap lines, or join newly created independent of Washington and dollar, international financial institutions to limit this spiral of death. Ironically swap lines actually boosts dollar since in addition to non-US$ denominated capital flight into US$ assets, there is shortage of FX dollar funding since nobody needs to sell dollars to buy other currencies if they have swap lines, with “fixed” exchange rate, open. In strange ways globalization makes de-dollarization inevitable one way or another. Dollar strength is in part result of dollar shortage at FX but not because everybody wants dollars but because nobody needs it any more as intermediary in FX exchange because it is overpriced to its value. It is classical FX market failure, similar to that of 2008 when FED open massive swap lines with worlds CBs to squash dramatic raise in dollar.

But why? What’s going on?

The general answer is that national economies and sovereign states (with few exception) are illusions. Their domestic markets are illusions, their economic and social policies are illusions maintained for domestic political audience. Global integration has been accomplished. Only global economy exists now. And unified global capital rules the world.

Production is distributed so much all over the world that no country controls production of nothing but some small subsystem, one of thousands parts from all over the world assembled in final product with no true ownership and no country of production. Just few multinationals are richer than GDP of at least bottom 120 countries in the world and have no national allegiance of any kind.

This serves purpose of practically eliminating any political leverage that country may have over world production. But now with ZIRP nobody has any leverage over global elites who print their profits. In other words countries (with few partial exceptions) cannot reestablish control over their economies and social policies by imposing tariffs, trade barriers, capital, labor controls, specific social, economic, military, foreign policies or whatever in any way that would not result in collapse of their “hollow” economies and painful political turmoil at least during transition.

Even countries at war cannot stop cooperating economically, close borders or limit civilian trade, thing unheard off 50 years ago. The unimpeded and even increasing cross border trade and people movement between Russia and Ukraine continues, Poroshenko candy factories in Russia are making profit while they are on war footing. US increased exports to Russia in last 12 months while spewing apocalyptic rhetoric of WWIII. Germany owned factories in Russia dramatically increased investment of their profits in Russia to avoid losses of manipulated currency play. And it paid off handsomely so far. These are examples of global integration paralyzing the social or international policies.

This has most corruptive influence of national politics. That’s why all politicians that promised economic growth, betrayed the people as soon as they got in power since they knew the only way to the growth in global economy is to export if not they have to cut expenses, collapsing governmental and private social programs and dismantling democratic institutions that still left, to pretend to pay un-payable debt.

 The fallacy of debt based global economic system is only too apparent.

There is no way out of world pauperization and death spiral except to break through globalism in very painful ways. Unfortunately, people rather believe in illusion than face pain of reality and turn around to stop this genocidal system of alien class of global oligarchy directed towards human extermination, all other priorities rescinded.

For brief discussion of inflation/deflation as well as so-called  “free” markets, benchmarks and indices I suggest fresh look at financial propaganda of deceit at:

https://contrarianopinion.wordpress.com/2015/01/29/invisible-hand-and-ot...

For those believing that economy is rational science and economic conditions are result of laws or rules of economy I suggest interesting read on wage economy at:

https://contrarianopinion.wordpress.com/2015/01/28/slaves-of-wage/ 

For some more background on Japan political and economic situation in historical context:

https://contrarianopinion.wordpress.com/2015/02/20/japan-miracle-that-wa...

 

 

Thu, 08/13/2015 - 11:31 | 6422292 FreedomGuy
FreedomGuy's picture

Excellent post. However, I think the loss of national economic controls is generally a good thing. As I get older and look more clearly around the world, I believe governments are the biggest enemies of peoples' well being, particularly economically. 

I would also disagree about what any politicians "know" about anything economic. I believe the majority are functionally illiterate in anything necessary for good governance. They are only expert in reelection and the sausage-making of the political process. 

I do think there is a general wage deflation going on and I feel it acutely. 

I will look forward to reading your links when I have more time.

Thu, 08/13/2015 - 02:38 | 6421345 FreedomGuy
FreedomGuy's picture

How are you bond traders doing?

Thu, 08/13/2015 - 05:53 | 6421479 Atomizer
Atomizer's picture

Debasing currency one day at a time. 

Pixies-I Bleed - YouTube

Thu, 08/13/2015 - 06:50 | 6421525 overmedicatedun...
overmedicatedundersexed's picture

look it has been established( here at least) ..this NWO free trade stuff is just the biggest criminal enterprise the world has ever seen..so analysis of who, what, why and outcome, is a little naive. and dangerous.

just think of the impact on LIBOR, (a joke)..or the FED's policy. (a joke)..or the markets (a joke)..

the world economy is like greece, millons of people consuming, jobs being done, business being done, but on some bank's balance sheet they have debt that cannot be paid, so all that must stop. the illusion of fiat and debt ..clouds the minds of people- the real economy of goods and services is no different- it is the illusion of who owes what that makes us insane..buddhists would understand that the reality is so clouded by the illusion of modern finance..that we think fiat devaluation is a problem. the problem is the elite .01% think they are less wealthy so somebody gotta die.

Thu, 08/13/2015 - 06:54 | 6421531 BritBob
BritBob's picture

The fallout from China's decision is going global...

China’s devaluation couldn’t come at a worse time for Argentina.

 

About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan

 

Ah well, they can always rely on their mythical Malvinas claims to distract their people from any domestic downturn.

https://www.academia.edu/10490336/Argentinas_Illegitimate_Sovereignty_Claims

Thu, 08/13/2015 - 06:54 | 6421532 BritBob
BritBob's picture

The fallout from China's decision is going global...

China’s devaluation couldn’t come at a worse time for Argentina.

 

About a quarter of the country’s $33.7 billion of foreign reserves are now denominated in yuan

 

Ah well, they can always rely on their mythical Malvinas claims to distract their people from any domestic downturn.

https://www.academia.edu/10490336/Argentinas_Illegitimate_Sovereignty_Claims

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