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A Currency War That Few Economists And Analysts Notice, Much Less Understand

Tyler Durden's picture




 

Submitted by Jesse via Jesse's Cafe Americain,

"The enormous gap between what US leaders do in the world and what Americans think their leaders are doing is one of the great propaganda accomplishments of the dominant political mythology."

Michael Parenti

Most economists and financial analysts think that 'currency war' merely refers to the competitive devaluations that nations sometimes engage in to help boost their domestic economies, as they had done in the 1930's for example.

 
 

This time the currency war is a much more profound confrontation of differing agendas revolving around the historically unusual role of the US dollar, based on nothing more than the will of the Federal Reserve and the 'full faith and credit' of the US, as the reserve currency for global central banks and international trade.

When a single nation begins to wield such an 'exorbitant privilege' to underwrite the speculative excesses of a crony capitalist banking system, and perhaps even more importantly, as an instrument in support of their international policy, one ought not be surprised that the rest of the world will begin to resist it.

A currency must be policy neutral, without regard to any party if it is to be a true medium of exchange.  Can this still be said of the US Dollar as it has been managed, especially since 1990?

As Alan Greenspan once correctly pointed out, but certainly did not heed when he was at the Fed, if a fiat dollar is managed by monetary policy such that it emulates gold, then it will be perceived as fair, and will certainly be above the particular domestic issues or international policy biases of a single nation that de facto wields the reserve currency status.

"And so it is an odd situation where all the central bankers -- while none of them are advocating a return to the gold standard -- nonetheless try to replicate the various types of interest rate policies that the gold standard would have created. And it is an interesting question whether you call that regulation, or basically functioning of a central bank in stabilizing the economy."

 

Greenspan: Role of Central Bankers Is To Emulate the Gold Standard

It might help one to understand this if they were to imagine a world in which Russia, for example, in a quirk of history had established the ruble as the benchmark currency for the world.  The ruble was recommended for use by all nations as the means of paying for oil,  and for settling international trade even when Russia is not involved in the transaction.  Each country was thereby compelled to hold a substantial portion of its international reserves in rubles.

And how would one be likely to react if the Russian Central Bank started using the ruble as an instrument of their international policy and extension of their quest for imperial power?  What if they began creating more rubles to underwrite the domestic bubbles which were created in their own corrupted financial system to bail out their banks and oligarchs?

And let's be serious and think 'like the other guys' for a moment.  What if some other nation that held the enormous power of the world's reserve currency was exhibiting a crop of candidates for their leader like the current choices for the US Presidency?   I would expect that some of the rhetoric being tossed about in these debates would send a chill to the very bottom of our toes.  Who could place their confident trust in their good and selflessly wise judgement to do the right things for other nations around the world, even if it might not favor the powerful special interests that give them so many millions in campaign donations?

Would you be content if your own government went quietly along with this abusive sort of monetary system?  Is this not indeed taxation without representation when the money supply is expanded and handed over directly to the hands of a few Bankers?

The intransigence of the Anglo-American financial establishment to recognize the legitimate issues of the rest of the world with regards to the manner in which they have conducted their control of the IMF, the World Bank, and the international reserve currency has ignited a currency war that is now becoming increasing visible, to just about everyone it seems except for those sequestered in their ivory towers at the heart of the Empire.  Or perhaps they think it too dangerous to even acknowledge that it exists, because then they might be compelled to render an opinion on it.

This is a 'big event' and it is all the more remarkable because the policy makers in the US act as though it is not even happening, or is not happening for any of the reasons for which it is.  They prefer to view it as a challenge to their authority, and to react uncompromisingly and with force.

I think that historians will find the start of the currency war in the Asian currency crises and the fall of the Russian ruble in the 1990's, with the roots of it in the closing of the gold window by Nixon in 1971.    But from the following essay it seems that China and a few astute Western observers have marked it as being visible from March 2015.

But whatever the date of its commencement, this dispute over the international monetary regime is the basis for the ongoing currency war that seeks to rebalance the terms of international trade and finance.

It is the old story of the very powerful resisting change that benefits the few of them inordinately. And as in so many wars of the past, those few who benefit from it do not include the bottom 90% of their own people at the least.

Most economists and analysts are ignoring this, or are unaware of it.  When they do finally wake up they will likely get busy finding ways to justify it, or dismiss it as an issue, and 'prove' that there is nothing wrong with it.  And very few will acknowledge the price of it in terms of economic stagnation and human misery.  All is well.

Here is an excerpt of a recent article that was published in Chinese and then translated into English in the journal of the International Monetary Institute in Beijing.

Has the US Lost its Role as the Underwriter of the Economic System?
By Willem Middlekoop

 

The recent news that Britain aspires to become one of the founding members of the new Asian Infrastructure Investment Bank (AIIB), has shocked many. Larry Summers, who served as a Secretary of the US Treasury between 1999 and 2001, immediately understood the significance of these developments, and wrote in an op-ed for the Washington Post:   'March 2015 may be remembered as the moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods comparable to the combination of China's effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.‘

 

This British announcement was highly criticized by the US. The Financial Times quoted an unnamed US official:  'We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power. This decision was taken after no consultation with the US.‘

 

Summers was also highly critical of the US‘ strategy toward the newly founded AIIB: 'The U.S. misjudged the situation tremendously, put pressure on allies and developing countries to under no circumstances be part of AIIB. Largely because of resistance from the right (neo-conservatives more precisely), the United States stands alone in the world in failing to approve International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their increased economic heft.‘

 

With Britain and many more major European countries signing up as founding members of the AIIB, the US economic hegemony has been dealt an enormous blow. For the first time since the end of the Second World War, the US is not in the driving seat during the foundation of a highly significant global institution. Of course, this will not change the world economic system overnight, but when we look back in five, ten or even fifteen years‘ time, March 2015 may be remembered as a turning point in economic history...

 

Another criticism is that the US move to more neoliberalism and global capitalism since the 1980‘s, has led to a change in the functions of the IMF. Critics claim allies of the US receive 'bigger loans with fewer conditions‘. Foreign governments who are non-allies have to sacrifice their political autonomy in exchange for IMF-funds and often have to sell assets crucial for their economy to foreign (often US) companies.

 

The former Tanzanian President Julius Nyerere, who was angered that debt-ridden African states were forced to hand over their sovereignty to the IMF (and World Bank), once asked:  'Who elected the IMF to be the ministry of finance for every country in the world?‘ And now the Chinese have openly asked for a 'new world wide central bank‘.

 

Joseph Stiglitz, a former chief economist at the World Bank, has also agreed that the IMF 'was reflecting the interests and ideology of the Western financial community‘. The 'helpful hand‘ by the IMF and World Bank towards military dictatorships friendly to the West‘ has been criticized as well.

 

It might be remembered as the start of an openly Chinese confrontation with the US over the world‘s economic leadership. As Summers points out, all of this has taken place because the Chinese leadership has had to wait a full five years for a change in the IMF-voting structure...

 

Willem Middlekoop, International Monetary Review, International Monetary Institute, Beijing July 2015, page 32

 

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Tue, 09/22/2015 - 19:02 | 6581690 SuperVinci
SuperVinci's picture

Free the Gold bitchez!

Tue, 09/22/2015 - 19:22 | 6581754 ptwnblzr
Tue, 09/22/2015 - 19:25 | 6581764 OC Sure
OC Sure's picture

Then when Luther Coleman teaches Johnny Hooker the two-bit, back-alley, hustle on how to swap shreds of non-value for receipts of value, you cheered for this?

The monopolies are not at "war" against each other. 

They are playing different characters on the same team in the Sting.

Tue, 09/22/2015 - 22:42 | 6582468 Policraticus
Policraticus's picture

Yes, they are like draft animals used to pull a farm implement.  You speak as if they are all on the same side.  If so, game over and no point to the formation of the team other than in the short term.  Perhaps the definition of a group or flock may be more appropriate.  Wandering around and the perception of most is that they are dominant.  Perhaps they once were but they are now long in the tooth and ripe for replacement.  That is where another team comes into play.  You seem to infer there is only one outcome.  I see many.

Tue, 09/22/2015 - 19:28 | 6581769 Saucy-Jack
Saucy-Jack's picture

Freegold is coming...and there's nothing anyone can do about it.

Tue, 09/22/2015 - 21:03 | 6582103 F22
F22's picture

Evil Gary.....Is that you downvoting freegold??

Tue, 09/22/2015 - 19:27 | 6581767 negative rates
negative rates's picture

Responsibility first, then free the gold!!

Tue, 09/22/2015 - 19:09 | 6581709 Ms No
Ms No's picture

The IMF is arbitrary and needs to be abolished along with the IBS, the EU, the UN, the Federal Reserve systems.  Then we could start working on the smaller corruptions.

Tue, 09/22/2015 - 19:14 | 6581729 Skateboarder
Skateboarder's picture

A giant monster with bloodsucking tentacles. Cut one off, another one springs. One man cannot slay it - all have to jump on it at once.

Tue, 09/22/2015 - 19:32 | 6581777 NotApplicable
NotApplicable's picture

Actually, all people need to merely step aside and watch The Beast collapse under its own weight, as it exists only due to our support of it.

Tue, 09/22/2015 - 20:56 | 6582067 ghostzapper
ghostzapper's picture

File a UCC1 against your own strawman. Upon birth the Banksters were kind enough to convert you to a security via your birth certificate so that your labor and life essentially serve as collateral for their counterfeit money printing scam.

Tue, 09/22/2015 - 19:10 | 6581716 blindman
blindman's picture

exponential operations on stupidity never
work out over time.
.
Eric Clapton Thinks Paul McCartney Is A F*CKING IDIOT!!
https://www.youtube.com/watch?v=63e8WRjiPyc

Tue, 09/22/2015 - 19:18 | 6581741 q99x2
q99x2's picture

US Dollar = Weapon of Mass Destruction.

Tue, 09/22/2015 - 19:18 | 6581742 Raging Debate
Raging Debate's picture

This is the biggest, most important economic story is 80 plus years that as the ZH suggests, nobody knows about. Where this goes in the next short couple of years drives geopolitics and wars. For the next six years I prepare for the worst.

Even if the worst happens mankind will survive and rebuild a lot faster than some predict. That said, making sure I am hedged not just in physical goods but getting in better shape mentally and physically. 

God bless you all. Take care of one another. 

Tue, 09/22/2015 - 19:22 | 6581760 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

The IMF, World Bank, and United Nations, are all under the thumb of de Rothschild Bank, synagogue of Satan Illuminati, and the Roman Catholic Vatican Bank, plus The City in the UK.

 

Note: There is no honour amongst thieves.

Tue, 09/22/2015 - 19:23 | 6581761 coast
coast's picture

hey all..I went to this djia future cnn whatever to see current and future prices blah blah.....It might change before you view this, but right now this is what I read:

Light Crude .00 -100.00% Natural Gas 2.58 -0.04% Gold 1,124.10 -0.06% Corn 3.80 -0.13%

 

  http://money.cnn.com/data/premarket/

Tue, 09/22/2015 - 19:31 | 6581774 Urban Redneck
Urban Redneck's picture

Most AMERICAN economists and analysts are ignoring this, or are unaware of it. (FIFY)

Tue, 09/22/2015 - 19:34 | 6581783 nmewn
nmewn's picture

Jesse is a much better critic of food and I share his admonition to all that gold & silver are real money but Michael Parenti is a card carrying Alinsky nutcase.

Tue, 09/22/2015 - 19:48 | 6581817 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

Next Stop------NWO     http://wolfstreet.com/2015/09/22/uruguay-does-unthinkable-rejects-global...

This TISA bullshit is going to be a major problem.

Tue, 09/22/2015 - 20:11 | 6581857 Bam_Man
Bam_Man's picture

Thank you Jesse, for providing the most insightful, coherent, relevant and erudite economic/monetary commentary available anywhere, at any price. IMHO, you and the Cafe Americain are truly priceless.

Tue, 09/22/2015 - 20:20 | 6581909 ajkreider
ajkreider's picture

After the events of the last month, the idea that China would not use it's currency or a bank it controls to further it's own national interests is laughable.

Someone's got to take the lead.

Tue, 09/22/2015 - 20:57 | 6582064 gregga777
gregga777's picture

• President Woodrow Wilson screwed the American People when he signed the Federal [sic] Reserve Act of 1913;
• President Franklin D. Roosevelt screwed the American People when he confiscated Americans gold in 1934 and then revalued said gold from $20 per Troy ounce to $35 per Troy ounce;
• President Lyndon B. Johnson screwed the American People when he reversed the late-President John F. Kennedy's decision to pull advisors from Vietnam, then escalated US involvement in the Vietnam War to over 500,000 troops in-country, while also ramping up domestic spending in the long since lost war on poverty and for also removing silver from US coinage;
• President Richard M. "Tricky Dick" Nixon really, really screwed the American People when he ended convertibility of the US dollar into gold at $35 per Troy ounce, making the dollar a completely fiat currency with no tether to real world value;

All-in-all the above Presidents made the ascendency of the Federal Reserve and it's ability to independently fund Washington's Wars of Aggression, amongst it's many odious endeavors, possible without the consent of the American People.

If karma exists, it is my hope that they are continuously reincarnated as maggots or worms for, say, the next ten thousand years or so.

Tue, 09/22/2015 - 21:03 | 6582102 Forbes
Forbes's picture

China set up the AIIB because US-dominated development banks (World Bank, Asia) under Obama refuse to finance development of fossil-fired generating plants.

Tue, 09/22/2015 - 21:17 | 6582161 medium giraffe
medium giraffe's picture

What Greenspan knows about interest rates isn't worth knowing.

Tue, 09/22/2015 - 23:30 | 6582444 Policraticus
Policraticus's picture

... The comment was removed and moved to where it was intended to be placed. 

Tue, 09/22/2015 - 23:50 | 6582620 assistedliving
assistedliving's picture
Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom Rhetoric 

where did i read that?  Oh...http://www.zerohedge.com/news/2015-08-12/china-devalues-yuan-3rd-day-4-y...

and

PBOC Devalues Yuan, Injects More Liquidity As China's Banking Regulator Admits "Bad Loan Situation Is More Severe Than 2008"

oh yeah there again...http://www.zerohedge.com/news/2015-09-21/pboc-devalues-yuan-injects-more...

 

Wed, 09/23/2015 - 00:17 | 6582664 Wild E Coyote
Wild E Coyote's picture

The fact that US ignored AIIB and that even allies ignored US to join AIIB actually does not imply that there is new awakening against Cartel of Bankers.
What is clearly shows is that US is being abandoned by the Cartel.
There is a new game. It may be AIIB. Maybe more.
The article is right, not many even understand the war that is already underway.

Wed, 09/23/2015 - 00:51 | 6582711 damicol
damicol's picture

I thought this was obvious since the Ukraine debacle started and that fucking bitch Nuland told the EU to fuck off.

It was a red herring, Russia was a distraction and the real goal was to close China down as far as it could be squeezed.

Why does anyone think China is building islands, if not to prevent the fucking neocons deciding to blockade their trade like they did with Japan which led to Pearl Harbor

The US is pissed because it can now protect its trade routes, the US is pissed because Putin was far stronger and smarter than those cunts Pyatt and Nuland.

The US is pissed because all those failures which was also designed to get a pipe under Syria is also now in fucking tatters  again thanks to Putin, and who was going to lose most by that pipelines.

Mindless cunts in the State dept started to see the writing on the wall years ago. Nothing happens overnight, and anyone with a modicum of intelligence and a bit of wit and experience can see how some things are gong to play out.

The only thing that stops most people seeing that is because they listen all day to the fucking lying sacks of shit in the MSM spouting their fucking drivel, and sucking that shit up instead of using some critical thinking.

It is only now that some people are starting to wake up and are smelling shit and not coffee and starting to look for the source of the stink.

And that is why people like Trump are getting ahead so fast, or that Marxist fuck Corbyn in the UK, because they don't smell of shit yet, at least the stink of putrid shit coming from the real politicians is making the smell from the Trumps like perfume.

When suddenly you wake up and realize you have been held hypnotized bathed in delusion, and reality is nothing more than heaps of shit around you, shitty fucking faggot for a president, a shitty lying useless congress, a shitty judiciary as corrupt as any fucked could imagine, a shitty thieving police force, shitty useless parasitic bureaucrats and even worse, you find that almost every neighbor and every fucker you knew most of your life is also a fucking shitty deluded moron.

So what do you do when you wake up and find yourself surrounded continent wide by nothing but fucking shit, well for me I got the fuck out of there.

 

 

 

 

 

Wed, 09/23/2015 - 03:44 | 6582846 eddiebe
eddiebe's picture

Ok. yes, but where do you go, pray tell?

Wed, 09/23/2015 - 02:12 | 6582783 jcdenton
jcdenton's picture

When you crushed the SUR (ruble) at one time (18 to 28 cents on the USD), and also counted tritium, on top of bringing down Frankie Bal and his sons (who were involved in the JFK assassination); I would say you know what you are talking about.

Your boss, that is the only person you personally reported to was the POTUS. Not the VPOTUS, not even the current DCI. I would say you are in a position to know what you are talking about ..

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp

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