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How Beijing & The West Work Together To Manipulate The Global Currency War
Submitted by Brendan Brown via The Mises Institute,
From reading the commentaries you might have imagined that the process of a currency winning international reserve status depends on getting the IMF seal of approval. At least that seems to be the story with China.
So, strange to tell, the great international monies of the past evolved either before the IMF was created or without its help. Think of the Deutsche mark and Swiss franc — the two upstarts of the 1970s and 1980s — or briefly the Japanese yen when it enjoyed great popularity. Their emergence was due to the path of monetary stability chosen by their issuing authorities together with complete freedom from restrictions.
So why is the world of currency diplomacy now playing along with the nonsense of the IMF examining whether the Chinese yuan has met the criterion to become a reserve currency?
Incidentally, the last time that Washington body bestowed “reserve currency status” it was with respect to the Australian dollar and Canadian dollar, on the eve of the bust for the respective commodity and carry trade bubbles which sent them to their respective skies.
Beijing and DC Pick the Winners and Losers
The question as to why the Western world is playing along with the official Chinese currency charade is part of a more general point. Why do Western governments pursue non-market trade diplomacy so enthusiastically with Beijing?
Think of the repeated times that Chinese communist party dictators traveled to a particular Western capital to hand out their list of chosen beneficiaries of Chinese corporate (mostly state) spending. These dictators were welcomed by fawning officials and bureaucrats who assured us that they also brought up, with muted whispers and inaudible comments, the problem of human rights to their guest.
And, by the same token, why are there high profile visits of Western leaders to China, presenting their own list of chosen industrialists selected to pick up the new business deals? This is not the way free markets, and global free trade, in particular, is meant to work.
If it smells like a rat it probably is a rat, and so it is with respect to these deals by collusion between China and Western governments, and their chosen corporate protégés, whether on currency or trade or investment matters. This is all an exercise in some combination of crony capitalism (with cronies on both sides!) and diplomacy by stealth. The gains and gainers are deliberately kept opaque. The losers are much less evident than the gainers, on whichever side of the fence, but principle and practice tells us that the total losses are much larger than the gains.
The Cronies’ Currency War
In particular, how much more prosperous would China be today under a regime of currency freedom and well-functioning markets, than under the cozy order of restrictions and preferred access (to capital and trade) put together by Beijing and foreign governments in cahoots? And how much are Western priority systems for getting Chinese capital and orders to favored domestic destinations distorting the signals which guide the invisible hands? And how far is the secret — or not so secret — G-20 currency diplomacy, related to China, abetting the most serious episode of currency warfare since the 1930s?
Think about the new currency offensive launched by Europe last month when ECB Chief Draghi’s calibrated remarks about further QE drove the euro down by 3–4 percent against the US dollar in 24 hours, which was double the extent of any Chinese currency maneuvers earlier in the summer. And in the bigger picture, China’s mini currency devaluation hardly smacks of currency warfare compared to moves ten or even twenty times greater by Europe and Japan in the past three years.
So why did Beijing agree to the mild censoring which occurred at the last G-20 meeting (in Lima) of its own mini-devaluation when it could have called on Europe and Japan to halt their currency warfare?
A plausible answer is that Beijing has no interest in facilitating the emergence of a free market in its currency together with full convertibility. If silence is required on currency warfare as the price of getting its coveted currency reserve status, then so be it.
Yes, a fully convertible Chinese currency might well find a substantially lower level than today’s official rate. Much would depend on what steps accompany the road to convertibility. Would there be broad-based liberalization in the Chinese economy and markets such as to make assets there more attractive to both domestic and international investors in the context of improved prospects of economic prosperity? Or would the road to convertibility simply facilitate a flight of capital out of the country with little foreign appetite to engage in the opposite direction?
There is little indication that the Chinese leadership would take the market reform route, which incidentally might seriously undermine the basis of the rents enjoyed by themselves and their connected state enterprises. In effect, there is an unholy alliance between the West and Beijing on only limited reforms and the currency status quo as blessed by the IMF. Meanwhile, currency wars remain a protected activity of the large powers outside China.
Official game plans do not always work out as hoped. It remains to be seen whether the continued and accelerated path of monetary easing by Beijing is consistent with only a mini-devaluation of the Chinese currency. There is anecdotal evidence of Chinese retail investors now engaging themselves in a new bout of yield-search frenzy in the local high-yield bond markets. That may not endure in the face of a rising tide of default. And the massive yuan carry trade which built up in the past few years could contract much more forcefully in coming months in the context of shrunken yield gaps and credit market cool-down.
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I cannot do anything about titans China and the USA fighting a currency war.
But, little fish can do OK: Chinese bearings are cheap for the reasonable quality (that we buy & sell). They are money-makers for us.
#Winnerz
Krap! Boris is take Blue Pill and now stuck in 2D Matrix.
http://twitter.com/borisalatovkrap
Whats the point in talking about whether or not China's currency is convertable or not convertible in a free currency market when Central Banks exist to consistently manipulate currencies to the benefit of their favored banks.
"now stuck in 2D Matrix."
Is that like "Super" Nintendo?
The currency war is nothing more than theater - a magician's distraction. The reality is all central bankers work together, whethern they are Chinese or Russian or American, etc. There are some economic writers out there and on Zero Hedge that have been trying to warn people about this for a long time, but the false east/west paradigm is powerful voodoo.
"How Beijing & The West Work Together To Manipulate The Global Currency War"
Finally a "refreshing" article that admits "the plan" and its players...including our "von Mises" clan.
Wake up folks...
Want the "roadmap"? Buy "Prospect for America: The Rockefeller Panel Reports" (1961).
It has all come to pass so far...
http://redefininggod.com/2014/11/the-rockefeller-plan-for-the-brics-new-...
They are compelled to "telegraph" what they will do to us in their sick rituals to enjoy the pain that much more and claim we "gave permission" by ignoring the "warning"....
The greatest con ever pulled was for China to position itself as the great (political/financial/social/economic) outsider in the eyes of the alternative media.
<Different plantation, same/similar plantation masters.>
Correct.
Soon Russia and China will be postioned as the "free world's" answer to the NeoZioLibCons plans for global bankster domination.
They are all one and the same team.
They are all team Rothchild
"They are all team Rothschild"
more like Team Rockefeller...who Von Mises is part of...
Don't be fooled....all London School of Economics is NWO!
"for China to position itself"
Whaaa? Yeah like the millions of tons of drugs that "enter" this country without the help of border Patrol, DEA, Port Authorities, FBI, CIA, US Military.....
China, Russia and the US are the "pawns"...the .00001% are the Chess Masters...
Rockefeller/Rothschild/Warburg decided this long ago...
http://redefininggod.com/2014/11/the-rockefeller-plan-for-the-brics-new-...
Let all currencies go to war. There will be only one winner.
And 6.999999999 billion losers...
1oz Silver American Eagles €12 @ EurGold
https://www.eurgold.eu/silver/american-eagle-1oz-silver-coin-1-dollar-le...
China is going to crash soon, if it isn't doing so already. And it's going to pull the entire world economy into a Greater Depression.
Rumor is they're sitting on over 30,000 tons of gold. If that is true and they use it to back the Yuan, my guess is they will win the currency war once they do a reveal...
They are also sitting on empty cities, and who knows how many other boondoggles, while the Commies' brothers-in-law who got the contracts to construct them have already spent the money on baijiu and hookers.
Might as well be 100,000 or 200,000 tons... after all the gold in those IMF SDR vaults will NEVER be audited.
The financial system is based on fraud. Plain and simple.
Backing a currency with gold forces that currency to be fiscally responsible.
Why would china want to be fiscally responsible?
They have not been so in the past. They have printed as bad or worse per capita as the western countries.
They are buying gold for one reason: to gain entry into the SDR to be part of KING FIAT.
Whatever helps you sleep.
If it hasn't been obvious to you for some time that the rich and powerful, in every government and society, work in a coordinated way to exploit the rest of humanity and countries and religion are just divide and conquer techniques, you haven't been watching closely enough.
Well said.
Many here haven't been watching closely enough... and if they do not understand that little fact then unfortunately they do not understand anything.
Oh look... John Kerry is playing the old potato testicle joke on the Russians as they try to diffuse the situation in the Crimea and Ukraine that could result in a nuclear WW3 that Putin's good friend Henry Kissinger warned us about while Victoria Nuland chuckles on...
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015...
China seems to think they have things under control on their own. They believe that they are doing things 'right' and are too proud to change. I don't think they have a vendetta for big banks, I just think they are too proud to conform to the same form of complete ass raping that everyone else has. Little do they know the big banks could run them over in a second if they wanted to. Their leverage lies in the mass amounts of money they have lent other countires, this is my assumption anyway.
Yes the Chinese government has a "dilemma" with over 1.3 billion inhabitants within it's borders and how to control any potential unrest from an economic melt down that the likes of Soros, Rockefeller and Rothschild shake in their face as the ultimate "ugly stick" to coerce them back into their box when they wish to test the waters by going off the reservation towards the promised land called BRIICS!...
But they have revealed themselves in far too many negative ways when they made the initial deal(s) first with Nixon, then George H. Bush and of course Clinton which was Bush I's protege from start to finish "always bearing moar and bigger gifts" in exchange for everything else they have.
Who can ever forgive or forget the ultimate deal with the devil China and India made after 9/11 to haul away the evidence from "Ground Zero" yes of course... for moar!!!
They sold their souls and from time to time they may stray but the Western banks have managed to keep them in line!
I'll say it again.
Russia where China and India are concerned always watch your "six o'clock" cause they ain't you!!!
So if China is in collusion then what are their plans for all the gold they're buying up?
I keep asking myself that question Lat.
When they are desperate and habitually threatened by the bank of England and Fed with short sells to their markets or bombs going off in Tianjin -do they send some of that AU westward or are they raising the "middle digit" more instead?...
Let's just hope that there is a coming "threshold" that will push China over the edge where we see some market anomaly like we witnessed earlier this summer that brought the "white face of death" fear to both sides of Pacific and their market(s).
I'll give you a hint:
When China is pushed too far you'll know it!
I think that it gains them "Legitimacy" and an argument for entry into the upcoming SDR. The SDR will be sold as "just as good as being backed by gold" since member currencies will have some Gold. Not that they will allow audits, or members of the Rothchild family will do the audit.
China is not the anti Fiat. They want to be part of the King Fiat.
Mises Monks are a problem. Their doctrine doesn’t comport with reality, it is a priori theorizing. It ensnares the gullible leading them down avenues of bad thought.
There is the price system, the cost system, the money system (monetary policy), fiscal system (taxes).
These four systems interact, so it is not just simple market dynamics.
Furthermore, there are three kinds of markets and each has its own rules. But, to listen to MM’s everything is only elastic markets, perfectly price competitive, and money should also derive from market mechanisms.
Let’s see how Mises Monk like mechanisms would have worked out for Russia:
The Harvard Boys (J) convinced Yeltsin to turn the economy over to extraction. Russian economy was to be exposed to the world Free Market. Goods of the earth, meaning minerals and oil would be sold on world market for dollars/euros/yen. A debt hook would then be inserted into the mouth of Russians denominated in foreign currencies. Even if it was gold, the debt hook would have been denominated in an international unit that had to be bought through exchange rates.
Paid for communist lands could also be hypothecated into foreign currency….Let’s all have a big party and use that new Credit to consume BMW’s and other foreign goods. Meanwhile, little local productivity will occur to then pay off growing consumption good debts. It is so easy to confuse the Goyim. Let’s offer them a party today, but don’t tell them we are going to steal the land from under their feet later, especially if they cannot pay their debts.
Then Oligarchs (J) borrowed dollar credit from their Wall Street in-group buddies and started buying up former Communist, and now privatized industry, like Steel and even Yukos. This is stealing the patrimony and natural resources from Russians by credit emitting (free money) from Wall Street, and vectoring toward tribe members. But it is all market dynamics!
Next, since the economy is now extraction only, minerals and mining become dominant. Russia is reduced to being like Africa. Oh but it is all FREE MARKETS.
Crime syndicates pop up. Muslims become restive. High quality labor like nuclear scientists can no longer find work. Russia’s platinum and other earth items go overseas to be fashioned into high tech goods. Russia’s labor becomes disenfranchised and stops having children. Russian labor value becomes useless because they are not allowed to make goods as prices to then fetch money from money supply.
There is a general population collapse, especially among Caucasian and Asian Russians that have ability to think long term. Oh but it is all free market.
Meantime, Oligarchs (j) buy up print media and TV, again by borrowing “credit” from their in group buddies. This credit is pretty easy to make, just attach land or an asset to a double entry ledger at a private bank. It is all ‘free market” dynamics, and even better the new credit is based on land, which can be grabbed later in a depression.
The press is now controlled; the economy is reduced to extraction, white Russian high quality labor is staggering around drunk, and not having children because there is no future in “labor.” Crime syndicates arise because they can then enclose land, to then grab and extort extraction rights on minerals. The price system is ignored because you know, free markets balance out always.
The Free market then undoes an ancient sovereign people, and scatters them to the wind.
Great ideas Mises Monks – you are the mensch.
Money is law, it is not credit. Money is not metal. Markets are law and have rules – they are not free.
The cost system and price systems can and do have rents taken on them, and hence free markets do not mean FREE TO TAKE RENTS. Free markets should be FREE OF RENTS, to then deliver lowest cost value. Your Mises ideas do nothing about rent seekers, only making markets free for parasites to steal.
Russia is much closer to delivering lowest cost value economics today, than if they had continued on the free market path proscribed for them by the Harvard Boys.
IMF basket of currencies :
Modern colonialism
Pay in paper ; buy anything at pittance from developing countries, and when they accumulate too much, attack or change govt using NGOs & loot back all of it.