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Currency Wars Update

Tyler Durden's picture




 

Yesterday, the fine folks of Tradition Analytics were kind enough to explain (once again) just how it is that the Fed has boxed itself into a corner, where in order to maintain the already outlierish growth rate of monetary supply, the Fed will have no choice but to print (same with the ECB), or else risk a massive economic collapse (thank you Austrian theory). Today, the same group provides an update on what everyone knows has been the status quo's only way of dealing with the deleveraging tsunami since March 18, 2009: currency warfare. In the note below, they provide a recap of the recent history of FX warfare, as well as an update of where we stand currently. Keep in mind, currency warfare only works to a point. Then it escalates into other, more violent forms, first trade wars, then real ones.

Recent History

 

From 1999 to 2011, the average growth rate of global foreign exchange reserves is just over 16% annually. At the start of 1999, global foreign exchange reserves stood at $1.6 trillion, before climbing above $5 trillion in 2006, before doubling and breaching the $10 trillion mark for the first time ever in Q2 2011.

Of particular interest is that a breakdown of this growth between developed economies (DMs) and emerging and developing economies (EMs) shows that EMs have debased their currencies at a much faster rate than DMs over the past decade. The average rate of EM reserve growth over the past 12 years is 23%, compared with 10% for DMs. This means that EMs have been creating massive monetary inflation in their domestic economies, and this is confirmed in money supply data, and was also reflected in the accelerating price inflation that these economies experienced from 2005 to 2008.

 

Noting the pie charts included on the following page, see how DMs holdings as a percent of total global reserves have grown since 1999. From 38% in 1999, DMs now hold 68% of global foreign reserves.

And here is where we are now:

Current phase of the currency wars

 

As shown on the chart above, EM economies are currently stepping up foreign reserve accumulation, outstripping the pace of forex accumulation of DMs by a substantial margin. This comes at a time when EM economies are slowing substantially, which means EMs are likely to see accelerating price inflation in 2012 as this new money seeps into their respective economies.

 

The very aggressive forex accumulation by EMs during the boom phase of 2002 to 2008 now has them in a sense trapped; they must continue to create money supply at the same or faster rate as before in order to keep domestic growth supported. These central banks can buy all kinds of assets to achieve this goal, but if they don’t continue to support and buy DM currencies, the major currencies may weaken to such an extent that emerging economies lose their export markets as their currencies strengthen. Also, if they did not buy DM currencies but rather bought domestic assets with newly printed base money, it would result in tremendous asset price inflation as well as consumer price inflation in their domestic economies. As a result, emerging economy governments are forced into buying USD, JPY, GBP and EUR to hold as part of their reserves.

 

Of course, the more EM governments acquire DM currencies, the more influence the former governments will have on the global stage, as a BRIC economic block. It creates the potential for the currency war to evolve from a currency debasement issue to EM governments using this as a way to force DM governments into submission. To illustrate, should China threaten to dump huge chunks of USD and EUR if NATO was to start a war with Iran, it could prove very effective as it would threaten the collapse of these currencies and potentially trigger a hyperinflationary economic collapse that would send interest rates skyrocketing in the US and Europe. Of course, this would threaten Chinese export markets, so it is unlikely to happen. However, the strategic implications of holding more of someone else’s debts are clear.

 

That said, note that there is a major shift in the composition of global FX reserves taking place at present. All governments have scaled down the pace of USD, GBP and EUR purchases by a significant margin over the past year, while “other currencies”, the JPY and CHF have seen rising interest as foreign reserve assets. “Other currencies” include mainly emerging market currencies that are becoming more reservable, as well as the AUD and CAD.
From Q1 2010 to Q2 2011, USD, GBP and EUR assets forming part of total global reserves grew by 14%, 14%, and 15%, respectively.

 

“Other”, JPY, and CHF in total reserve holdings have grown 59%, 52%, and 34% respectively over the same period. There is a very definite shift taking place, whereby emerging economies are beginning to buy up increasing amounts of currencies with lower interest rate and currency risk.

 

Ultimately, the currency war is won by the government that can debase its currency at the fastest rate while still boosting employment creation and manufacturing capacity in its domestic economy. This is why China’s currency policy is scorned by the West, they have managed to maintain a weak currency while becoming an economic powerhouse. Other countries feel China has achieved this at the expense of their own economies.

 

While all governments are simultaneously in the process of debasing currencies against one another by increasing respective money supplies, they cannot debase the value of real assets as they do not and cannot control and manipulate its supply. As a result, the global economy is bound to see continued increases of commodity prices across the board in nearly each and every currency denomination. It is set to result in a global price inflationary environment if the currency wars continue, which we expect will. Monetary metals such as gold and silver stand to benefit tremendously as the currency wars continue.

h/t Converttrader13

 

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Wed, 12/28/2011 - 14:05 | 2016667 misterc
misterc's picture

EURUSD movement smells like insider trading ahead of a FrAAAnce downgrade.

Wed, 12/28/2011 - 14:28 | 2016739 falak pema
falak pema's picture

planned for February 29, 2012!!

Wed, 12/28/2011 - 14:41 | 2016790 ZeroHedgeFan
ZeroHedgeFan's picture

Why February 29 2012?

Wed, 12/28/2011 - 14:49 | 2016808 falak pema
falak pema's picture

Leap year>Frogs>birthday of leap frogs. There. 

Wed, 12/28/2011 - 16:03 | 2017021 Oh regional Indian
Oh regional Indian's picture

Falak, yesterday I saw an Auto-Rickshaw (tuk tuk for the un-initiated), with FALAK in big bold letters on it's wind-shield. Good fun.

As fer Current Sea wars? It's the sub-set of the oil wars and super set of the PM wars.

Out of context if all three are not shown together. Price action is all relative.

ori

/world/

Wed, 12/28/2011 - 17:37 | 2017224 Orly
Orly's picture

Two of my favourite fellows, back-to-back.

Greetings, gents!

Thu, 12/29/2011 - 03:27 | 2018403 Oh regional Indian
Oh regional Indian's picture

Orly! Where have you been? Good to see you. :-)

ori

Fri, 01/06/2012 - 14:00 | 2039897 BigJim
BigJim's picture

...Leap year>Frogs>birthday of leap frogs. There.

You sly dog, you!

Wed, 12/28/2011 - 14:33 | 2016757 PulauHantu29
PulauHantu29's picture

Are these numbers "seasonally adjusted?"

Wed, 12/28/2011 - 14:51 | 2016815 infotechsailor
infotechsailor's picture

...breaking:

http://www.presstv.ir/detail/218160.html

Press TV banned in England over criticisms of British Government.

Wed, 12/28/2011 - 14:58 | 2016842 Irish66
Irish66's picture

well all be, times are changing rapidly, hold on

Wed, 12/28/2011 - 15:39 | 2016953 gmrpeabody
gmrpeabody's picture

"Press TV banned"

Yes..., and they will be sorely missed,I'm sure. <sarc>

Wed, 12/28/2011 - 15:44 | 2016962 Stax Edwards
Stax Edwards's picture

Damn brits should have known better than to allow all of thos iranians to immigrate over there.  Going to the city is like taking a trip to Tehran.  GD mosques all over the place and mullahs walking around on the streets. 

 

Wed, 12/28/2011 - 15:10 | 2016878 GeneMarchbanks
GeneMarchbanks's picture

'This black stain will be recorded in history along with other acts of aggression of the British monarchy.'

Those Persians are making too much sense, don't worry, they'll manipulate the Yanks into a bombing in no time...

Wed, 12/28/2011 - 15:45 | 2016966 Stax Edwards
Stax Edwards's picture

Persian is what Iranians claim to be so they don't have to say they are from Iran. 

Wed, 12/28/2011 - 20:49 | 2017758 Sokhmate
Sokhmate's picture

Especially Christians

Wed, 12/28/2011 - 15:10 | 2016871 xela2200
xela2200's picture

"EURUSD movement smells like insider trading ahead of a FrAAAnce downgrade."

Looks like banks trying to get the FED to print. The US cannot have the euro below 1.30 especially in an election year. The USD is turning into a big wrecking ball for the economy not just commodity or stock prices. Wait until those GDP and unemployment numbers start to hit the news media.

Damn, why is it that 2012 is starting to look like the worst financial year of our lives? Hopefully, it is just the inevitable cynicism that comes with age. :-)

Wed, 12/28/2011 - 14:07 | 2016670 GeneMarchbanks
GeneMarchbanks's picture

Currency Wars, Bitchez!

Nothing new here, except we might skip that trade war and just go to plain old fashioned war.

Wed, 12/28/2011 - 14:23 | 2016722 spiral_eyes
spiral_eyes's picture

"The United States is turning our attention to the vast potential of the Asia-Pacific region.

— Barack H. Obama

And hey! Putin is in hot water in Russia. So he too will want a new war to grasp a fuller grip on power. Everyone wins! Higher aggregate demand! Social darwinism! Military-Keynesianism!

America!

Fuck yeh!

http://azizonomics.com/2011/12/22/the-deline-and-fall-of-the-american-empire/ 

Wed, 12/28/2011 - 14:36 | 2016767 hedgeless_horseman
hedgeless_horseman's picture

 

 

...we might skip that trade war and just go to plain old fashioned war.

The MIC says Episode 2 will be The Drone Wars

Wed, 12/28/2011 - 14:50 | 2016812 ZippyDooDah
ZippyDooDah's picture

Didn't you watch Star Wars?  That should be The Clone Wars.

Wed, 12/28/2011 - 14:52 | 2016817 GeneMarchbanks
GeneMarchbanks's picture

My hope is that Keynesians, Monetarists and Austrians are all wrong and we just have a Minsky moment meltdown where everyone is too stunned to actually go to war. Either that or a natural catastrophe of Biblical magnitude that would, paradoxically, save us from ourselves.

What are your New Years hopes and dreams, h_h?

Wed, 12/28/2011 - 16:55 | 2017151 economics1996
economics1996's picture

Austrians predict;

1.  War.

2.  Austerity over decades.

3.  Inflation.

4.  Deflation and liquidation of mal-investments.

Wed, 12/28/2011 - 16:57 | 2017158 economics1996
economics1996's picture

Keynesians predict;

1.  Print more money to fill the GDP gap.

2.  Borrow more money to fill the GDP gap.

3.  Tax more money to pay other people to fill the GDP gap.

4.  Tax savers and spend the money to fill the GDP gap.

Wed, 12/28/2011 - 17:00 | 2017160 economics1996
economics1996's picture

Monetarist predicts;

1.  Print some more money and pass it around to bankers.

2.  Print more money and pass it around to politicians.

3.  Remove gold and silver from marketplace.

Wed, 12/28/2011 - 14:06 | 2016672 non_anon
non_anon's picture

I'd say a precursor to WW3

Wed, 12/28/2011 - 14:14 | 2016678 hugovanderbubble
hugovanderbubble's picture

I think we are in the III WW currently....

Not all Wars are physical...this has begun financially

Wed, 12/28/2011 - 14:17 | 2016709 navy62802
navy62802's picture

If you go back to the beginning of WWI, you can draw a line of causality all the way from that war to our present conflicts. I would argue that we have been engaged in a single global war for the past century with various hot spots of different intensity throughout those 100 years.

Wed, 12/28/2011 - 14:30 | 2016744 Vergeltung
Vergeltung's picture

excellent point. top notch. +100

 

(whoever gave you the down ding, lacks a clear historical understanding)

 

 

Wed, 12/28/2011 - 15:48 | 2016975 gmrpeabody
gmrpeabody's picture

I've been telling my family since they were puppies, that WW ver1.0 has never been resolved on many different levels. You have to give the Koreans credit, at least they call a spade a spade.

Wed, 12/28/2011 - 14:44 | 2016766 fuu
fuu's picture

WW1 can be traced back to the 30 Year War.

Wed, 12/28/2011 - 14:59 | 2016846 Dadburnitpa
Dadburnitpa's picture

Correct.  Just as the US Civil War is traced to the Revolutionary War and the unsolved issues.

Wed, 12/28/2011 - 15:15 | 2016894 xela2200
xela2200's picture

I still think that some of those Civil War issues might resurface at some point. I remember when I passed through North Carolina once a few years back and heard some southern bells complaining about Yankees screwing the state. North Carolina never surrendered. :-)

Wed, 12/28/2011 - 20:48 | 2017756 laserjock
laserjock's picture

Yes, Yankees have screwed our state.  Higher tax burden than Mass. now, thanks to all the dipshits moving down here from Jersey who don't undestand all the superfluous government services they got used to up there cost money but since they've started clamoring for them here I hope the'll understand.  SC is next on their list.

Wed, 12/28/2011 - 14:37 | 2016773 eurusdog
eurusdog's picture

I wouldn't agree that the line is "causality", but one of near perfect "correlation" (1).

Wed, 12/28/2011 - 14:55 | 2016833 Caviar Emptor
Caviar Emptor's picture

Your point is a perfect illustration of recency bias. Ongoing warfare was the reality and the norm and long periods of peace and prosperity as seen in the 20th century were the anomaly. Keep in mind that in every generation prior to WW1 there was an epic, devastating war that detroyed a nearly identical proportion of the population on a % basis. It was just accepted. THe only major shift was ww2 where the casualties became mostly civilian and less armed forces. It was "state-sponsored terrorism" warfare. Prior to that wars were fought on battle fields. 

Wed, 12/28/2011 - 15:11 | 2016883 uno
uno's picture

only one "state" has been at war for 10+ years, otherwise it would be all quiet throughout the world; Libya having a gold and silver dinar and highest standard of living in Africa, Africa standard of living improving with Libya's help, Iraq selling oil for Euros, Pakistan worrying about India instead of US

Wed, 12/28/2011 - 15:57 | 2016999 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I'll point out here that Native Americans went to war, on average, only every few generations, because when there is only 50 people in your tribe, a war will wipe out your bloodline. 

Usually if there was a problem between tribes, it was settled by a top warrior from one tribe and a top one from another. 

Thu, 12/29/2011 - 03:27 | 2018402 hivekiller
hivekiller's picture

Sounds like West Side Story on the reservation.

Wed, 12/28/2011 - 15:34 | 2016914 xela2200
xela2200's picture

The 20th century was marked by a great time of prosperity/abundance brought about by energy (Oil, Coal) and innovation. However, human history has been one of fighting over resources, so I suspect that once these become scarce, war is inevitable. I mean, come on, 9 Billion people by 2050. That is the world's carrying capacity with infinity oil. The only way to equilibrium will be famine or war. I hoped that capitalism through its price mechanisms will prevent coming to that. Now, I see that when capitalism tries to balance, politicians and economist call it a failure and go into a command/directed economy under the guise of stimulus and investment.

Wed, 12/28/2011 - 15:15 | 2016891 Lord Koos
Lord Koos's picture

If you go all the way back to Adam & Eve, you can draw a line of causality all the way from then to every war.

Wed, 12/28/2011 - 17:17 | 2017213 ucsbcanuck
ucsbcanuck's picture

Did Adam & Eve actually exist? Creationist!

Wed, 12/28/2011 - 18:03 | 2017316 87GN
87GN's picture

Just replace "adam and eve" with "2 apes flinging shit at each other"

Thu, 12/29/2011 - 02:04 | 2018357 ucsbcanuck
ucsbcanuck's picture

I was kidding there OK. Could be two amoeba flagellating something at each other for all I know.

Wed, 12/28/2011 - 14:08 | 2016677 Irish66
Irish66's picture

Can someone explain the drop in euro price verses the swaps 

Wed, 12/28/2011 - 14:17 | 2016707 NooooB
NooooB's picture

Someone else is selling more than the ECB is tying up with the US??

Wed, 12/28/2011 - 14:09 | 2016679 Mike2756
Mike2756's picture

The question is: when will they qe again?

Wed, 12/28/2011 - 14:16 | 2016683 GeneMarchbanks
GeneMarchbanks's picture

Notional GDP targeting is next. Print until you hit your desired GDP target, inflation be damned. Begins January 1st, but they'll announce it later than that.

Wed, 12/28/2011 - 16:11 | 2016939 xela2200
xela2200's picture

Agree. Launching a new "QE" would be a very unpopular move. If the FED goes through the pain one more time, they might as well just make it an ongoing program. Like some sort of inflation adjusted GDP target. I don't think financially anybody escaped (other than insiders and politicians) this year without feeling some pain. The notion of "liquidity" is probably more palatable today than it was 6 months ago. The "do something" mentality from the average Joe will hit soon. Politicians only know how to spend, and the FED only knows how to print.

Wed, 12/28/2011 - 18:50 | 2017423 Catequil
Catequil's picture

QE has a half-life. Each new QE has less efficiency meaning shorter (in terms of duration and also magnitude) economic upswing at the price of higher inflation (the real one, not the FED's one), widening wealth gap hence social unrest. Each new QE puts the Status Quo at jeopardy ever more.

Wake-up. NO QE any time sooon, especially in an election year!!!!

Wed, 12/28/2011 - 14:17 | 2016704 SheepDog-One
SheepDog-One's picture

The real question to me is: Does 'QE' even fool anyone any longer? And how long is it good for now, maybe a week?

Wed, 12/28/2011 - 14:22 | 2016721 Dr. Engali
Dr. Engali's picture

They won't QE until the market craters. Right now if they QE the market would crater when they print because it would be priced in. They are going to make everybody beg for it.

Wed, 12/28/2011 - 14:09 | 2016680 JustObserving
JustObserving's picture

"Monetary metals such as gold and silver stand to benefit tremendously as the currency wars continue."

Wake me up when reality returns

Wed, 12/28/2011 - 14:15 | 2016696 SheepDog-One
SheepDog-One's picture

Yea really....wake me when reality makes its much talked about reappearance. All I see is the more they print the more they use the printing to hammer down PM's.

Wed, 12/28/2011 - 14:26 | 2016736 FinHits
FinHits's picture

Also the natural resourch rich countries who produce the natural resources such as oil, minerals and food will generate profits and cash flow from these resources independently from the currency war. It would appear to be in the interest of these economies to push for the global currency war, since they would profit as a by-product?

Wed, 12/28/2011 - 14:30 | 2016745 frieswiththat
frieswiththat's picture

Since the largest holder of physical gold is the US Gov. they will short against the box just to keep prices in line and continue to capitalize on it. just like the old bear stearns GLD positions. IMHO

Wed, 12/28/2011 - 14:14 | 2016690 yogibear
yogibear's picture

Those trading partners with strategic assets, such as oil, should demand hard assets counter Bernanke's printing and devaluing! It's become every country for themselves now. Survival of the financial fitest. Bernanke through his printing (QEing) has shown he is willing to make countries starve  (Eygpt, etc food prices) to save his member banks.

Wed, 12/28/2011 - 14:23 | 2016723 AnAnonymous
AnAnonymous's picture

should demand hard assets counter

//////////////////////////////////

yes and it will meet with hard assets like hard heavy bombs, dull lead and the rest.

Extortion biz, run by US since 1776.

Wed, 12/28/2011 - 14:32 | 2016753 Vergeltung
Vergeltung's picture

oh yeah, the US was a real powerhouse in 1776 (face palm).

 

you post with an uncommon stupidity. nice work!

 

Wed, 12/28/2011 - 15:55 | 2016996 AnAnonymous
AnAnonymous's picture

Hey, bis are started small, you start small, and grow, grow... US citizen dream.

US citizens in US of A started extortion biz on Indians,negroes to learn the trade... When ready and assured, the success story of the extortion history.

Wed, 12/28/2011 - 15:57 | 2016997 gmrpeabody
gmrpeabody's picture

"you post with an uncommon stupidity. nice work!"

And with a predictable bias which has become very fashionable of late.

Wed, 12/28/2011 - 16:09 | 2017034 AnAnonymous
AnAnonymous's picture

Ah, but US citizenism charm is its predictibility.

US citizens nature is eternal. If it was not, it would be much less funny...

Wed, 12/28/2011 - 14:38 | 2016777 Urban Redneck
Urban Redneck's picture

If their interests diverge and it comes comes down to roughnecks vs bankers- my money is on the oilmen, and they would be one of the few groups with the clout and strength to depose the bankers, but it wouldn't be pretty and the politics would make for some very queer bedfellows in the public arena.

Wed, 12/28/2011 - 14:14 | 2016692 SheepDog-One
SheepDog-One's picture

And even with printing, that just kicks the can for a few days time until the inevitable far larger crash.

Wed, 12/28/2011 - 14:16 | 2016700 kralizec
kralizec's picture

Race to the bottom...SSDD...enjoy the ride!

Wed, 12/28/2011 - 15:49 | 2016784 hedgeless_horseman
hedgeless_horseman's picture

 

 

It's not a race anymore.  The CBs are in league with each other.  Synchronized diving is the new game. 

Just as the NFL wins the SuperBowl every year, the central banks win every currency devaluation.

Keep buying those season tickets, pom-poms, and NFL Team belly rings!

 

PS:

From the article:

Ultimately, the currency war is won by the government that can debase its currency at the fastest rate while still boosting employment creation and manufacturing capacity in its domestic economy.

Are you kidding us?  Stop believing the CB marketing departments' WIIFM statement!  We had employment and manufacturing growth long before central banking, and we will have it again after it. 

Would Americans still play football if there was no NFL?  Of course.

The "social contract" between the bankers and the rest of the world is not a quid pro quo....it is a one-sided scam.

 

Wed, 12/28/2011 - 16:00 | 2017010 gmrpeabody
gmrpeabody's picture

A member in good standing of the Mile High Club.

Wed, 12/28/2011 - 14:17 | 2016705 Anarchyteez
Anarchyteez's picture

BTF'nD, then sit on a nice sunny beach outside of the US a few years. All will be just fine.

Wed, 12/28/2011 - 14:18 | 2016710 espirit
espirit's picture

"Ultimately, the currency war is won by the government that can debase its currency at the fastest rate while still boosting employment creation and manufacturing capacity in its domestic economy. This is why China’s currency policy is scorned by the West, they have managed to maintain a weak currency while becoming an economic powerhouse. Other countries feel China has achieved this at the expense of their own economies."

Bullish, eh?

Wed, 12/28/2011 - 14:53 | 2016823 Tortuga
Tortuga's picture

Economic powerhouse my ass. China builds junk, any economic data they supply is lies. GBA, RICO all the banksters, their whore politicians and IMPEACH the current DOJ.

Wed, 12/28/2011 - 15:47 | 2016970 Hollywoodcole
Hollywoodcole's picture

Serious question here.  I've long understood from my time at college/in the world of finance that China's currency is artificially depressed, and that this (obviously) gives them a production advantage b/c the shit they put out is cheap for everyone else b/c of the "false" low value of the yuan.  

 

So I guess my very basic question is, why/how does China get away with this artificially low price?  Why do the other major countries not demand that China free float their currency?  Why was this allowed in the beginning, and why does it continue today?  Seems like, if you want to play with the big boys, you need to play by the big boy rules.

 

Apologies in advance if I'm missing something basic...

Wed, 12/28/2011 - 16:20 | 2017066 Thinkor
Thinkor's picture

The welfare states need China to run a surplus so they can borrow it to keep their welfare programs chugging along.
This allowed a short run dynamic equilibrium that is now very close to reaching its logical end.

 

 

Wed, 12/28/2011 - 17:06 | 2017175 Hollywoodcole
Hollywoodcole's picture

Seems to me that we're well past the logical end, but I am a rather simplistic thinker at times....Anyone else???

Thu, 12/29/2011 - 03:48 | 2018412 mrpxsytin
mrpxsytin's picture

The reason they 'allow' China to keep doing this is that while it happens the Developed Economies use the Chinese as their slaves.

The Chinese actually produce physical products and the Americans use imaginary money to buy those real products. So who is winning there?

As long as you can keep printing money to buy things it's a great system. You get everything for free.

The long term impact of this is that your own system ends up becoming LaLa Land as it becomes further and further removed from the physical world of goods production.

So why does America allow China to do it? Well if they stopped then LaLa LAnd would quickly become "Hell on Earth".

Thu, 12/29/2011 - 08:23 | 2018644 Thinkor
Thinkor's picture

The logical end is a drastic deflation, possibly after a very strong inflation or hyperinflation.  We aren't there yet. 

 

 

Wed, 12/28/2011 - 17:18 | 2017216 frieswiththat
frieswiththat's picture

and the Blue Ribbon winner and all time king of the game "FUCK AROUND" goes to....wait for it.....THE FEDERAL RESERVE! golf clap

Wed, 12/28/2011 - 14:20 | 2016718 XtraBullish
XtraBullish's picture

Buy the E/S and short the PM's - long E/S short GLD is THE "New Trade" for 2012!

BUY BUY BUY - stocks for the long term!

Wed, 12/28/2011 - 14:26 | 2016734 MFL8240
MFL8240's picture

And with this Gold is down.  F you to the slaves of the Federal reserve manipulating paper Gold in the Chicago sewer, Biullion will shine brightest.

Wed, 12/28/2011 - 14:33 | 2016756 uno
uno's picture

good link from gata - showing the morgue et al having the lowest short silver contracts since 2001, this selloff may get the vultures net long

 

 This is the least net short silver futures for the combined commercial traders in a decade.  We can say that as of December 20, 2011, the usual Big Sellers of silver futures, as a group, were about as confident of silver falling to lower levels as they were a decade ago with silver then trading at $4.20.    

The current LCNS condition is rare.  We have only witnessed such low readings of LCNS two times in a decade.  

http://www.gotgoldreport.com/2011/12/got-gold-report-comex-futures-for-silver-near-extreme-bullish-levels-.html

 

Wed, 12/28/2011 - 14:57 | 2016839 Al Huxley
Al Huxley's picture

Amazingly low commercial short positions, and short:long position ratios for both gold and silver as of last Friday, and even moreso now. Not sure how much is due to contraction of the paper market in general as a result of lack of trust due to the MF Global theft but historically when the short:long ratio gets to these levels, the bottom's pretty close for the price of the metals (that would be the comex paper price).

Wed, 12/28/2011 - 15:27 | 2016926 uno
uno's picture

the no-brainer is going to be silver, even the cartel knows it.  MF destroyed the bullion banks access to physical, any SWF is going to go around them to the miners now.  Here is another good article from king world a week ago   http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/12/21_London_Trader_-_There_are_Tremendous_Silver_Shortages.html

It is so tight, the silver market is so tight that we’ve been waiting three weeks plus, before this takedown, for deliveries of size to arrive.  I’m talking about tonnage orders.  This is also key, most of the silver being delivered was refined after the orders had been placed, and again, that was before the takedown.  You can just imagine how long the wait times will be going forward.


Wed, 12/28/2011 - 15:50 | 2016981 xela2200
xela2200's picture

Am I the only that feels that all of this smack down is ground work for what the FED has concocted? If the FED needs to inject liquidity, they need to have the perceived value of the FIAT as high as possible. Gold at $2,000 just wouldn't cut it.

If bankers (JPM) knew something was amidst, Silver shorts would be moving out of the way and getting ready to take the other side.

I am going to become an alcoholic in 2012 for sure. :-o

Wed, 12/28/2011 - 16:03 | 2017020 uno
uno's picture

agreed, S&P, Gold needs to go down for Jan FOMC meeting.  Any buyer of size needs to break trendlines to get long by setting off stops.

With Italy and Greece run by Goldman (also USA and ECB), the gold from Italy and Greece and Libya is probably being used to supress price.  I hope this selloff continues until the miners stop giving it away.

 

Wed, 12/28/2011 - 14:34 | 2016762 Dr. Engali
Dr. Engali's picture

Take advantadge of the gimme and buy more.

Wed, 12/28/2011 - 16:36 | 2017110 Josh Randall
Josh Randall's picture

Exactly - Jimmy Moore Jimmy Moore - not looking to catch a knife but will load up my wagon once it hits the next support line.

Wed, 12/28/2011 - 14:29 | 2016742 PulauHantu29
PulauHantu29's picture

Deflaitonary depression + stock market collapse almost guarantees  Barry will not get reelected...thats what one analyst said on PBS last night.

Wed, 12/28/2011 - 14:33 | 2016760 Dr. Engali
Dr. Engali's picture

They didn't factor in the false flag war with Iran. That will change everything. Of course they will make it look like Iran attacked us.

Wed, 12/28/2011 - 14:30 | 2016746 Missiondweller
Missiondweller's picture

Speaking of "Currency Wars":

 

Its the name of a great book I'm reading by James Rickards. Reviews past Currency wars to provide context for today. Its a fairly easy read, no need to be an economist. Haven't finished it yet but its very interesting. Lots of stuff they never taught you in Econ class.

 

Check out the reviews on Amazon:

http://www.amazon.com/Currency-Wars-Making-Global-Portfolio/dp/1591844495

 

 

Wed, 12/28/2011 - 17:15 | 2017201 xela2200
xela2200's picture

The book is really good. You might enjoy the video below. It is the presentation that He did for the armed forces which He mentions in his book.

http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRickardsPresentationVideo.aspx

 

Wed, 12/28/2011 - 14:30 | 2016747 Shizzmoney
Shizzmoney's picture

I mean, if these assholes are just gonna print their way outta this mess, can they at least have the decency to cut me a check?

I wanna be a sellout when I grow up.

Wed, 12/28/2011 - 14:43 | 2016796 zorba THE GREEK
zorba THE GREEK's picture

Shizz,  You have already been sold out by the baby boomers before you.

Wed, 12/28/2011 - 14:48 | 2016803 Tortuga
Tortuga's picture

It's not a generational sellout dipstick, it's a "class" sell out and while I'm at it, GBA, RICO all banksters and their whore politicians and IMPEACH the current DOJ.

Wed, 12/28/2011 - 14:58 | 2016841 GoldenTool
GoldenTool's picture

I think it is more apt to be like this.

 

http://www.youtube.com/watch?v=S7pijrAOLdg&feature=related

 

Anything for a raise sir.

Thu, 12/29/2011 - 23:45 | 2020969 ThrivingAdmistC...
ThrivingAdmistCollapse's picture

Nah, the money printing is just a ruse to keep everything running long enough for them to cash out before the entire world lands into an economic collapse.

Wed, 12/28/2011 - 14:36 | 2016768 eurusdog
eurusdog's picture

I wouldn't agree that the line is "causality", but one of near perfect "correlation" (1).

Wed, 12/28/2011 - 14:41 | 2016789 Boilermaker
Boilermaker's picture

XLF and IYR just hit their magical and unexplainable turning point higher.  They'll end positive under all circumstances.  I love the break-neck reversals from nowhere.  It's so real like.

Wed, 12/28/2011 - 14:42 | 2016793 kito
kito's picture

there is no currency war. in the face of deflationary pressures, dollar is only getting stronger. gold and silver continue their plunge. with all of this supposed ecb monetary expansion, and with this alleged m2 supply increase, why is the dollar gaining and pms losing? deflation and it cant be stopped.............

Wed, 12/28/2011 - 14:49 | 2016806 zorba THE GREEK
zorba THE GREEK's picture

Kito, Gold and silver are still being sold by hedge funds to cover huge losses and heavy redemptions.

The sell-off will be over before you know it and PMs will turn sharply higher as the world financial

system starts to unwind. 

Wed, 12/28/2011 - 15:53 | 2016990 jomama
jomama's picture

yeap, any day now...

Wed, 12/28/2011 - 14:49 | 2016807 JimmyTheHand
JimmyTheHand's picture

If it were true deflation Bennie would be in the middle of the MF'ing street cranking the handle on the printing press himself.  They are truely terrified of deflation and they won't let it happen.  They will print trillions upon trillions of bills before they let true deflation to take place.

Wed, 12/28/2011 - 15:01 | 2016854 Al Huxley
Al Huxley's picture

Yes, very true. Average person will tolerate gradually rising prices and falling product sizes way better than finding out that their bank has closed and they've lost all their money. End result is the same, but its the old 'boiling the frog' trick.

Wed, 12/28/2011 - 15:10 | 2016873 kito
kito's picture

according to the hyperinflationistas, the whole world is printing to debase their currencies. this has been a very clear argument. again, they say ecb has been "printing", japan has been "printing", ben has been furtively "printing" (look!! the m2!!! the m2!! see!!! i told you so!!!) and yet, its making not a shit of a difference. the world has never deleveraged like this before. ever. 

Wed, 12/28/2011 - 15:14 | 2016890 Pegasus Muse
Pegasus Muse's picture

"In the first throes of the new deflationary cycle the Dollar will do well, as the fight intensifies and the US uses the Dollar as a monetary tool and prints more Dollars, it will fall precipitously. Correlations will break this year and many of the “relative value” trades will implode. Gold will break away from being pressured by a strong Dollar as the hunt for alternatives to Fiat currency explode." 

-- Maurice Pomery of Strategic Alpha

http://www.zerohedge.com/news/strategic-alpha-preview-2012-hope-and-expectations 

Wed, 12/28/2011 - 17:20 | 2017209 jimmyjames
jimmyjames's picture

according to the hyperinflationistas, the whole world is printing to debase their currencies. this has been a very clear argument. again, they say ecb has been "printing", japan has been "printing", ben has been furtively "printing" (look!! the m2!!! the m2!! see!!! i told you so!!!) and yet, its making not a shit of a difference. the world has never deleveraged like this before. ever.

 

*************

I am no hyper-inflationist-i am a deflationist and if everyone is printing in sync there can be no hyper-inflation-until one major or the others bond market pukes and then look out-

If even one of the majors bond/currency markets starts to die-it will be the kiss of death for all of them-it does not matter which one goes first-

So hyper-inflation still wont happen-because the first one to falter will be the first one to weight to gold and the first one to weight to gold will destroy all the rest unless they too match or beat the weighting and so they will be forced into gold by the market-

When/if that happens and you aren't already on the gold train-

You will have missed it completely-

Wed, 12/28/2011 - 14:58 | 2016844 ZippyDooDah
ZippyDooDah's picture

kito my little babeee--  there are currency wars and there is also a deflationary depression.  Both, together.  That's the problem with your comment and the analysis in the above article.  It ain't simple, and that's why the simple-minded analyses have so far missed the mark.

Wed, 12/28/2011 - 15:12 | 2016887 Caviar Emptor
Caviar Emptor's picture

-flation is goin bi....

Wed, 12/28/2011 - 15:28 | 2016932 kito
kito's picture

@zippy, my simple minded analyses have "so far" missed the mark? with all commodities dropping "so far" despite the incessant relentless cb expansion? youre using your vision of the future to justify what has "so far" missed the mark? because "so far" all i see is the pressures of deflation and deleveraging ripping the fabric of nations.......again, "so far"....................

Wed, 12/28/2011 - 14:58 | 2016845 Caviar Emptor
Caviar Emptor's picture

"If we all print simultaneously, then we can't get into trouble" -Global CBs and .Govs

Wed, 12/28/2011 - 15:14 | 2016893 KickIce
KickIce's picture

It's not currency wars but ccurrency balancing, or juggling might be an even better term for it.  It's all orchestrated to justify the printing machine.  This is what happens when you measure fiat vs fiat rather than a PM standard, it's all about relative strength because in reality they're all growing weaker through debt.

Wed, 12/28/2011 - 15:18 | 2016901 fiftybagger
fiftybagger's picture

Silver For The People Blog and YT channel are BLOWING UP

Calling all Silverbugs - check it out

http://brotherjohnf.com/

http://www.youtube.com/user/BrotherJohnF?feature=mhee

Wed, 12/28/2011 - 15:21 | 2016910 Georgesblog
Georgesblog's picture

Such is the way of the world. It has always been so. It traces back to a basic flaw in human nature. Just as one man seeks to make another an extension of himself, so do nations. Private banks know no allegiance to any nation.  They defraud nations out of their wealth with fiat currency. In the process, they play both sides in a conflict against each other, financing their wars. The objective of commerce is always conquest.

 http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/

Wed, 12/28/2011 - 15:37 | 2016949 f16hoser
f16hoser's picture

Time for a new war (IRAN/SYRIA) and 800 FEMA camps to go active! Welcome to Amerika! Home of the enslaved and empovershed!

 

Wed, 12/28/2011 - 15:45 | 2016951 GoinFawr
Wed, 12/28/2011 - 16:26 | 2017084 Snakeeyes
Snakeeyes's picture

Notice that the world's central banks are lending to banks at negative (real) interest rates. Talk about distorting capital markets!

http://confoundedinterest.wordpress.com/2011/12/28/ecbs-balance-sheet-go...

Wed, 12/28/2011 - 16:32 | 2017099 Bastiat009
Bastiat009's picture

Still no words on the gold crash ... is it because it was not planned or is it because gold is definitely a safe haven against fiat currency crash. The euro is a major currency and it is dying. Europeans should have bought yen or US$, which are the most commonly printed currencies on earth, to preserve their wealth. Go figure.

Wed, 12/28/2011 - 16:48 | 2017136 JW n FL
JW n FL's picture

 

 

Monster Boxes for $15k(ish)!!!

Merry Christmas to ME!!!

Dont worry.. the monetary base growing by 300% - 400%.. thats not ever going to effect the price of Gold and Silver!! as long as the FED can continue to Buy down the Price of Silver and Gold!

LOL!!

The Euro Zone Printing how many Trillion so far? NOPE! no affect on Prices for Physical!

China slow down and crash? NOPE!! paper all over the World is FANTASTIC! easy to fold and carry in your pocket!!

The week between Christmas and New Years is a BEAUTIFUL THING!!

Wed, 12/28/2011 - 20:09 | 2017633 proLiberty
proLiberty's picture

When all major suppliers of fiat currency roughly inflate at the same rate, this is "co-inflation".  The long term effect is that assets will respond in proportion to the value of the real things they contain compared to the fiat things they contain.  Thus a product with a high labor component will not go up in nominal price as fast as one with a greater proportion of real things in its makeup.  Thus the price of consultants will not rise as fast as the price of tires or gold.

 

Wed, 12/28/2011 - 23:37 | 2018136 michaelsmith_9
michaelsmith_9's picture

The USD could reverse from current levels, especially as AUDUSD looks poised to push higher in the near term.  Looking for a "risk on" reversal.  An inter-market analysis of the AUDUSD, SPX, and TNX all point to higher levels in the near term and in the weeks ahead.  http://bit.ly/vc6b4X

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