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Presenting The Winners And Losers In The Ongoing Currency Wars

Tyler Durden's picture





 

Rather than focus simply on the actual adjustments in the real effective exchange rates which shows the UK and US as having used monetary policy to devalue/weaken their currencies since the 2008 crisis really took shape, we look at an intriguing chart from Nomura's EEMEA FX research team. Google Trends shows, that in the year since Brazil's finance minister Mantega warned of a currency war's immediacy, a dramatic pickup in searches for both 'Currency Wars' and 'Recession' and we believe, like them, that 2012 will see further engagement of the vicious circle of antagonism around the world (with the EUR the obvious next chapter). Only EUR, USD, and TRY are actually weaker since the 2009 lows with most of the Emerging Market over 16% higher on average. It would appear that whether Europe escalates or US retaliates, gold will eventually benefit from this fiat fiasco and the search patterns set a rather nasty precedent.

 

And the winners and losers from the 2009 equity lows, in FX land (in REER terms):

and comparing UK, US, and Europe from the start of the 2008 crisis. US and UK have been using monetary policy effectively to keep their currencies weak? It is almost a given that Europe will want to join in as the valuation gap between periphery and say the UK is now extreme...

Simply put, you can't grow fast enough, you can't cut rates, that leaves only one option (call it what you want), currency devaluation.

 


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Wed, 12/21/2011 - 17:16 | Link to Comment YesWeKahn
YesWeKahn's picture

The only option left, people will start using Gold as currency.

Wed, 12/21/2011 - 17:17 | Link to Comment YesWeKahn
YesWeKahn's picture

XBOx: 1/4 gold bar.

coffee: 1/2048 oz of gold.

...

Wed, 12/21/2011 - 17:34 | Link to Comment css1971
css1971's picture

Seriously?

Imperial?

Thu, 12/22/2011 - 03:41 | Link to Comment Belarusian Bull
Belarusian Bull's picture

I am a metric racist.

Wed, 12/21/2011 - 18:27 | Link to Comment whatsinaname
whatsinaname's picture

Indian currency sure getting slapped around - maybe thats what hurting them from getting more Au.

Wed, 12/21/2011 - 17:17 | Link to Comment HedgeAccordingly
HedgeAccordingly's picture

1.75 in the 10 year? 20 handle melt up and currency didnt move today - http://hedge.ly/ugN5md

Wed, 12/21/2011 - 17:31 | Link to Comment Let them eat iPads
Let them eat iPads's picture

Currency Wars would make a good TV program.

Wed, 12/21/2011 - 17:53 | Link to Comment Gene Parmesan
Gene Parmesan's picture

They'd have to figure out a way to create and televise tracer MT300s.

Wed, 12/21/2011 - 20:32 | Link to Comment gangland
gangland's picture

speaking of wars...

Finland impounds shipment of Patriot missiles, explosives in ship destined for Shanghai

 

http://www.washingtonpost.com/world/europe/finnish-police-find-shipment-...

 

 

Wed, 12/21/2011 - 17:36 | Link to Comment lizzy36
lizzy36's picture

1. devalue

2. export crap to the island of misfit toys

3. export inflation to 2nd&3rd world countries

4. social instability begins

5. revolution and civil war (but as long as it is over there no problem)

6. start to replace democracy with technocracy

7. wait...........

Wed, 12/21/2011 - 19:55 | Link to Comment Temporalist
Temporalist's picture

March of the Paper Soldiers

Wed, 12/21/2011 - 17:40 | Link to Comment scratch_en_sniff
scratch_en_sniff's picture

umm, the thing about the Google search trends is that it depends a lot on the given context. A lot of people looking for the term "currency wars" probably have never heard of it before, hence just want to find out what the talking heads are yapping about. Its a bit like the quantitative easing thing, im sure there was a spike in that as well in Google trends…where the only thing that it indicated was that people didn’t have a clue what was happening. As for the Euro being devalued, I seriously don’t believe that the ECB has to do anything other than let the politicians get on with fucking things up naturally.

Wed, 12/21/2011 - 17:56 | Link to Comment greased up deaf guy
greased up deaf guy's picture

that, or most folks were looking up jim rickards' best-selling book of the same name... especially after the free publicity by roubini spouting off like a fool lately.

Wed, 12/21/2011 - 18:48 | Link to Comment hyper-critical
hyper-critical's picture

lol.

This is a good post, and I'm sure both the authors of this study and Tyler are well aware of the dangers of inferring anything from historical time series, but still gave me a chuckle. I'm positive Rickards' book contributed significantly to the recent increase, thus inferring anything about the future from that chart would be making the same high-school level stats mistake that 95% of 'market professionals' make every day...textbook non-stationarity.

Good book, by the way, from a guy who comes at markets with a unique perspective.

Wed, 12/21/2011 - 17:42 | Link to Comment s2man
s2man's picture

??? USD is down only 6%?  AUS is up 40%? Why isn't AUSUSD @ 1.46?

It must be me...  dazed and confused.  But hey, Peter Tchir has admitted to being confused a couple of times this week.

Wed, 12/21/2011 - 18:37 | Link to Comment tooktheredpill
tooktheredpill's picture

Don't forget the aussie plummeted big time at one stage in 09.

Wed, 12/21/2011 - 17:51 | Link to Comment youngandhealthy
youngandhealthy's picture

Its obviously clear....US banks with huge capital in EU banks and Sovs are looking for the last rescuer. ECB.

QE in UK and US is over, both politicaly and money wise.

Now with huge Gross exposures (e.g. BoA with a gross @ 2700 BN with a pathetich net of 79Bn thru derivatives) is looking for a savior. ECB.

Fuckem...

Wed, 12/21/2011 - 17:46 | Link to Comment topcallingtroll
topcallingtroll's picture

Bankruptcy.
Nationalization.
Repudiation of certain obligations.

There is an option other than printing.

Wed, 12/21/2011 - 17:48 | Link to Comment JustObserving
JustObserving's picture

How did we miss this?  About 40 minutes ago:

 

Fitch warns it may follow Standard & Poor's lead and downgrade America from its AAA rating, attacking the country's high and rising government debt burden.

http://www.telegraph.co.uk/finance/debt-crisis-live/8969532/Debt-crisis-live.html

 

Wed, 12/21/2011 - 18:29 | Link to Comment z123
z123's picture

gold is loser

after all  the problems in europe and usa gold should be trading now @3000 but it can't because it is a loser, that's my opinion

Wed, 12/21/2011 - 19:51 | Link to Comment LeBalance
LeBalance's picture

ah I am able to see that you have truly reached the mountain top of yogic study.  Your asana practice is so advanced that you are supremely flexible in the spine.  It is regretable that you use this capability to eat your own feces as it seems to be affecting your cognitive capabilities.

this is not my opinion. it is a comedic jest.

Wed, 12/21/2011 - 20:03 | Link to Comment DosZap
DosZap's picture

z123

Ask WHY?....................Margin hikes fkd us over,and then Europe.

As far as VALUE (real Value,not manipurtaled paper shit) it's still the ONLY place to put money, and ever hope to regain it.

PERIFUCKINOD

Wed, 12/21/2011 - 18:38 | Link to Comment akak
akak's picture

.

 

Winners: Central governments and central banks (and perhaps, those who own PMs)

Losers: Everyone else

 

It is that simple. It always has been, and always will be during times of exponentially rising governmental debt and currency debasement, and no, we are NOT going to see any putative "deflation", because this time is NOT different!

Wed, 12/21/2011 - 20:47 | Link to Comment economics1996
economics1996's picture

That’s when we peasants reinvent the guillotine.  

Wed, 12/21/2011 - 18:38 | Link to Comment Georgesblog
Georgesblog's picture

Ah, good. You're keeping score. Does this mean we should be watching IRT: Most Dangerous Roads, more? Could see the next big thing in emerging markets.

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

Wed, 12/21/2011 - 18:57 | Link to Comment Yen Cross
Yen Cross's picture

 What about the abstainers?

Wed, 12/21/2011 - 19:57 | Link to Comment CreativeDestructor
CreativeDestructor's picture

and US piled into massive government debt while dollar was already week. US is doomed even on that criteria. It'll have to devalue even further to pay back debt or ask a magician to make it all go away...

Wed, 12/21/2011 - 20:05 | Link to Comment Alex Kintner
Alex Kintner's picture

 Q: If you owed $15 Trillion in debt and could force inflation to make that worth 15 cents, what would you do?
 
 A: QE until there were no electrons left on the planet.

Wed, 12/21/2011 - 22:52 | Link to Comment indygo55
indygo55's picture

What would that do for gold and silver?

Wed, 12/21/2011 - 20:05 | Link to Comment Yen Cross
Yen Cross's picture

 The trade is upon us.   Spank me %0/%0.

Wed, 12/21/2011 - 23:07 | Link to Comment f16hoser
f16hoser's picture

Welcome to the US Ameribanna.

Thu, 12/22/2011 - 01:12 | Link to Comment Bill Shockley
Bill Shockley's picture

I am surprised there aren't more posts on this.

Trench warefare guess.

Gold will rise in price if market demand increases or market supply decreases in physical terms and further rise, if gold commands a higher fiat interest than bonds/fiat denominated in currency vs. spot gold price in fiat given an equal lending period.

No one wants gold/gld, fiat is way easier to use, digital is easier still, but you know that.

If the gold price is falling but the GOFO price is rising continue to buy. I learned that yesterday.

   bill

While the world's  reserve currency isn't stable, the EURO is at least  social so in the long run it is a better bet.

The Euro is more democratic and therefore stands a better chance for survival. The Euro public is better educated and the phsical plant is in better shape. There are fewer guns, better transport and a common history. Where hell could break loose is in the USA unless we change our ways.

   b

 

Thu, 12/22/2011 - 01:23 | Link to Comment rosiescenario
rosiescenario's picture

....and they were in containers marked "fireworks".....and they were from Germany.

This is one interesting article.....

Thu, 12/22/2011 - 01:52 | Link to Comment steveo
steveo's picture

I still think this is the best Christmas Gift I have ever received (even if I had to buy it).  

 Celestron C8 SGT XLT

Visitors to my site kliking ads have helped pay for 7% of this fine beast, and I appreciate that, since with accessories I was $1200 over budget, ouch.    Consider stopping by and viewing some scope pics, etc.   I actually do stock charts too!

A fantastically good telescope, able to hook up to a camera, and also able to hookup to a computer and be controlled by the computer ...."go to Orion Nebula" and it takes you right there.    It has its own GPS so it has a pretty good idea where it is in the world, then you just point it at any three bright sky objects, and it then knows automatically where everything is Exactly.    Pick any 3 bright objects and you don't even have to tell it what those objects are.

Now that is cool!

 

The Scope is only about 60 lbs wet (lets hope it doesn't get wet), but is a beast at gathering light.   These are actual pictures.   

C'mon how about a little Christmas present for steveo?    Thanks and have a Happy Holiday season.  I will probably be pretty scarce between Christmas and New Years as far as blogging goes.

http://oahutrading.blogspot.com/2011/12/perspective-via-telescope.html

Thu, 12/22/2011 - 05:43 | Link to Comment The Monkey
The Monkey's picture

I woudn't say that it's by any stretch of the imagination, absolute, that endless devaluation into the abyss in the cards. The prolific number of articles such as this, speak for themselves. Watch voter sentiment in this electoral cycle. Bailouts and massive open market purchases are looking increasingly long-in-the-tooth, politically and practically.

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