Quantum Pranx


Archive for October 6th, 2010

China joyfully bails out EU?

leave a comment »

from The Daily Bell
Posted originally Monday, October 04, 2010

CHINESE PREMIER WEN (left) SAYS GREECE EMERGING FROM CRISIS… Greece is starting to emerge from its severe debt crisis, Chinese Premier Wen Jiabao said on Sunday during a visit to Athens. “It is with joy that we see Greece emerging from the shadow of its debt crisis,” Wen told the Greek parliament. “The financial market has started to stabilise, the budget deficit is coming down, investor confidence is increasing and a growth prospect is emerging on the horizon.” – Reuters

Dominant Social Theme:
As human beings who care so much, we celebrate the resurgence of the Greek economy.

Free-Market Analysis:
Joy! That was the word that caught our eye. Premier Wen sat straight up in bed one morning, teary-eyed. He was overwhelmed with joy … at Greece’s recovery! “China,” he muttered to no one in particular (he really did), “is prepared, hand in hand with the EU, as passengers in the same boat, to strengthen cooperation … to confront the financial crisis.”

Joy! You know, we woke up the other morning, too, with the same emotions surging in our collective breast. We just felt a great love of Greece. It came out of nowhere. Sometimes those emotions just well up and there’s nothing to do but call a press conference … But perhaps we are too cynical. Perhaps Wen is merely an aficionado of the classics and the Greek golden age.

Or perhaps, more than ever (sarcasm off), the old men of the Communist party are in cahoots with the Anglo-American power elite. The sub dominant social theme that the elite wants the West to imbibe seems to be “China – what a great country, but you can’t trust ‘em.” Yet perhaps that’s not the case. The confrontation is only for show. The reality is different.

So in this article we want to explore the issue of how close the Chinese elite is to Western elites. It is a very important issue from our point of view, focused on elite dominant social themes as we are. Over and over throughout history we see elites of various sorts coming to understandings unbeknownst to the populations they lead.

Hm-mm … Say that Anglo-American and Chinese elites had decided that it was in the interest of both sides to do away with the dollar in favor of an IMF-initiated bancor. Say a deal had been struck and while the Anglo-American elite would maintain control of the bancor the Chinese leadership would have a tremendous amount of input. The Chinese elite essentially would agree to become junior partners to the Anglo-American elite.

What would be in it for the Chinese? Well, Chinese leaders are struggling with a good deal of price inflation right now – and also with a good deal of pressure from Western leaders to revalue the yuan at a higher price relative to the dollar. Say that the Chinese are aware that one way to ameliorate inflationary pressure is to purchase foreign real estate, industries, etc. Perhaps at the same time, American leaders would agree to stop pressuring China about a yuan revaluation.

Is it possible that Chinese and Western elites would cooperate closely? More than Korea, more than Japan, the Chinese elite is likely of the same psychological makeup and mindset as its Anglo-American counterpart in our humble view. China is an ancient society and a horribly damaged one. The sociopaths at the top will evidently and obviously do anything to stay there and the divide between those at the top and the average Chinese person seems wide and deep indeed.

Read the rest of this entry »

War has broken out and your savings are at stake

leave a comment »

by Graham Summers
Phoenix Capital Research
Posted originally September 30, 2010

THE FIRST AND MOST IMMEDIATE ITEM WE NEED TO NOTE IS THE BANK OF JAPAN’S (BoJ) CURRENCY INTERVENTION. Prior to this, all currency interventions were generally indirect (the Fed’s QE program) or not generally promoted (the Swiss banks numerous attempts to buy Euros and suppress the Franc). In contrast, the BoJ’s move was not only sudden, it was promoted.

Japan’s government sold yen, pushing the dollar up sharply. “It was Japan’s first foreign exchange market intervention in more than six years,” Finance Minister Yoshihiko Noda said. “The ministry would take decisive steps, including intervention if needed. The intervention was aimed at curbing excessive fluctuations in the foreign exchange market.”

Moreover, Japan stated it would:
1) Intervene more in the future if needed
2) Use the funds from the intervention to provide liquidity to the stock markets

The move, while hinted at previously, was a bit “out of left field” (the BoJ had not intervened since 2004). The Japanese Yen is one of the primary carry trade currencies to borrow in (the US Dollar being the other). So Japan’s move was largely seen to be “pro-risk” resulting in the Nikkei spiking. However, it marks a major turning point in the financial crisis. Going forward, the key issue for the financial markets will be currency interventions. Japan’s move can, in a sense, be seen as an open declaration of war between the BoJ, the Federal Reserve, and other Central Bankers.

Indeed, we can’t leave the European Central Banks out of this. Indeed, the most noted currency intervention prior came from the Swiss Nation Bank which bought Euros by the billions in an attempt to keep the Swiss France/ Euro trade low. And Germany and other European countries want the Euro low to boost their exports.

In plain terms, the currency war has officially begun. Since Japan’s announcement, numerous other countries have begun intervening in the currency markets including Brazil, Colombia, Peru, Russia, South Korea, Serbia, Romania, and Thailand.

In plain terms, WWIII is already being staged in the currency markets. Predicting exactly how this will all play out is impossible, but the clear result is that market volatility will be increasing and we are absolutely guaranteed heading for a Crash.

Read the rest of this entry »

Why Gold Is Rising

leave a comment »

by Gary North
Originally posted October 1, 2010

AROUND THE WORLD, INVESTORS ARE BUYING GOLD. THEY HAVE BEEN DOING THIS FOR NINE CONSECUTIVE YEARS. There was a temporary dip in gold’s price from about $1000 to about $750 in 2008, but the reversal has been substantial, as we all know. This has not just been in the United States. This is not uniquely a phenomenon of the United States dollar. This is an international phenomenon, and it involves the major currencies of the world.

You will sometimes hear that the movement of gold is primarily due to a decline in the value of the dollar. The person who offers this argument is probably suggesting that gold’s price has not been moving up because of fundamental conditions that persist around the world. He is arguing that there is something fundamentally wrong with the dollar. Or maybe he is arguing that the dollar is in a temporary decline, which has raised the price of gold as denominated in dollars.

One of the best ways to assess the logic of an argument that explains the move upward in the price of gold by means of an appeal to a falling dollar is to check the price of gold in several other currencies. If you find that, over several years, the price of gold has moved up in a number of major currencies, then you can conclude that the driving force behind gold is not the Federal Reserve System acting alone. The cause is the policies of other central banks around the world. In other words, if gold moves upward in multiple currencies, investors worldwide have determined that gold is a way to hedge their economic futures against a decline in the purchasing power of their own currencies.

If gold’s move were simply a result of expansionary monetary policies by the Federal Reserve System, then the price of gold ought to be flat in relation to the other currencies. Under these circumstances, we would expect the purchasing power of the dollar in relation to those other currencies to be falling. “See? The other currencies are stable; the problem is the declining value of the United States dollar.”

On the other hand, if the relationship between the dollar and the other currencies is fairly stable, and the price of gold has been rising in those other currencies, then we ought to conclude that the problem is not unique to the dollar, and that the move upward of the price of gold is due to more fundamental causes than the policies of the Federal Reserve System.

Read the rest of this entry »

Written by aurick

06/10/2010 at 11:43 am