Posts Tagged ‘currency collapse’
Bring it on, Ben!
Saxo Bank joins chorus of voices calling for the end of the Federal Reserve
Originally posted by Tyler Durden, Nov 3, 2010
Following the recent surge in Fed critics, including Gross, Buffett, Grantham, and most other self-respecting economists, Saxo Bank’s John J. Hardy shares the most recent, and very scathing, critique of the Fed, which essentially calls for the end of the US central bank, saying the days of the Fed are now numbered.
SO, BEN, LET’S GET THIS THING OVER WITH AND LET’S TEST HOW THIS MARKET is positioned for what you have to say today. We’re tired of speculating and gaming what you may or may not write in today’s statement and how many billions of dollars you might conjure into existence on a monthly basis for the next year or more.
Bring it on: let’s watch another wave of monetary policy history crash over us as you pull out the hammer and close your lips around another batch of coffin nails – ready to grasp the first nail to drive into the soon sealed coffin of Keynesian economics and then another in the coffin of fractional reserve banking and perhaps another into the coffin of fiat currencies.
Oh, it’s all the same coffin? Fine – it will go quicker that way. Just remember to save a few nails for the millions of coffins of pensions and savings: for all of the responsible people who didn’t join in on the credit bonanza of the last few decades and spent their lives scrimping and saving. Let’s devalue their savings and nuke the US currency rather than go the quicker and more just road of default, shall we?
Extend and pretend is the Fed’s motto, after all. Just watch out for those new crazies on the Hill that are starting to bang on the doors of the Eccles building. Will they break in and cart you off before you’ve finished your final magnum opus – the end of the US dollar and the US economy?
Bring it on, Ben: take us that much nearer to the denouement of 100 years of US Federal Reserve. There won’t be a second hundred years. The final countdown starts now.
Amen
We’re in a Global Currency War… but what does it mean?
by Washington’s Blog
Posted originally at Global Research, October 4, 2010
THERE IS A CURRENCY WAR RANGING WORLD-WIDE. JAPAN, BRAZIL, PERU AND COUNTRIES ALL OVER THE WORLD are trying to beggar thy neighbor (just as happened during the 1930s) and gain a leg up for their exports by cheapening their currencies. If you take a step back, it really is an odd situation. As Joe Weisenthal writes in Business Insider, Sep 30, 2010:
Just think for a moment about the screwy times we live in when central banks are trying to hurt their rivals by buying up their rivals’ bonds –essentially lending them money. Such is the state of things in a world where every country wants to weaken their currencies to boost their own exporters.
And the House has passed legislation saying China is a currency manipulator and has to raise the value of the Yuan. What does it mean? American experts say that the Chinese Yuan is undervalued by 25%, which makes Chinese exports artificially competitive. The U.S. Congress is trying to blame China’s undervalued currency for America’s bad economy and unemployment woes.
But the former U.S. trade representative, Susan Schwab, says that “while there’s a very real problem in terms of China artificially keeping the renminbi low, this isn’t the way to solve anything”. Schwab calls it “a signal-sending exercise during an election season”. She says that the bill won’t really do anything, even if the Senate passes it and it is signed into law. Schwab says it “makes no sense”, won’t solve any problems, will escalate tensions, and will only divert attention from the real trade problems between the U.S. and China.
Indeed, Schwab warns that other countries might decide that this U.S. bill means that its open season for addressing currency manipulation, and that other countries believe that the U.S. is manipulating our currency. She says there could be a “boomerang effect” from the legislation.
(Ironically, an anti-sourcing bill – the kind of legislation which might actually keep jobs in the country – was defeated in the same week that the toothless China bill passed.)
Zachary Karabell notes that China is not to blame for all of America’s economic woes, and China is in the middle of revaluing its currency: “The idea is that there is direct line between China, its currency, its exports of lower-cost goods to the United States, and the erosion of middle-class life and now soaring unemployment. But U.S. manufacturing has been bleeding jobs for decades…”
What’s more, the recent loss of millions of jobs since 2008 has everything to do with the collapse of the construction and housing industries along with the near-death of the Big Three American auto makers than with any competitive challenge from China. China has become a large car market for General Motors, but not for export to the United States: for sale in China. It would take a massive leap unsupported by any fact to lay the demise of the U.S. auto industry at the feet of China, or for that matter hold China responsible for the sub-prime and derivative debacles. Those are the cause of recent job loss.
Furthermore, China has been revaluing its currency, nearly 20% between 2005 and 2008 and now nearly 3% since June when the government resumed that policy having shelved it during the midst of the global financial crisis. It is in the domestic interest of the Chinese government to raise the value of their currency because they are focused on building up on internal, domestic consumption market. They have no wish to be dependent long-term of the vagaries and whims of American consumers, and higher purchasing power for Chinese consumers is the answer. They are not revaluing quickly enough to suit an America stuck in second gear and looking for someone to blame, but revaluing they are.
Martin Wolf points out that the real problem is global weakness in demand, and China is understandably trying to avoid what happened Japan’s ramped-up currency, which led to the Lost Decade.
“We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.” This complaint by Guido Mantega, Brazil’s finance minister, is entirely understandable. In an era of deficient demand, issuers of reserve currencies adopt monetary expansion and non-issuers respond with currency intervention. Those, like Brazil, who are not among the former and prefer not to copy the latter, find their currencies soaring. They fear the results.