* Robust physical demand supports gold prices
* COMING UP: Federal Reserve’s Bernanke to speak at 1230 GMT
LONDON, Oct 25 (Reuters) – Gold rose more than one percent on Monday and palladium hit its highest in nearly a decade, as the dollar slumped after weekend comments at the G20 meeting and investors awaited a speech by the Federal Reserve Chairman. Read more »
In an interview, Brad Watson, political reporter for WFAA-TV (Channel 8), asked Broden about a tea party event last year in Fort Worth in which he described the nation’s government as tyrannical.
“We have a constitutional remedy,” Broden said then. “And the Framers say if that don’t work, revolution.”
Um, no, dummy, that’s not what the Framers said. Why is it that these so-called Tea Party candidates who profess to be constitutionalists actually know very little about the US Constitution?
Even worse, why do they dislike it so? They want eliminate most of the amendments, the ones don’t suit them. Does the constitution evolve as a breathing living document or should we stick to the original document as Tea Party candidates advocate? The truth is actually found in the Constitution itself as a structure (amendments) was established from the outset to add amendments forever. We currently have 27 and counting for rights not thought of, as they discussed, by the Framers.
There are some Tea Party candidates, such as Art Robinson of Oregon, who would like to replace US Constitution with the Bible.
[S.F. - Untitled via Flickr Pool/RChin]
From 24/7 Wall St.:
From BusinessInsider:
A little reality about the job situation in this country is in order. The unemployment rate reported by the Bureau of Labor Statistics and parroted by the mainstream media is currently 9.6%. Once you stop counting people who have given up looking for jobs and “left the workforce”, discouraged workers, marginally attached workers and workers forced to work part-time, you magically get a 9.6% rate. Using the method of measuring unemployment used during the Great Depression and reproduced by www.shadowstats.com, the real unemployment rate is a depression-like 22.5%. The peak unemployment rate during the Great Depression was 25%. There is no doubt that we are in the midst of 2nd Great Depression, but where are the bread lines and the lines of unemployed winding around the corner? No need. This is the electronic Great Depression – iDepression 2.0. Your 99 weeks of unemployment and food stamps are direct deposited into your bank account so that you don’t have to leave the comfort of your McMansion that you haven’t made a mortgage payment on in the last 14 months.
There were no credit cards in 1933. Without a job or a house, you needed to move to where there might be a job. Hence, the mass migration from the Midwest to California – ala The Grapes of Wrath. Today, a neighbor in a matching McMansion down the street, with the perfectly manicured lawn, could be unemployed for three years and no one would ever know. They could sustain themselves on unemployment payments, food stamps, and credit cards. Welcome to the iDepression 2.0.
Dude, Where’s My Job?
Every politician in the U.S. is running for election on a platform of “creating” new good paying jobs for Americans. Only one problem, politicians don’t create jobs. Businesses create jobs. When politicians and the Federal Reserve get involved in the job market, bad things happen. The excessively low interest rates put in place by the Federal Reserve created a housing bubble that led to the “creation” of 1 million new construction jobs between 2002 and 2006. Of course, the bubble burst has led to the loss of 2 million construction jobs since 2007. What the myopic pundits on CNBC don’t realize, because they aren’t programmed to think, is that the Greenspan Housing Bubble “created” millions of other jobs that had no chance of being sustained. The number of realtors grew from 750,000 in 2000 to 1.3 million in 2006. We needed hundreds of thousands of new mortgage brokers and appraisers to falsify documents and not conduct proper due diligence. Wall Street needed to hire thousands of new MBA shysters to create fraudulent packages of toxic mortgages and the rating agencies needed to hire thousands of Burger King level thinkers to stamp AAA on the packages of toxic mortgages. These were just the direct jobs created by Easy Al. Home Depot, Lowes and a myriad of other home retailers built thousands of stores to service the needs of all these new “homeowners” and hired hundreds of thousands of clerks, installers, and cashiers. Once the delusion really got going, the “equity” from the homes generated jobs at car dealers, restaurants, cosmetic surgery centers, cruise lines, and yacht retailers.
Barry Ritholtz described how the Federal Reserve provoked housing bubble further warped an already unbalanced American job market:
Job creation has taken place across a wide swath of industries – much more than just residential construction. Sure, developers, builders, and subcontractors saw job growth explode. But it was far more than that. From real estate agents to mortgage brokers, from designers to contractors, plus the many employees of stores like Home Depot (HD) and Lowes (LOW), the Real Estate industrial complex was responsible for a disproportionate percentage of new job creation. From 2001, to the housing peak in 2005, the total number of Realtors, as a percentage of the Total Labor Force, gained nearly 50%.
The reality is that Greenspan, Bernanke, and the rest of the Federal Reserve Governors “created” millions of jobs that were not sustainable. Their policies distorted an already tenuous economic model, dependent upon consumer spending, no savings, and delusions of home wealth. The chart below paints the picture of sorrow. The key points are:
| Type of Jobs | 2007 | Today | Change | % Change |
| Manufacturing | 13,879 | 11,670 | -2,209 | -15.9% |
| Construction | 7,630 | 5,604 | -2,026 | -26.6% |
| Mining & Logging | 724 | 745 | 21 | 2.9% |
| TOTAL GOODS PRODUCING | 22,233 | 18,019 | -4,214 | -19.0% |
| Trade & Transportation | 26,630 | 24,785 | -1,845 | -6.9% |
| Education & Health Services | 18,322 | 19,611 | 1,289 | 7.0% |
| Professional & Business Services | 17,942 | 16,734 | -1,208 | -6.7% |
| Government | 22,218 | 22,231 | 13 | 0.1% |
| Financial Services | 8,301 | 7,577 | -724 | -8.7% |
| Leisure & Hospitality | 13,427 | 13,169 | -258 | -1.9% |
| Information Services | 3,032 | 2,711 | -321 | -10.6% |
| Other Services | 5,494 | 5,364 | -130 | -2.4% |
| TOTAL SERVICES | 115,366 | 112,182 | -3,184 | -2.8% |
| ALL JOBS | 137,599 | 130,201 | -7,398 | -5.4% |
| U.S. Population | 299,398 | 310,233 | 10,835 | 3.6% |
| % of Population Employed | 46.0% | 42.0% |
When I hear Obama and his minions blather on about the jobs we have added in the last six months, I want to break something. The truth is that the country should still have 64.4% of the working age population employed today as we did 10 years ago. That means we should have 153.5 million employed Americans today. Instead, we have 130.2 million employed Americans. That is a 23.3 million job deficit and the Obama administration crows when we add 50,000 new jobs in a month. Welcome to iDepression 2.0.
No Way Out
The United States of America is a hollowed out shell of the great industrial machine that dominated the world after World War II. The BLS data unequivocally proves this is so. The chart below compares American jobs in 1970 versus today. The storyline about good paying manufacturing jobs being shipped overseas is absolutely true. The population of the United States in 1970 was 203 million. Today, the population of 310 million is 53% higher. During this same time frame manufacturing jobs have declined from 17.8 million to 11.7 million, a 34% decrease. The corporate oligarchs that run this country will tell you this is due to efficiency. The truth is that these jobs were shipped to China in order to enrich the oligarch CEOs and their MBA efficiency “experts”. The key disturbing facts from this data are as follows:
| Type of Jobs | 1970 | % of Total | Today | % of Total |
| Manufacturing | 17,848 | 25.1% | 11,670 | 9.0% |
| Construction | 3,654 | 5.1% | 5,604 | 4.3% |
| Mining & Logging | 677 | 1.0% | 745 | 0.6% |
| TOTAL GOODS PRODUCING | 22,179 | 31.2% | 18,019 | 13.8% |
| Trade & Transportation | 14,144 | 19.9% | 24,785 | 19.0% |
| Education & Health Services | 4,577 | 6.4% | 19,611 | 15.1% |
| Professional & Business Services | 5,267 | 7.4% | 16,734 | 12.9% |
| Government | 12,687 | 17.9% | 22,231 | 17.1% |
| Financial Services | 3,532 | 5.0% | 7,577 | 5.8% |
| Leisure & Hospitality | 4,789 | 6.7% | 13,169 | 10.1% |
| Information Services | 2,041 | 2.9% | 2,711 | 2.1% |
| Other Services | 1,789 | 2.5% | 5,364 | 4.1% |
| TOTAL SERVICES | 48,826 | 68.8% | 112,182 | 86.2% |
| ALL JOBS | 71,005 | 100.0% | 130,201 | 100.0% |
The politicians attempting to buy your vote today are promising new good jobs. One side is going to impose 100% tariffs on all Chinese crap coming into the country. This will revive domestic manufacturing. Another side is going to create millions of “green” jobs. Imagine all the solar panel jobs coming our way. Someone else is going to rebuild the infrastructure of the country, generating millions of made in America jobs. Too bad there are only 7 million people in the whole country that have a construction background. The Federal Reserve is going to print our way to millions of new jobs by reducing the value of the dollar, again reviving our dormant manufacturing sector. I can see Bethlehem, PA firing up the steel mills that have been dead for 20 years and closing down their casinos. Maybe if we hire some more government bureaucrats to administer the implementation of Obamacare and the financial regulations that are eliminating free checking accounts, the economy will miraculously revive. Paper pushers don’t morph into construction workers. Criminal Wall Street MBAs don’t become petroleum engineers. Unemployed waitresses in Riverside, California aren’t moving to Washington DC to get a great job at Ruby Tuesdays.
The delusions continue. Unless American union workers are willing to work for $7 per hour with no benefits, the manufacturing jobs are not coming back from China. The corporate oligarchs and their bought off cronies in Congress sold the country down the river over the last 40 years. Mega-Corporation profits are at record levels as goods are produced by slave labor in the Far East at 80% lower costs than they could be produced in the U.S. With 86% of the U.S. workforce in the service industry, introducing tariffs on imported goods and devaluing the dollar will further put the squeeze on the American middle class who already have been systematically screwed by the ruling elite over the last 40 years. Our society took 40 years to dig this hole. It is now so deep, there is no way out. But, look at the bright side. At least we don’t have to watch bread lines stretching down the block when we are watching our 52 inch HDTV, holed up in our 5,000 sq ft McMansions, ignoring the monthly mortgage payment bill, and waiting for our unemployment funds to be direct deposited into our bank accounts. I get all teary thinking about it. This is the iDepression 2.0.
The real people of this country who have worked and saved and done the right things have been beaten down. It is time to stand up to those in power and take this country back. We need the moral backbone of Ma Joad at the end of The Grapes of Wrath:
I ain’t never gonna be scared no more. I was, though. For a while it looked as though we was beat. Good and beat. Looked like we didn’t have nobody in the whole wide world but enemies. Like nobody was friendly no more. Made me feel kinda bad and scared too, like we was lost and nobody cared…. Rich fellas come up and they die, and their kids ain’t no good and they die out, but we keep on coming. We’re the people that live. They can’t wipe us out, they can’t lick us. We’ll go on forever, Pa, cos we’re the people.
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21 October 2010, 9:24 a.m. By Daniela Cambone Of Kitco News http://www.kitco.com/ |
| (Kitco News) -Gold’s rally isn’t just based on a weaker U.S. dollar but is being driven by the fact that every nation in the world is looking to have its currency devalued, said Dennis Gartman, editor of the Gartman Letter.
“I find it amusing that people are telling me gold is going up because the dollar is weak when gold is going up in dollar terms, gold is going up in euro terms, gold is going up in sterling terms and the Japanese would love to see gold go up in Japanese yen terms. Gold is even going up in Chinese renminbi terms, so there is something here besides a knee-jerk response by a weak dollar,” he said. The real story said Gartman is that people everywhere are devaluing their own currencies. “Whether it is Americans disdaining dollars or Europeans disdaining the euro – it is a rush by nations almost everywhere to devalue their own currency ostensibly to pick up exports trade which historically that doesn’t prove to be very true and if it does prove to be true – it is with a long lag.” Gartman said he finds the tactic of countries devaluing their currencies to be poor economics and poor politics. “The government here in the US is clearly fostering if not sponsoring a weak dollar again to pick up export trade – it will probably prove to be a fallacy.” A speaker at the upcoming New Orleans Investment Conference, Gartman said that he will be urging gold bugs to have a little caution since gold has become, ”a bit sporty on the upside.” He said that gold might well be modestly lower next month. “The market has become a bit overbought in the short run and gold needs a correction,” he said. “A lot of the late buyers need to be taken out and the market will get a good deal healthier I think a year from now,” Gartman told Kitco News. Looking two years down the line, Gartman said gold could be dramatically higher, simply because that has been the trend for the last six years. “In the last two months we have seen each of the governments of the G7 doing what they can to devalue their own currency. That trend is likely to accelerate but I think a year from now, gold will be at higher prices then it is now,” he said. Gartman added that he could also imagine a hundred dollar break-in price sometime in the next several weeks. A Republican Win – Bad for Gold Gartman does not expect the upcoming U.S. mid-term elections to have much impact on gold, other than to keep people out of the markets on November 2, he said. “If it has any effect it might be a reason for gold to sell-off because clearly the supposedly more fiscally responsible Republicans, will almost certainly win the House and may well win the Senate,” said Gartman. A Republican win would mean more spending cuts next year, which would be detrimental to gold, Gartman said. |
Geithner was asked in a question and answer forum, “Are you concerned with all of the money being printed over the last couple of years? Are we on our way to debasing the value of the dollar? Geithner surprised his audience with a passionate defense of the US-dollar. “Not going to happen in this country. It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity and competitiveness,” he said.
“It is not a viable feasible strategy and we will not engage in it. It is very important that people have confidence in our capacity to meet our long-term fiscal obligations, to make sure the Federal Reserve does its job of keeping inflation low and safe over time. And we recognize that the US plays a particularly important special role in the international financial system, because the US-dollar serves as the principal reserve asset of the global financial system. So we’re going to work very hard to make sure that we preserve confidence in the strong dollar,” Geithner declared.
Yet just a few days earlier, during a much-anticipated speech on October 15th, Fed chief Ben “Bubbles” Bernanke broadly hinted that he favored an early resumption of “quantitative easing” (QE-2), knocking the US-dollar into a tailspin. “Inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Fed’s dual mandate in the longer run. There would appear, all things being equal, to be a case for further action,” Bernanke declared.
Bernanke took the highly unusual step of making it clear that the Fed’s policy going forward would be to raise the rate of inflation to 2% by means of massive money printing. Bernanke tried to brainwash the American public into believing that QE-2 will significantly bring down the jobless rate. Bernanke’s support for QE-2 helped the Dow Jones Industrials index to soar above 11,100, despite further losses in US-payrolls, and a jump in the under-employment (U-6) jobless rate to 17.1%.
Bernanke knew that simply hinting at QE-2 would spark a further sell-off of US-dollars. After Bernanke spoke, the Australian dollar reached parity against the US-dollar for the first time since it was freely floated in 1983. The US$ also fell to parity with the Canadian dollar, and hit new all-time lows against the Swiss franc, and a 15-year low against Japan’s yen. Brazil’s real, Chile’s peso, the Korean won, and the Indian rupee rose versus the US-dollar. Gold hit a new record high, and commodities such as crude oil, copper, corn, cotton, cattle, soybeans, platinum, palladium, rubber, and silver all continued their upward spiral.
After Geithner’s remarks, the Euro quickly found resistance at $1.400, and began to sink to $1.3935 within a few minutes. The Aussie dollar dropped 0.80-cents to 98.50-cents, before getting blasted again, a few hours later, after China’s central bank shocked the markets, by lifting its one-year loan rate a quarter-point to 5.56%, its first rate hike in 3-years, knocking industrial commodities lower. The Aussie plummeted towards 96.50-cents a few hours later, before regaining its footing. The Euro’s slide came to a halt at $1.3700, where sidelined buyers emerged.
However, 24-hours later, the impact of Geithner’s remarks and China’s surprise rate hike, had already dissipated into thin air. The Aussie dollar, – a symbol of risk taking, – rebounded strongly to 98.75-cents, and the Euro recovered to $1.3950. The US-dollar skidded to 81-yen, despite threats by the Bank of Japan a few hours earlier to expand its own version of QE-3, beyond the 5-trillion yen of JGB buying pledged earlier. Once again, traders resumed their betting on “Bubbles” Bernanke, and a massive tidal wave of QE-2, starting after Nov 3rd, that would trump the efforts of other central banks to prevent the US-dollar’s downfall.
A few hours later, Geithner stepped-up his verbal rhetoric, by telling the Wall Street Journal, on October 20th, there’s no need for the US-dollar to sink further against the Euro and the yen, saying these currencies are “roughly in alignment” now. He emphasized that the US-Treasury isn’t trying to devalue the US-dollar, echoing comments he made in Palo Alto, California. Geithner appeared to offer a secret gentleman’s agreement with Beijing, to stop the currency war, if the pace of the Chinese yuan’s appreciation against the US-dollar since September is sustained, to correct its undervaluation. “If China knew that if it moved more rapidly, other emerging markets would move with them, it would be easier for them to move.”
Traders can expect greater volatility and turbulence in exchange rates, with the Group-of-20 nations moving towards the brink of a currency and trade war that is being driven by high unemployment in the United States. Faced with slumping domestic demand, the US-Treasury is trying to boost US-exports abroad, by cheapening the value of the US-dollar in relation to other currencies. President Barack Obama is under heavy pressure from leading Democrats, to declare China a currency manipulator, and to agree to stiff tariffs against Chinese imports.
The Fed has engineered the devaluation of the US-dollar, by issuing a steady drumbeat of threats to unleash QE-2, upon the world money markets. Bond dealers reckon the Fed could print a minimum of $500-billion in the months ahead, or it might decide to monetize the entire US-budget deficit for this fiscal year, projected at $1.2-trillion. Also greasing the skids under the US-dollar has been the steady slide of US Treasury yields compared to German bund yields.
In early September, the US Treasury’s 5-year note yielded �basis points more than German 5-year yields. Today, the US-Treasury’s 5-year note yields -53-bps less. The US-dollar’s allure as a “safe haven” currency has also crumbled, as tensions surrounding the Greek bond market continue to subside. Credit default swap (CDS’s) rates, measuring the odds that Athens would default on its debts, have dropped in half over the past four-months, to around 650-basis points today.
The US Treasury has sought to gain extra leverage from the dollar’s slide, by seeking to corral the support of other G-20 central bankers and finance ministers, behind its drive to strong-arm China into more rapidly and sharply rising yuan. With the dollar down 12% against the Japanese yen since mid-June, compared with less than 3% versus the Chinese yuan, sparks began fly. Tokyo denounced Beijing for bidding up the yen by increasing its purchases of Japanese government notes.
Since Beijing scrapped a 23-month-old peg to the dollar on June 19th, and said it would let the yuan resume a managed “dirty” float, the yuan has appreciated +2.8% against the US-dollar, but weakened 10% against the Euro. “It is much worse against the Euro than the US-dollar – this is not a good situation. It contributes to global imbalances. We want China to assume its responsibilities as a global player,” said Euro zone finance chief Jean-Claude Juncker.
US-lawmakers and President Obama have seized upon America’s widening trade deficit, which reached -$49.7-billion in June 2010, to take aim against the Chinese yuan. Over the last 12-months, the US-trade deficit with China reached $257-billion, and is running 21% above the pace from a year earlier. The deficit with China as a share of America’s balance of payments is now over 40%, compared to just 20% in 2001. Year-to-date imports from China are $229-billion, while exports are only $55.8-billion, leaving the ratio of imports to exports at 4.9. The average for all nations’ imports-to-exports with the United States is a ratio of 1.6.
Beijing intervenes regularly in its foreign exchange market to rig the value of the yuan, and it’s acquired a massive $2.65-trillion in FX reserves, while keeping the Chinese yuan undervalued by 40% against the US-dollar, on a trade weighted basis. Democrats and Republicans in the US-Congress aren’t willing to wait for Beijing to revalue the yuan at a snail’s pace over the next several years. In Hong Kong, the 12-month yuan forward contract is trading at 6.4425 /dollar indicating that traders figure that Beijing would only allow the yuan to rise by a paltry +3.2% rise against the dollar over the next 12-months.
Instead, US-lawmakers aim to level the playing filed in one fell swoop. On Sept 29th, the US-House passed legislation by an overwhelming margin, 348-79, to allow the Commerce department to apply tariffs on Chinese goods entering the United States. In the past, the Senate has pushed for tariffs of 25% on Chinese imports. “There is no question that China manipulates its currency in order to subsidize Chinese exports,” said Republican Senator Richard Shelby of Alabama. “The only question is: Why is the administration protecting China by refusing to designate it as a currency manipulator?” he asked.
On October 16th, Treasury chief Geithner backed away from a showdown with Beijing over the value of the yuan, by delaying a much-anticipated decision on whether to label China as a currency manipulator until after the Group-of-20 summit on November 11th. “Since September 2, 2010, the pace of the yuan’s appreciation has accelerated to a rate of more than 1% per month. If sustained over time, this would correct a significantly undervalued currency,” the Treasury said.
Geithner said on October 18th, the delay in the currency report was “an acknowledgment of the faster pace of the yuan’s appreciation and we’d like to see that sustained. What we know now is that it’s significantly undervalued, which I think they acknowledge and it’s better for them, and of course, very important for us, that it move. And I think it’s going to continue to move,” Geithner said.
Bank of England Mervyn King warned that the prospect of a trade war over global imbalances could spark a 1930’s-style economic collapse. “The need to act in the collective interest has yet to be recognized, and, unless it is, it will be only a matter of time before one or more countries resort to trade protectionism as the only domestic instrument to support a necessary rebalancing. That could, as it did in the 1930’s, lead to a disastrous collapse in activity around the world. Every country would suffer ruinous consequences — including our own,” King warned.
Chinese – Indian Central banks fear Commodity Inflation
A stronger yuan is in China’s best interest, since it can be utilized to shield the world’s biggest buyer of commodities from the sting of sharply higher import prices. Since Beijing un-hinged the tightly pegged US$-yuan peg, and the Fed began sending signals about unleashing of QE-2, the Continuous Commodity Index (CCI) – an equally weighted index of 17 different commodity futures, has rallied by 23% to its highest level in two-years. Coffee, cotton, corn, cattle, gold, silver, platinum, soybeans, and wheat have been the stellar performers, with crude oil lagging behind. Other key industrial commodities not included in the index which have skyrocketed are tin, rubber, nickel, and palladium.
Efforts by Fed to weaken the US-dollar by threatening to unleash QE-2 have led to sharply higher commodity prices, and is pushing-up China’s inflation rate to +3.5%. There’s also bubbles brewing in Chinese property prices and renewed interest in Shanghai red-chips. Against this backdrop, the Fed and the US-Treasury have exerted considerable pressure on Beijing to allow the yuan to rise. The People’s Bank of China (PBoC) finds it difficult to lift interest rates to combat inflation, because a widening in the Chinese yield spread over US Treasuries would only suck in more “hot-money” into the Chinese yuan.
But on October 19th, the PBoC surprised the markets with its first interest rate hike in three years, taking one-year lending rates 0.25% higher to 5.56-percent. The rate hike follow on the heels of the PBoC’s decision to lift reserve requirements by half-point to 17.5% at six Chinese banks last week, draining 200-billion yuan out of the Shanghai money markets. Commodity traders are beginning to wonder if Beijing has just started to roll-out a longer-term tightening campaign.
The Reserve Bank of India (RBI) has also been forced to tighten its monetary policy to fend off commodity inspired inflation, by lifting its repo rate on five occasions this year to 6-percent. India’s wholesale inflation rate is +8.5% higher than a year ago, and is far above the RBI’s perceived tolerance level of around 5%, keeping the inflation adjusted interest rate stuck in negative territory. India’s economy is on track to grow at 8.5% this year, lagging only China, so the RBI could be forced to hike its repo rate several more times, if commodities continue to spiral higher under the magic carpet ride of the Bernanke’s QE-2.
Soaring Copper, QE-2, Rising Interest rates Lift Chile’s Peso
Chile is among a number of emerging economies, including Brazil, India, Thailand, Korea, and South Africa, whose currencies have risen sharply against the Chinese yuan and US-dollar. They’re rising from an influx of foreign capital seeking higher returns than are available in the England, Japan, and the US, where interest rates are hovering near zero-percent. Capital is flooding into emerging markets and could lead to excessive exchange-rate moves, asset bubbles and financial instability, warned IMF chief Dominique Strauss-Kahn on October 18th.
Many of these emerging countries are intervening repeatedly in the currency markets to hold down the value of their currency against the US-dollar, and by default –the Chinese yuan. “Near-zero interest rates and rapid monetary expansion are geared at stimulating domestic demand but also tend to produce a weakening of their currencies,” warned Brazilian Finance Minister Guido Mantega on October 9th. “As a result, emerging countries will continue to build up reserves in foreign currency to avoid volatility and appreciation.”
Traders are pouring vast sums of capital into the emerging stock markets, forcing-up the exchange rate of emerging currencies and inflating asset bubbles. The MSCI Emerging Markets Index has soared +13% since the start of September. The US-dollar has tumbled -14% against the Chilean peso since the beginning of July, due to fears of QE-2. Chile’s peso is also gaining support from soaring copper prices, which reached a 2-year high of $8,400 /ton in London. Chile posted economic growth of +6.5% in the second quarter, helped by inflated copper prices, which are linked to a staggering 40% of the country’s total economic output.
Banco-de-Chile chief Jose De Gregorio is utilizing the direction of copper as a real-time indicator to gauge the forward momentum of the local economy. In sync with higher copper prices, Chile’s central bank has guided its overnight loan rate higher, by 225-basis points to 2.75% last week. In turn, the steady increase in Chile’s interest rates has widened the gap with US-Treasuries, and has attracted foreign capital, – putting upward pressure on the Chilean peso.
Chile’s finance chief Felipe Larrain says, “Both China and US are at fault in the currency war. Although the currency tension seems to be a dispute just between Washington and Beijing, its implications go well beyond the two countries. If exchange rate variability between the yuan and the US-dollar is very little, the US-currency will likely depreciate against currencies of emerging markets. Developed but fast-growing economies, like Korea and Australia, in turn, will also face great appreciation pressure on their currencies,” he predicted.
Brazil Locked in Tough fight with Currency traders
Brazil’s ministry of finance (MoF) is locked in a bitter struggle with traders over the value of its currency – the Real, – in a battle that requires unorthodox techniques. The MoF is desperately trying to halt the appreciation of the real, which has more than doubled in value against the US-dollar since President Lula da Silva took office in 2003. It’s now a darling of foreign investors. Yet what was once seen as a blessing has become a curse. From January until August, Brazil’s trade surplus was whittled down to $11.6-billion, or -41% less than in the same period a year earlier. Finance chief Guido Mantega warned he’ll take whatever measures are necessary to keep the real from further eroding Brazil’s trade surplus.
The Bank of Brazil has resorted to multiple interventions in the currency market to prevent the real from climbing higher. Brazil’s foreign exchange stash now exceeds $250-billion, with $165-billion parked in US-Treasuries. However, the combination of Brazil’s robust economy and the world’s highest interest rate at 10.75%, has made the real an irresistible target for foreign traders, at a time when Japanese and US bonds are saturated with excess liquidity and ultra-low yields.
Brazil has one of the most advanced industrial sectors in Latin America, accounting for roughly one-third of the GDP. It’s also a major supplier of commodities and natural resources, with significant operations in iron-ore, tin, sugarcane, coffee, tropical fruits, orange juice, corn, cotton, cocoa, tobacco, and forest products. Brazil has the world’s largest commercial cattle herd, and it’s the world’s #2 grower of soybeans and #1 exporter of ethanol, which are all soaring thanks to QE-2.
Brazil should begin to reap bigger trade surpluses in the months ahead, as the latest upward thrust in global commodity prices filters into its economy. Currency dealers are tracking commodity prices, lifting the real briefly above 60-US-cents last week. Finance chief Mantega says Brazil is engaged in a “currency war” with Bernanke’s Fed, and has “a lot of ammunition” such as boosting taxes on foreign investment in Brazilian fixed income. Mantega criticized the Fed for “considering more quantitative easing. It won’t reactivate the US-economy, but it will weaken the US-dollar.”
On October 18th, Brazil hiked taxes on foreign investment in fixed-income bonds to 6%, and also closed a loophole that allows speculators to avoid the tax on margin deposits for transactions in futures markets. The higher taxes will only affect new flows of money into the bond market, not deposits already in Brazil. “This currency war needs to be deactivated,” Mantega said.
Beijing takes aim at Shanghai Gold
China’s central bank (PBoC) surprised traders on October 19th, with its first hike in bank deposit rates in three years, reflecting its concern about rising asset prices and stubbornly high inflation. The PBoC guided 1-year bank deposit rates higher by 25-basis points, to 2.50%, and triggered a 3% drop in the Shanghai gold market. Once a consensus has been forged in Beijing to raise or cut rates, past experience shows that the PBoC moves in a series of adjustments.
To date, the PBoC has relied on slowing down bank lending and lifting banks’ reserve requirements to keep the growth of the M2 money supply from boiling over. Still, China’s Treasury yields rates are too low for an economy that’s growing at a +10% clip. The real rate of interest on China’s Treasury notes is buried in negative territory – yielding less than the official 3.6% rate of inflation. Negative interest rates are whetting the appetite of Chinese traders in gold, silver, and base metals. The Shanghai stock index, a laggard this year, has jumped +16% in the past nine trading days, led by banks and commodity related companies.
The PBoC’s rate hiked jolted the yield on China’s 5-year T-note out of its summer slumber, lifting it upwards by 30-basis points to as high as 3.05% on October 19th. In a knee-jerk reaction, Shanghai gold fell 3% to as low as 8,850-yuan /oz, where an upward sloping trend-line resides. Buyers emerged from the sidelines, on ideas that negative interest rates in China would continue to fuel gold’s historic rally.
Li Daokui, an adviser to the People’s Bank of China, said on October 19th, “The interest rate rise will make people feel safe and prevent them from taking out their money from bank deposits to invest in stocks or property market.” However, gold traders and speculators in Shanghai red-chips disagree. The amount of cash sitting in China’s bank deposits increased by 1-trillion yuan ($156-billion) in September, to 30-trillion yuan, and could lend plenty of firepower for the Shanghai gold market.
However, on October 20th, China’s central bank continued to exert upward pressure on short-term Treasury yields, by draining 145-billion yuan ($21.8-billion) from the Shanghai money markets through 91-day reverse repos. The PBOC also mopped-up 50-billion yuan by selling one-year T-bills.
However, there’s other channels that can keep the gold market buoyant. The Value Gold ETF is expected to be launched on the Hong Kong Stock Exchange, in early November, with the underlying physical gold held at Hong Kong’s Precious Metals Depository. The Gold ETF could attract a whole new wave of wealthy investors to the yellow metal, since the Hong Kong Monetary Authority pegs its overnight loan rate at a miniscule 0.50%, in order to keep the HK-dollar fixed to the US$.
Is Mr Geithner going to make good on his vow to defend the US-dollar? He’ll need to convince the radical inflationists at the Bernanke Fed to mend their foolish ways, and follow the blueprints of the European Central Bank (ECB). Having bought 16.5-billion Euros of Greek, Irish, and Portuguese bonds in the second week of May, the ECB’s purchases of bonds slowed to a trickle by early August, winding down its sterilized QE scheme at 63.5-billion Euros. The three-month Euro Libor rate climbed above 1% this week, a signal that the ECB is slowly withdrawing liquidity.
By turning off the currency printing presses, the ECB laid the groundwork for the Euro’s recovery to $1.400 last week. Will Mr Geithner convince the Bernanke Fed to rescue the US-dollar by nixing QE-2? Philadelphia Fed chief Charles Plosser opposes the idea of launching QE-2. “Do we really think that creating another trillion dollars of excess reserves is going to solve our problems?” he asked. “We need to make the right decision for the longer horizon. And if the right decision means we disappoint markets, then that might be short-run painful, but is the right long-run decision,” Plosser said. However, Bernanke’s inflationists out-number the Fed hawks, and the world economy should brace itself for a round of hyper-inflation.
By: David_Knox_Barker
Introducing the Chronicles of Atticus McShrugg: Instead of typical article format, I’ve created a fictional character and will chronicle his interaction with the President of the United States during these trying times of global crisis. Atticus McShrugg, a staff member in the National Security Council (NSC), is making his debut in order to speak into the fast-paced developments in the international political economy and global financial markets.
A brief conversation from the first week of the President’s term is in order to introduce McShrugg. The President was reviewing the roster of the National Security Council staff and saw a name he did not recognize; Atticus McShrugg, Special Assistant to the President, Director for Global Financial Market Stability. McShrugg’s job responsibilities are to include being the NSC liaison regarding matters of global financial market stability with the National Security Agency’s (NSA) Office of Systemic Risk Analysis (OSRA), the CIA, the Department of Defense (DOD), the Federal Reserve, the Treasury, including the Treasury’s Plunge Protection Team (PPT), and the Office of Homeland Security (OHS).
The President picked up the phone and dialed the line of Admiral Al Clark in the Eisenhower Building; Clark serves as Deputy Assistant to the President and Deputy National Security Advisor for International Economic Affairs, National Security Council (NSC). Admiral Clark came to the NSC during the prior administration, after a stint at the National Security Agency (NSA). Read more »
Group of 20 finance chiefs are struggling to agree whether to set targets for their current account imbalances as a way of defusing tension over currencies before it sparks a trade war.
G-20 finance ministers and central bankers began talks in Gyeongju, South Korea, today after weeks of wrangling over whether nations from the U.S. to China are relying on weaker exchange rates to spur growth.
Seeking a solution, U.S. Treasury Secretary Timothy F. Geithner proposed G-20 members pursue policies to reduce trade gaps “below a specified share” of their economies, according to an Oct. 20 letter obtained by Bloomberg News. That suggestion today split the emerging and industrial countries.
“Setting numerical targets would be unrealistic,” said Japanese Finance Minister Yoshihiko Noda, while German Economy Minister Rainer Bruederle rejected a “command economy” approach and Indian Finance Minister Pranab Mukherjee said caps would be hard to quantify. In interviews with Bloomberg Television, Canadian Finance Minister Jim Flaherty said the idea was a “step in the right direction” and Australian Treasurer Wayne Swan called it “constructive.”
Repeating themes he has pushed for the last month, Geithner told his colleagues not to seek “competitive advantage by either weakening their currency or preventing appreciation of an undervalued currency.”
‘Undervalued Currencies’
He urged countries with persistent current account surpluses to “undertake structural, fiscal, and exchange rate policies to boost” domestic demand and those with “significantly undervalued currencies” to allow them to “adjust fully over time.” In return, advanced economies will pare their budget shortfalls, he said.
Geithner suggested to counterparts that current account deficits or surpluses of no more than 4 percent of gross domestic product be the aim, Noda said. The IMF this month estimated China’s surplus will swell to 7.8 percent of GDP in 2015 from 4.7 percent this year. The U.S. wants the Washington- based lender to monitor progress if goals are adopted.
Stocks in Europe fell from a six-month high, bonds gained and the dollar fluctuated. The dollar strengthened to $1.3882 per euro as of 9:43 a.m. in London from $1.3920 in New York yesterday. It was little changed at 81.27 yen from 81.33 yen. The euro bought 112.84 yen from 113.22 yen.
‘Trade Surplus’
The G-20 officials are meeting in a bid to end what Brazilian Finance Minister Guido Mantega calls a “currency war” as next month’s Seoul summit of leaders nears. China’s restraint of the yuan even as it runs a trade surplus and the recent slide of the dollar as the Federal Reserve shifts toward easier monetary policy are in the spotlight.
Nations caught in the middle such as Brazil and South Korea are embracing capital controls or intervening themselves to stay competitive with China and limit inflows of speculative cash from North America and Europe.
This has raised concern from policy makers and investors that the friction will spark a round of devaluations and retaliatory protectionism, derailing an already fragile global economic recovery.
‘Serious Risk’
“If we fail to reach an agreement now and delay it to next time, the global economy will face a serious risk and it will unnerve people,” South Korean President Lee Myung Bak told the meeting. He joked he “may have to stop buses, trains or planes on your way back home” if the officials failed.
Focusing on current account imbalances takes the debate beyond the thorny topic of currencies and allows policy makers to address excess U.S. demand and Chinese savings, according a South Korean official.
Limiting talks to foreign exchange is too inflexible for nations with trade surpluses and would make agreement less likely, the official said. Looking at the current account allows countries to decide on which tools to adopt to reduce them, including exchange rate appreciation, he said.
“It’s fraught with difficulties, but a framework would be an attempt at looking at currency revaluation and cooperation without resorting to a shouting match,” said Kit Juckes, head of foreign exchange research at Societe Generale SA in London.
Draft Statement
The G-20 policy makers are also debating whether to make their first joint comment on currencies since their leaders began meeting in 2008, having previously resisted remarks for fear of alienating China. A draft statement yesterday included a pledge to avoid “competitive undervaluation” of exchange rates. The final text is scheduled for release tomorrow and won’t be finalized until then.
Leaders said as recently as an April 2009 summit in London that they would “refrain from competitive devaluation” of currencies and at June talks in Toronto said exchange rates should avoid excess volatility and be made more flexible in emerging markets.
Setting current account targets still leaves Asian economies under pressure to allow their currencies to gain, said Win Thin, global head of emerging markets strategy at Brown Brothers Harriman & Co. in New York. His estimates on the basis of purchasing power have the yuan, Thai Baht and Philippine Peso undervalued by at least 70 percent.
It may nevertheless provide a way of persuading such nations to revalue in lock-step rather than be wary of acting alone only to lose competitiveness as others hold back, said Juckes.
Yuan Gains Read more »
Let us be very clear about the impact of the coming massive Quantitative Easing (QEII) by the FED, the financial bully of Wall Street. It is the unleashing of a financial nuclear weapon!
The financial media is portraying this process as “a war of survival” between America and the rest of the world. This is a war waged by Wall Street. Its main instrument is a Global Ponzi Scheme.
If the American people is hoodwinked into believing the financial media, which justifies the use of “financial WMDs” against America and the world, the consequences will be catastrophic and the American economy and people will be devastated. Moreover, for the 1% of the financial elites, about half will survive, consolidate their control and form new global alliances. This is already taking place, as highlighted in my recent article. [1]
Read more »
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Global Economic Crisis: Towards a Worldwide Process of Geopolitical Dislocation
by GEAB
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Global Research, October 17, 2010
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GEAB N°48 – 2010-10-16
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In this issue, our team introduces the annual “country risk” update in the light of the crisis. Based on an analysis incorporating eleven criteria this year, this decision-making tool has already demonstrated its relevance in faithfully anticipating developments over these past twelve months. The identification, at the beginning of 2009, of a new phase of the crisis (the phase of global geopolitical dislocation) forced us to take new parameters into account (nine indicators were selected in 2009) to effectively incorporate trends that are reshaping the global system (1). As 2010 draws to a close, LEAP/E2020 now estimates that the world’s various countries are heading for a collective dive at the core of this phase of socio-economic and strategic geopolitical dislocation (2). Thus our studies enabled us to continue presenting the LEAP/E2020 anticipation of “country risk” for the 2010-2014 period (3), by adapting the categories to the crisis’ development, via four groups of countries (4) characterized by the contrasting impacts of this dive in the geopolitical dislocation phase of the global systemic crisis (5). On the other hand, in this GEAB issue, we give our anticipations for the progress of Euro-Russian relations between now and 2014. In our recommendations, we pay particular attention to helping our readers deal with a currency market in global conflict, a fallout anticipated over 18 months ago by our team, as a result of geopolitical dislocation. Moreover, on the occasion of the publication of his book “The Global Crisis: The Path to the World After – France, Europe and the World in the 2010-2020 decade “, Franck Biancheri, Director of LEAP/E2020, and Anticipolis editions, have given us permission to publish his analysis of the process of the ongoing global geopolitical dislocation.
Documented instances of social unrest 2009-2010 – Source: IILS, 09/2010
The G20’s (or IMF’s) now patent failure to secure effective international cooperation to try and remedy the structural weaknesses of the current international monetary system perfectly illustrates LEAP/E2020’s anticipation which in March 2009, before the London G20 meeting, explained that the summit was the only window of opportunity to fundamentally rethink the global monetary system at the heart of the current crisis. In failing to seize this opportunity, we reported that the world would begin to enter the global geopolitical dislocation phase from late 2009. At that time, by way of an introduction to this new phase of the crisis, the world has seen the mid-flight explosion, during the Copenhagen summit, of the whole international process on global warming. Since then, every month brings a stream of public finance crises in one state or another, drastic austerity measures causing increase in social unrest (6), international meetings leading to reports of disagreement, the proliferation of threats between States over trade imbalances, etc., all against a background of a downward spiral into hell of the global system’s central power, namely the United States (7).
Change in labour force participation between the first quarters of 2009 and 2010 (Indonesia, Mexico, Brazil, Germany, France, South Korea, Argentina, Italy, Canada, United Kingdom, Japan and the United States) – Source: IILS, 09/2010
For several months now we have been witnessing the onset of a massive currency world war just like LEAP/E2020 anticipated nearly two years ago and reiterated in its time-frame of the crisis (8). Several weeks hence, the inevitable failure (9) of the FMI/G20 duo to resolve these currency-trade (10) tensions will provide both new evidence while marking a new tipping point of global geopolitical dislocation: every man for himself becoming the rule (11). Two weeks from now, with the announcement of the actual details of a comprehensive plan to reduce spending, the United Kingdom will eventually have to face an unprecedented (12) socio-economic crisis that it has desperately tried to hide for months (13), and it will have to do it alone (since the United States are unable to help it, and it has put itself outside the European financial rescue system). And in three weeks, the United States will concurrently expose an unprecedented political paralysis following the mid-term election (14), whilst the US Federal Reserve will launch a new attempt to rescue the US economy by monetizing a stimulus plan that the federal government is no longer able to launch (15). This attempt – whose size will be less than financial markets expect (because the Fed is now forced, in this case by the holders of US Dollar denominated assets: China, Japan, Europe, oil-producing countries (16)…) but more than enough to lead to a further fall in the dollar and plunge the world monetary system into an even worse conflict – will fail anyway because US society has, de facto, entered a phase of austerity that US leaders, in 2011, will have to recognize must also constrain the country’s fiscal and monetary policy (17). From the world leaders’ side (18), the next four years’ global sequence can be summarized quite simply: last US attempts to “return to the world before the crisis” (stimulating consumption, maintaining deficits, debt monetization) that will all fail (19), last Western attempts to deal with the crisis using “Washington consensus” methods (limiting deficits by reducing social spending, no tax increases on high incomes, privatization of public services, …) which will generate growing socio-political chaos, acceleration of the BRIC countries’ exit from the majority of Western financial and monetary markets (especially the two financial pillars of Wall Street and London) which will increase monetary instability, rising intensity of trade wars (coextensive with currency wars (20)), the coming to power from 2012 of groups of leaders who have decided to try new solutions (21) to exit the social, economic and political consequences of the crisis, taking note of the fact that the “Washington consensus” is dead … because there is no consensus anymore and because Washington is a moribund world power. As for the rest, the keeping the US debt’s Triple-A rating belongs to the same virtual world as the recent declaration by US economic authorities (22) of the end of recession: the growing disconnect between the words of a collapsing system’s key players and the reality perceived by the majority of citizens and socio-economic players is an infallible indication of systemic decline (23). But the financial markets are not mistaken because with the soaring cost of insuring US debt hot on the heels of Ireland and Portugal with a 28% third quarter increase in cost, the United States has become the third country for which the debt markets fear some very unpleasant surprises (24).
Comparative progression of the United States’ deficit (in trillions USD) and the amount of known global reserves held in U.S. Dollars (1999-2009) – Sources: Reuters/IMF/White House OMB, 10/2010
Notes:
(1) From the beginning of 2006, in the GEAB No. 5, LEAP/E2020 indicated that the global systemic crisis would evolve in 4 major phases. “A global systemic crisis develops in a complex process that can be cut into four phases which may overlap: . early 2009, in the GEAB No. 32, LEAP/E2020 identified a fifth phase of the crisis, called global geopolitical dislocation, which begins at the end of 2009, following the G20 failure to launch a credible process of establishing a new international system, particularly in the monetary field. This new phase has been, of course, integrated into the time-frame presented last year in GEAB No. 38. (2) The ability of states to cope with social unrest that will multiply in the coming quarters and years is closely linked to their ability to contain the most traumatic social effects of the crisis; therefore, our team has introduced a tenth indicator correlated to the tax burden of the past twenty years, whilst an eleventh indicator has been added to assess the resilience to a global monetary war. (3) Our team has analyzed indicators for 39 countries in addition to Euroland. (4) These country- risk analyses may be particularly useful for those planning an investment in a given country, intending to settle there or wishing to make an investment in assets linked to that country. (5) We chose to keep 2014 as an overview because we believe that the changes in political leadership occurring in many important countries (China, USA, Russia, France, …) in 2012, and which are the principal potential positive factor looking at the next four years, will have no appreciable impact on these country-risks before 2014, the time that new policies are starting to yield results. (6) France gives a striking example with the growing unpopularity of an executive which fails to prevent social unrest against its reforms and which risks turning into a general strike ( France 24, 14/10/2010). Meanwhile, throughout Europe, there is a marked increase of extremist political forces. Source: Le Point, 20/09/2010(7) All the lights are turning red. The road transport volume has started to decline again ( Los Angeles Times, 13/10/2010). Foreclosures continued to grow last month, whilst the whole legal system on which they rest has now broken down (for the legal reasons mentioned in the GEAB a year ago) upsetting a real estate market on Fed and Federal Government life support even more (CNBC, 14/10/2010; USAToday, 14/10/2010; USAToday, 11/10/2010). Cities are sinking into vey deep deficits (such as their employee retirement funds estimated at over 500 billion USD, CNBC/FT, 12/10/2010) and are obliged to turn to the states to try and extricate themselves (CNBC/NYT, 05/10/2010), while the latter can no longer balance their budgets and are obliged to pay interest rates higher than developing countries (thus, Illinois must now pay more than Mexico to borrow, Bloomberg, 05/10/2010).(8) See the GEAB N°43 particularly.(9) History doesn’t repeat itself. If we pushed so hard (including at the cost of a full page advertisement in the global edition of the Financial Times) for world leaders to seize the opportunity at the G20 in Spring 2009, it was because we were aware that such a set-up would not happen again. Now the US is too weak to continue to steer the global game, no other player is able to take affairs in hand … and therefore, the global financial system looks more and more like the “ drunken boat; in Rimbaud’s poem describing the drift towards unexplored beaches, a perfect description of the world’s course today.(10) As for the negotiations on climate change, a “West” already clearly divided (here between the Dollar, Pound, Yen and Euro), tries to make the emerging countries (the Yuan in particular) pay the cost of adapting a system they invented and which no longer works. And it’s not by ending the game as shown by US efforts to prevent any new Chinese rating agency from operating in the United States that will dissipate this feeling in the BRIC countries. One remembers the performance in Copenhagen. It will pale in comparison to what awaits us at the G20 meeting in Seoul. Besides, the soaring gold price is a very reliable indicator: even the European central banks have stopped their sales. Sources: New York Times, 21/09/2010; Vigile, 29/09/2010; PrisonPlanet/FT, 27/09/2010, Bloomberg, 10/10/2010; ChinaDaily, 27/09/2010(11) The Telegraph summarized it admirably on 11/10/2010 in “Jobless America threatens to sweep us all away.” Sign of the times, Bloomberg on 08/09/2010 announces the opening of a Ruble-Yuan currency exchange in Shanghai to finance Sino-Russian trade.(12) There is a growing fear in the United Kingdom over the country’s social and political situation in the context of “super-austerity” planned by the government due to financial and budget crisis: the loss of nearly a million jobs, social crisis, unrest…. Sources: Independent, 02/10/2010; Telegraph, 13/10/2010; Guardian, 11/09/2010; MarketWatch, 21/09/2010.(13) This was, moreover, the main reason for the “Greek crisis becoming the Euro crisis” in Spring 2010, in particular fed daily by articles in the Financial Times to divert attention from London and the Pound Sterling. See GEAB in the first half of 2010. (14) Recent statements by Steve Schwarzman, head of the financial giant Blackstone, comparing Barack Obama’s willingness to tax financial companies more heavily to Hitler’s invasion of Poland, illustrates the explosive atmosphere that rules at the core of the US elite. Source: NewYorkPost, 14/10/2010(15) Because of the magnitude of existing deficits and political deadlock in Washington. (16) In this regard, our team gives a timely reminder that there is no mystery about the simultaneous rise of different asset classes, like stocks or gold for example: operators are leaving the stock exchanges (as we showed in the last GEAB issue) and selling their financial and monetary assets for gold (or other less dangerous assets) and the Fed (and its partners) are injecting liquidity into the financial markets to prevent a widespread collapse. The only problem, when the music stops: it will be a tragedy for the stock exchanges. Source: CNBC, 08/10/2010(17) The situation is so bad that a reading of the New York Times of 13/10/2010 started to look like a cut and paste of the GEAB a year or two ago … that’s saying something! The article by Michael Powell and Motoko Rich, which describes the “recovery” as merely a continuation of this recession shows the plight of the middle classes across the country in a harsh light, while the very same day Paul Reyes unveils a remarkable collection of photographs showing the ravages of the “Very Great US Depression” as LEAP/E2020 has called it since late 2006.(18) Franck Biancheri offers a detailed presentation, with the two likely main scenarios for 2010-2020, in his book “ The Global Crisis: The Path to the World after;(19) Source: SeekingAlpha, 24/09/2010(20) Singapore’s recent announcement that from now on its currency’s trading band against the U.S. dollar will be wider, is the latest example (each day brings a new one) of increasingly defensive positions taken by individual states. Each one tries to increase its room for maneuver to cope with the unexpected. Incidentally, it is interesting to note that Singapore suffered a 19% third quarter fall in GDP, evidence that the mood in Asia is becoming gloomy. Source: YahooFinances, 14/10/2010; MarketWatch, 13/10/2010(21) For China, one solution will most probably be to inject the country’s huge US Dollar reserves into the economy as already suggested by the new generation of Chinese bankers. This will not help the US Dollar. Source: Dallasnews, 19/09/2010(22) The National Bureau of Economic Research ( NBER is in charge of “holding a Mass” on this subject.(23) As MSNBC aptly described on 06/10/2010, it’s once a month at midnight that America’s great depression is revealed in the supermarkets, when tens of millions of food voucher recipients go and do their shopping. According to the study by the Center for Economic and Policy Research published on 16/09/2010, in effect now one in three Americans can no longer make ends meet (one hundred million people ).(24) Source: CNNMoney, 12/10/2010 |
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Even the most educated people, sometimes misled by mainstream media and the so-called “experts”, fail to identify the root cause of the current economic downturn and tend to confuse the symptom (inflation, unemployment, etc.) for the cause. Other inaccurate triggering factors often blamed are inherent human greed, overpopulation, baby boomers, abandonment of the gold standard, fractional reserve banking, fiat currencies, over-consumption and even technology.
The monetary system has become the global cage of debt-fuelled enslavement we know today through a series of events: invention of usury (lending money at compound interest), establishment of fractional reserve lending, privatisation of the money supply, creation of central banks, abolition of the gold standard and legal enforcement of fiat currencies. Read more »
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