H ομάδα ζητά τη δημιουργία ενός νέου διεθνούς συναλλαγματικού συστήματος με φανερό απώτερο στόχο την απεξάρτηση από το δολλάριο.
Στις BRICS ζει το 40% του παγκόσμιου πληθυσμού και το συνολικό ΑΕΠ τους ξεπέρασε πέρυσι το 18% του παγκοσμίου.
Today’s biggest piece of news received a mere two paragraph blurb onReuters, and was thoroughly ignored by the broader media. An announcement appeared shortly after midnight on the website of the People’s Bank of China.***Reuters provides a simple translation and summary of the announcement:
“China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency’s international role. In a statement on its website http://www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily.” To all those who claim that China is perfectly happy with the status quo, in which it is willing to peg the Renmibni to the Dollar in perpetuity, this may come as a rather unpleasant surprise, as it indicates that suddenly China is far more vocal about its intention to convert its currency to reserve status, and in the process make the dollar even more insignificant.International Business Times provides further insight:This is all part of China’s plan for the internationalization of its currency, which may, in the decades to come, threaten the global ‘market share’ of other currencies like the US dollar.
Previously, China also announced that bilateral trades with Russia and Malaysia will begin to be conducted with the yuan and the ruble and ringgit, respectively.
Other moves on the part of China to internationalize its currency include allowing foreign companies to issue yuan-denominated bonds and relaxing rules for foreign financial institutions to access the yuan.
Aside from the efforts of the Chinese government, fundamentals also point to the increasing international popularity of the Chinese currency.
China is already the leading trade partner with Australia and Japan. It’s also the leading or a large trade partner with many of its smaller neighbors. The purpose of having foreign currencies is to conduct foreign trade and investment, so the yuan is expected to become a more attractive currency for China’s trade partners, espeically as the government continues to relax restrictions.The reason for this dramatic move may be found in what Stephen Roach [former chief economist for Morgan Stanley, and now director of Morgan Stanley Asia] wrote a few days ago in Project Syndicate:In early March, China’s National People’s Congress will approve its 12th Five-Year Plan. This Plan is likely to go down in history as one of China’s boldest strategic initiatives.
In essence, it will change the character of China’s economic model – moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy.
Like the Fifth Five-Year Plan, which set the stage for the “reforms and opening up” of the late 1970’s, and the Ninth Five-Year Plan, which triggered the marketization of state-owned enterprises in the mid-1990’s, the upcoming Plan will force China to rethink the core value propositions of its economy. Premier Wen Jiabao laid the groundwork four years ago, when he first articulated the paradox of the “Four ‘Uns’” – an economy whose strength on the surface masked a structure that was increasingly “unstable, unbalanced, uncoordinated, and ultimately unsustainable.”
The Great Recession of 2008-2009 suggests that China can no longer afford to treat the Four Uns as theoretical conjecture. The post-crisis era is likely to be characterized by lasting aftershocks in the developed world – undermining the external demand upon which China has long relied. That leaves China’s government with little choice other than to turn to internal demand and tackle the Four Uns head on.
The 12th Five-Year Plan will do precisely that, focusing on major pro-consumption initiatives. China will begin to wean itself from the manufacturing model that has underpinned export- and investment-led growth. While the manufacturing approach served China well for 30 years, its dependence on capital-intensive, labor-saving productivity enhancement makes it incapable of absorbing the country’s massive labor surplus.
Instead, under the new Plan, China will adopt a more labor-intensive services model. It will, one hopes, provide a detailed blueprint for the development of large-scale transactions-intensive industries such as wholesale and retail trade, domestic transport and supply-chain logistics, health care, and leisure and hospitality.Obviously, a reserve currency would be not only extremely useful, but quite critical in achieving the goal of China’s conversion to an inwardly focused, middle-class reliant society. And even that would not guarantee a smooth transition. However, should China really be on a path to a step function in its evolution, the shocks to the system will be massive. Roach puts this diplomatically as follows:But there is a catch: in shifting to a more consumption-led dynamic, China will reduce its surplus saving and have less left over to fund the ongoing saving deficits of countries like the US. The possibility of such an asymmetrical global rebalancing – with China taking the lead and the developed world dragging its feet – could be the key unintended consequence of China’s 12th Five-Year Plan.A less diplomatic version implies that the relationship between China and the US would suffer a seismic shift in which the game theoretical model of Mutual Assured Destruction, and symbiotic monetary and fiscal policies, would no longer exist, allowing China to pursue its fate completely independent of any economic shocks that the increasingly distressed United States may be going through.And confirming that the PBoC announcement is far more serious than the amount of airtime allotted to it by the mainstream [U.S.] media, is the just released article in Spiegel “China Attacked the Dollar” (google translated):The Chinese central bank surprised with a spectacular announcement:The would-be superpower wants to handle their entire future foreign trade in yuan, not in dollars. Beijing shakes America’s claim to represent the key currency – with serious consequences for the U.S..
The announcement was inconspicuous , but it has the potential, to permanently change the balance of power on the world currency market: China strengthens the international role of the yuan. All exporters and importers will, this year, be allowed to settle their business with their foreign partners in Yuan, the central bank said on Wednesday in Beijing.
This will respond to the growing importance of the yuan as a global reserve currency. “The market demand for cross-border use of the yuan rises,” said the central bank. The PBoC had previously tested this plan by allowing 67 000 enterprises in 20 provinces to run their business abroad in yuan. The trade volume amounted to the equivalent of €56 billion.
Now the amount of yuan to be extended, it should be handled much more business in Chinese currency – and less in the U.S. Chinese companies trade at present often in dollars, they are thus dependent on the decisions of the U.S. Federal Reserve to pay on it in a rising oil price and will have pay higher transaction fees than necessary. That should change now.
Currently, the People’s Republic can hardly take yuan out of the country and even that is monitored within the boundary of all legitimate capital flows. Chinese exporters have to change a large part of their euro, yen or dollars at a fixed rate revenue in yuan. Foreign companies wishing to do business in China must do so in Yuan, they can exchange their money in the People’s Republic. Tourists are allowed a maximum of 20,000 yuan and exporting. Yuan an international market can not occur – and not on supply and demand-based exchange rate.Needless to say, should the yuan be seen increasingly as a reserve currency, all of this, and virtually everything else is about to change.The only question is whether or not the Yuan will cement its status at the top of the currency pyramid by allowing the backing of the currency with individual or a basket of commodities. If that were to happen, it would be the last nail in the coffin of the already terminally ill dollar.
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ΣΤΑ 1350 ΔΟΛΛΑΡΙΑ Ο ΧΡΥΣΟΣ ΣΥΝΕΧΙΖΕΙ ΝΑ ΤΡΑΒΑΕΙ ΤΗΝ ΑΝΗΦΟΡΑ…
…εν μέσω του παγκόσμιου πολέμου χαρτονομισμάτων που μαίνεται.
2000-2010. Μέσα σε 10 χρόνια, το χαρτονόμισμα -fiat- δολλάριο έχασε 7 φορές την αξία του σε σχέση με τον χρυσό.
700% δηλαδή, και απλά μια υπενθύμιση σε όσους θεωρούσαν οτι η εποχή και τα “λογιστικά κέρδη” με τις πάσης φύσης φούσκες και με τα τυπογραφεία χαρτονομισμάτων της FED και της ΕΚΤ στο φούλ, θα κατάφερναν να απομειώσουν τις πραγματικές και διαχρονικές αξίες.
(Επίσης, πέρα απο τα σχετικά δημοσιεύματα στο προτεινόμενο ανωτέρω λινκ για την ΤτΕ, και λόγω της “έκρηξης” Σημίτη-ΠΑΣΟΚ” για ενδεχόμενη “εξεταστική” της περιόδου 2000-2004, αξίζει μια δεύτερη ανάγνωση η δημοσίευση The CDS Planet όπου δίνονται απαντήσεις για τα μαγειρέματα της κας Αντιγόνης Λουδιάδη της Goldman Sachs με την κυβέρνηση Σημίτη, εποχή που με αυτές τις ταρζανιές ξεκίνησε το μεγάλο δράμα της ελεγχόμενης και μοιραίας πτώχευσης, καθώς και του asset stripping της Ελλάδας που βρίσκεται σε εξέλιξη…)
Ακολουθεί αναδημοσίευση για τις πρόσφατες κινήσεις της Κεντρικής τράπεζας της Ιαπωνίας και τον κολασμένο χορό του φρεσκοτυπωμένου χαρτονομίσματος απο το λίνκ
Global Competitive Debasement; Currency Wars Begin; Message of Gold
The Bank of Japan is leading the way to new measures of stimulus insanity with a plan to buy a wide variety of assets including real estate investment trusts (REITs) and asset backed commercial paper (ABCP).
Please consider Factbox: BOJ to set up fund to buy JGBs, corporate debt
The Bank of Japan on Tuesday decided to set up, as a temporary measure, a 5 trillion yen ($59.9 billion) pool of funds to buy assets ranging from government bonds to corporate bonds.
Following are key points about the new measure:
— The programme will consist of a fund totaling 5 trillion yen to buy assets anew as well as the existing 30-trillion-yen fixed-rate fund-supply tool that will hold designated assets as collateral.
— The programme is a temporary measure aimed at encouraging declines in long-term interest rates and risk premiums.
— The fund is designed to cover Japanese government bonds, treasury bills, commercial paper (CP), asset-backed commercial paper (ABCP), corporate bonds, exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITs).
— The BOJ will not apply its self-imposed ceiling on its outright JGB buying to the JGBs to be purchased with the new fund.
— The BOJ will aim to bring the balance of assets purchased using the new fund to 5 trillion yen in one year, with about 3.5 trillion yen assigned for JGBs and treasury bills and about one trillion yen for CP, ABCP and corporate bonds.
What About Paintings and Shellfish?
Why not paintings, equities, and shellfish? Given enough time, perhaps it comes to that.
Meanwhile, I am pleased to report that the global recovery has gained so much traction that numerous countries feel obliged to join the US/Japan sponsored stimulus party.
Global Competitive Debasement
Bloomberg reports BOJ May Have Acted First in Renewed Round of Action
The unexpected decision by the Japanese central bank yesterday to drop its interest rate to “virtually zero” and expand its balance sheet follows the U.S. Federal Reserve’s move toward more unconventional easing. Bank of England officials will consider further stimulus tomorrow, while the central banks of Australia, Canada and New Zealand are among those now holding fire on further interest-rate increases.
The renewed push for easier monetary policy comes as the International Monetary Fund warns growth in advanced economies is falling short of its forecasts ahead of its annual meetings in Washington this week. The dilemma for policy makers is that their actions may do little to revive growth and end up roiling currency markets.
Bank of Japan Governor Masaaki Shirakawa may not be alone for long in taking action and Daiwa Institute of Research argues he’s now engaged in a “vicious spiral” of monetary easing with the Fed as both compete to bolster their economies.
“The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world,” Joseph Stiglitz, a Nobel Prize-winning professor at New York’s Columbia University, said today in New York.
The ECB will be forced to postpone tighter policy as European exports fade and investors continue to fret about peripheral euro-area economies such as Portugal and Ireland, said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Inc. in London.
“The ECB’s exit strategy is fully on, but the business cycle will turn against them,” said Peruzzo. “The communication will then be adjusted to consider downside risks greater than what they have anticipated.”
The ECB last week stepped up its government bond purchases as the cost of insuring against default on Portuguese government debt surged to a record and Irish bond spreads soared to euro- era highs.
Another risk is that the use of unconventional monetary policy is viewed as an effort to weaken currencies to boost exports, rising competitive devaluations and protectionist responses, said Eric Chaney, chief economist at AXA Group in Paris. Japan, Switzerland and Brazil are among the countries that have already intervened in markets to restrain their exchange rates.
“This is close to a currency war,” said Chaney, a former official at the French France Ministry. “It’s not through exchange-rate manipulation, but through monetary policies.”
This is not “close to a currency war” this IS a currency war.
While I have had numerous differences of opinion with Joseph Stiglitz, he is absolutely correct when he says “The irony is that the Fed is creating all this liquidity with the hope that it will revive the U.S. economy. It is doing nothing for the U.S. economy and causing chaos for the rest of the world.”
Moreover what Stiglitz says about Bernanke and the Fed, applies equally to the Bank of England, the Bank of Japan, and the central banks of Canada and Australia as well.
Message of Gold
The competitive currency debasement can be seen in the price of gold and silver.
None of these central bank measures are doing a damn thing for the real economy (in the US or anywhere else), but it sure has ignited a fire in gold and silver.
Wall Street tumbles on Fed chief’s comments about the ”unusually uncertain” economy.
Bobbi Rebell reports.
Επίσης η πλήρης συζήτηση για την πορεία της Αμερικανικής οικονομίας (2 ωρες και 35 λεπτά) εδω
Federal Reserve Board Chairman Ben Bernanke delivered his semi-annual report on monetary policy this week before the Senate Banking Committee on Wednesday followed by the House Financial Services Committee on Thursday. Bernanke told the committee that the U.S. economy is “unusually uncertain,” but was unlikely to go through another recession in the near future. He also said he expects unemployment levels to remain high at least through 2012.
reposted αναδημοσίευση απο Jesse’s Café Américain μπλόγκ σε μόνιμη RSS σύνδεση βλ. ΣΥΝΔΕΣΜΟΥΣ-ΛΙΝΚΣ
“Economics: a social process in which one group of economists argues that all the other groups of economists are incompenent buffoons. They are often successful in this endeavor, thereby persuading large groups of ordinary people to adopt public policies that are afterwards considered to be outrageous acts of folly. This clears the way for a different group of economists to do the same thing all over again, based on a fresh set of improbable assumptions.”
US Dollar: The Mother of All Bubbles
A bubble is a significant increase in valuation supported by a set of artificial, inexplicable, and otherwise unsustainable conditions. The ‘increase in valuation’ can be nominal as in a price that goes ‘higher’ without a corresponding increase in value, or a decline in the value underlying the asset while the price remains nominally the same. (note 1)
True bubbles almost always involve some element of secrecy, a cover up, and some dispensation from common knowledge and experience. There are almost always dissenters, voices of warning, that are ignored and even ostracized. “It’s different this time…” without there being an identifiable difference, only the self referential rationale.
Stocks are not a bubble because they are going higher and the market is infallible. Housing cannot be a bubble because the housing market is so geographically diverse. You get the point. Not all things that increase in price are a bubble, but this does not mean that bubbles cannot be identified. They can, but when they serve some greater end, the voice of dissent are overwhelmed. Almost all bubbles involve control frauds and the corruption of the media, the analysts, and the regulators, to some degree, through benefits and intimidation.
When the artificial conditions are removed the valuation of the bubble ‘reverts to the mean, ‘ a more normal valuation based on the fundamentals, unadjusted and undistorted supply and demand. An asset bubble often involves a fraudulent design taking advantage of and even perpetuating a corresponding foolishness. In other words, the fraud is father to the folly.
The duration of a bubble does not make it valid or ‘the new normal.’ Like most chronic conditions it just means that the adjustment will be all the more difficult.
The US dollar as the world’s reserve currency, and the unusual period of US prosperity, is a non-historical artifact of the post World War II era that will not continue indefinitely. When the reversion to the mean occurs, it is likely that the dollar will have to be reissued as ‘the new dollar’ similarly to the rouble in the post-Soviet adjustment.
This is my fundamental currency thesis that I have been following since 1997, and it appears to be valid so far. I do not see the resolution in hyperinflation per se, but I do think the new dollar will have a value of about 10% of the current dollar. In other words, they will knock a zero off the current dollar on surrender for new dollars. For example, if you have $100,000 in savings, and it will afterwards be worth 10,000 in new dollars.
Eliminating 90% of its foreign debt obligations will certainly help to repair the US Balance Sheet. It is possible that this is accomplished in inflation, rather than a more formal evaluation, and over a long period of time, say twenty years or so.
If this seems impossible to you, then you are not aware perhaps that the same thing was accomplished from 1933 to 2000, or 67 years, and should avoid looking at the last chart. The Fed was merely squandering the nation’s wealth, without the advantages of modern financial engineering and deregulation. The next leg down will probably be about three times more efficient, under the leadership of Zimbabwe Ben.
“Facts do not cease to exist because they are ignored.”
Wouldn’t it be convenient for the oligarchs if their think tanks could somehow concoct a story, some plausible sounding theory, to persuade a portion of the world’s population to hold dollars, expecting them to GAIN in value, even in the face of significant defaults and credit failures and a deteriorating return in GDP growth per marginal dollar debt? Or even better, getting them to remain fully invested in a series of artificially contrived dollar denominated financial assets that could be selectively ‘pulled down’ while keeping the overall scheme intact and running. Bernays would be proud.
But the trick is to convince the non-sleepwalking portion of the public to ignore the signs of a failing economy and an approaching currency collapse. This is the sort of black is white brainwashing exercise that occupied quite a few of the whiz kids for the latter part of the twentieth century.
It might take a lot of work, and some high level financial engineering, raw determination to play the long game, public relations professionals engaging invoking slogans and prejudices, and a suite of new financial instruments that would have to be protected even when it was suspected they were fraudulent, but it would be a useful tool for the Übermenschen to have in their toolbox. Nothing works better than to convince a free people to willingly enslave themselves.
Advice for far too many economic forecasters and precious metals analysts.
You know who you are.
Stay thirsty, my friends.
Note 1: The latter case is the most difficult phenomenon to understand, but is behind much of the financial crisis which we are experiencing today. Inflation can occur even if money supply is flat and declining, because it is the level of demand for the money that could be dropping even while supply is constant. A example of this would be Europe in the aftermath of the Black Death, in which case the ‘wealth’ remained constant but the number of people demanding it were reduced dramatically and precipitously. If the value, the productivity of a country is all that stands behind a fiat currency, if that productive capability is in decline, to be replaced by ‘service,’ then in fact an inflation can occur even while the nominal money supply is flat or decreasing. One has to consider what is ‘backing’ the money from an external perspective.
It might be easier to understand if you imagine that a country is on a gold standard, with a constant money supply, but covertly gives away all of its gold. That country will experience a significant inflation which will come upon it seemingly overnight once the confidence, the backing, in the currency is dissipated.
This argues strongly against the monetarists who are pure relativists. Their relativism lead inevitably to central planning and a command economy, ideally a one world government. The need for great and greater control is necessary of the continuation of their fraud. This is why Wall Street banks always seem to be entranced with fascism, or more properly, statism, and why the robber barons chose to build slums rather than vibrant cities. And why the Chinese government fears to stimulate domestic prosperity under market discipline. Its a matter of control. Their end is not an increase in general prosperity, but rather the maintenance and increase of the power of the few over the many, relatively speaking as a close ended system. Your weakness increases my strength.
I will leave the discussion of value for another time, but let it suffice to say that it involves the determination of efficient markets. An efficient market is one that is free of fraud, all information being available to all participants at the same time, with full transparency. Any limitation or even worse, monopolization of information detracts from market efficiency. Transactions are relatively frictionless, and there are strict limits on the use of size and leverage to distort the determination of value. Obviously there are no perfectly efficient markets in this world, but it is useful to have a measure to understand how imperfect that are, and whether a rule or a change makes them better or worse.
Two Year Greek Bond Spread Goes Ballistic
Σε δορυφορική τροχιά εκτοξεύτηκαν τα σπρέντ των διετών ελληνικών κρατικών ομολόγων (>1000), και ο χρυσός, καταφύγιο στον χαρτοπόλεμο του διεθνούς καζίνο φρεσκοτυπωμένων τρισεκατομμυρίων χαρτονομισμάτων, μετά από επίπονες μοχλεύσεις μηνών για να διατηρηθεί στα 1100$, ξέφυγε και απο το όριο των 1200 δολλαρίων ανα ουγκιά…
Τιμές 30 τελευταίων ημερών
Τιμές 5 τελευταίων ετών
“Βάστα Ρόμελ”, φώναζαν οι μαυραγορίτες στην κατοχή του 3ου Ράιχ, “Βάστα Μέρκελ” θα είναι ένα απο τα συνθήματα καθώς η ευρωζώνη του 4ου Ράιχ – σαν τα χωριά που όμορφα καίγονται – καταρρέει συστημικά…