Currency

The Coming War of Central Banks

~ admin ~ Leave a comment

currencyCharles Hugh Smith – History has shifted, and we’re leaving the era of central bank convergence and entering the era of central bank divergence, i.e. open conflict. In the good old days circa 2009-2014, central banks acted in concert to flood the global banking system with easy low-cost credit and push the U.S. dollar down, effectively boosting China (whose currency the RMB/yuan is pegged to the USD), commodities, emerging markets and global risk appetite.

That convergence trade blew up in mid-2014, and the global central banks have been unable to reverse history. In a mere seven months, the U.S. dollar soared from 80 to 100 on the USD Index (DXY), a gain of 25%–an enormous move in foreign exchange markets in which gains and losses are typically registered in 100ths of a percent.

This reversal blew up all the positive trades engineered by central banks: suddenly the yuan soared along with the dollar, crushing China’s competitiveness and capital flows; commodities tanked destroying the exports, currencies and economies of commodity-dependent nations; carry trades in which financiers borrowed cheap USD to invest in high-yielding emerging markets blew up as currency losses negated the higher returns, and global risk appetite vanished like mist in the Sahara.

Continue reading →

Are Gold And Silver The Only Money In Existence?

~ admin ~ Leave a comment

Michael Noonan – Gold and silver ARE money.  Neither is a “currency,” although money is often cited as interchangeable with currency.  Take the Federal Reserve Note, [please!], as an example. A Federal Reserve Note [FRN], is more commonly known as a “dollar.”  Even though the word “dollar” appears on every FRN, each and every FRN is a debt instrument issued by the Federal Reserve and not a true dollar.  The Federal Reserve is a privately held corporation, owned mostly by  certain european bankers, and may include the Rockefellers, from the US.

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” – Napoleon Bonaparte, Emperor of France, 1815

Napoleon knew of what he spoke.  You would think, over 200 years later, people would be all the wiser.  Alas, the opposite is true.  When it comes to money, people know next to nothing.  A Federal Reserve Note is not federal.  There are no reserves, and a FRN is not a note. There is no promise to pay anything to anyone at any time, all requirements of a note.

Then, why are FRNs called “dollars?”

Last week, we called the Rothschild and his moneychangers takeover of the US the greatest Ponzi scheme of all time. [See A Clarion Alarm Call For All Paper Assets, opening paragraph].  We went on to explain the bankruptcy of the US and how gold and silver are money.  FRNs were an integral part of the globalist’s Ponzi scheme.  Originally, FRNs were backed by gold and silver as they circulated alongside  US-issued Treasury Notes, all backed by gold and silver.

Continue reading →

The Fallacy that Weakening Your Currency Generates Prosperity

~ admin ~ Leave a comment

currencyCharles Hugh Smith – Of the many economic policies that are accepted as true yet are absolute nonsense, perhaps none is more achingly nonsensical than the notion that weakening a nation’s currency will magically make that nation prosperous.

Like the equally nonsensical Keynesian Cargo Cult’s misplaced obsession with “aggregate demand” driving “growth,” the idea that devaluing one’s money makes one more prosperous does not make even rudimentary sense.

If devaluing one’s currency generated prosperity, then those nations that have destroyed their currencies should be the most prosperous on Earth. The reality is those nations that devalue their currency are poor, for self-evident reasons: devaluing one’s currency lowers its purchasing power, which generates price inflation as imports soar in cost.

By lowering the yield on bonds (the favored method of devaluing one’s currency), the leadership inflates enormous credit/asset bubbles as everyone seeks to borrow nearly-free money to buy real-world assets that generate income streams. This fatally distorts the domestic economy and creates the potential for crisis in the foreign exchange (FX) market.

The obsession with devaluing one’s currency is rooted in the idea that exports are the key to growth, and the only way to boost exports in a world awash in virtually everything is to beggar thy neighbor by lowering the cost of one’s exports in other currencies by devaluing your own currency more than competitors are devaluing their currencies. Continue reading →

Is This How the Next Global Financial Meltdown Will Unfold?

~ admin ~ Leave a comment

currencyCharles Hugh Smith – I have long maintained that the structural imbalances of debt and risk that triggered the Global Financial Meltdown of 2008-2009 have effectively been transferred to the foreign exchange (FX) markets.

This creates a problem for the central banks that have orchestrated the “recovery” by goosing asset bubbles in stocks, real estate and bonds: unlike these markets, the currency-FX market is too big for even the Federal Reserve to manipulate for long.

The FX market trades roughly the entire Fed balance sheet of $4.5 trillion every day or two.

Currencies are in the midst of multi-year revaluations that will destabilize the tottering towers of debt, leverage and risk that have propped up global growth since 2009.

Though the relative value of currencies is discovered in the global FX market, there are four fundamental factors that influence the value of any currency:

1. Capital flows into and out of the currency (and the nation issuing it).

2. Perceived risk, specifically, will this currency preserve my global purchasing power (i.e. capital) or erode it?

3. The yield or interest rate paid on bonds denominated in this currency.

4. The scarcity or over-abundance of the currency. Continue reading →

What China’s Devaluation Means For The Future Of The Dollar

~ admin ~ 1 Comment

Simon Black – As the saying goes, “Fool me once, shame on you. Fool me twice, shame on me.” (… to which George W. Bush famously added after flubbing the aphorism on live TV, “can’t fool me again!”)

currencyFor months, despite every shred of data pointing to a weaker economy, China’s currency has been strengthening.

This was really counterintuitive. When an economy is weak, its currency tends to suffer.

But that didn’t happen in China.

Even when China’s stock market suffered one of the biggest crashes in history a few weeks ago, the currency barely moved.

None of this made any sense.

Just look at Greece– problems in that single nation, one of the smallest economies in Europe, dragged down the currency used by 18 other nations in Europe to its lowest level in more than a decade.

But when problems broke in China, the renminbi actually got stronger. And party bosses insisted that they would not devalue their currency.

Fool me once.

Yesterday they showed the world what their promises really mean: nothing. And in a surprise announcement, they devalued the renminbi by roughly 2%.

2% might not sound like very much. But in currency markets, especially for a major one like China’s, 2% is a huge move.

Curiously, in the very same announcement, Chinese officials stated that they would not devalue the currency again, and that Tuesday’s move was a one-time thing.

Fool me twice.

Less than 24-hours later they did it again — a second devaluation that saw the renminbi tumble to as low as 6.57 per US dollar, a 6% decline in roughly 36 hours.

Continue reading →