Home » Posts tagged 'currency wars' (Page 2)
Tag Archives: currency wars
Not the “Death of the Dollar” but “Death of the Euro?”
Not the “Death of the Dollar” but “Death of the Euro?”
The rise of the Chinese yuan as an international currency is not only unstoppable but is advancing in leaps and bounds, according to SWIFT. It comes at the expense of other currencies, though it’s not triggering the long-awaited “death of the dollar.” On the contrary. Yet the euro has stumbled into the line of fire.
SWIFT is in a position to know. The member-owned organization, based in Belgium, provides among other things a network that enables financial institutions around the globe to send and receive information about financial transactions in a standardized environment. It also cooperates with various intelligence and law enforcement agencies around the world, including the US Treasury, the CIA, and others. The NSA is likely to get what it wants without asking.
In its latest RMB Tracker, SWIFT is relentlessly effusive about the rise of the yuan. In August, global payments in renminbi rose once again, achieving another milestone: it edged out the yen to become the fourth largest payments currency with a share of, well, 2.8% of global payments – “reflecting RMB’s huge potential and staggering momentum as a major currency,” the report gushes.
That’s not exactly a lot, compared to China’s economic power in the global markets. When China sneezes, as it just did, the world catches pneumonia. But it’s a big leap forward: In August 2012, the yuan was in 12th position, with a minuscule share of 0.8%.
In the Asia-Pacific region, the yuan is already the most actively used currency for intra-regional payments with China and Hong Kong, having edged out the yen this year.
Becoming a major global currency is one of the preconditions for becoming a reserve currency held by central banks as part of their foreign exchange reserves baskets. But the yuan isn’t in those baskets yet.
…click on the above link to read the rest of the article…
Currency Wars Continue As Kazakh Currency Crashes 25% After Peg Abandoned
Currency Wars Continue As Kazakh Currency Crashes 25% After Peg Abandoned
On Tuesday we remarked on the increasingly perilous plight of yet another country whose economy has come under increased pressure from plunging oil prices and China’s move to devalue the yuan: Kazakhstan.
Just one day after allowing the tenge to fall sharply in the interbank market and no longer able to take the pain from falling crude prices, the country moved to a free float for the tenge overnight, causing the currency to plunge by a quarter.
The move is clearly a desperate attempt to preserve export competitiveness in the face of a falling rouble and a devalued yuan. This is the third time the country’s central bank has devalued the currency since 1999 – the last time was in February of 2014.
Although central bank governor Kairat Kelimbetov put on a brave face and very rationally explained that “this is not a devaluation, this is a transition to a freely floating rate when the market itself determines a balanced exchange rate on the basis of demand and offer,” it’s quite clear that the situation for the country’s exporters had become dire and bringing the tenge more inline with moves seen in the currencies of China and Russia (Kazakhstan’s top trading partners) was probably long overdue. Here’s Bloomberg:
The central Asian nation, which counts Russia and China as its top trading partners, said it was switching to a free float, triggering a 23 percent slide in the tenge to a record 257.21 per dollar. Following the shock yuan devaluation last week, a gauge of 20 developing-nation exchange rates capped its longest slump since 2000, and losses continued this week as Vietnam devalued the dong and currencies from Russia to Turkey fell at least 3 percent.
…click on the above link to read the rest of the article…
The Shot Not Heard Around the World
The Shot Not Heard Around the World
…click on the above link to read the rest of the article…
12 Signs That An Imminent Global Financial Crash Has Become Even More Likely
12 Signs That An Imminent Global Financial Crash Has Become Even More Likely
Did you see what just happened? The devaluation of the yuan by China triggered the largest one day drop for that currency in the modern era. This caused other global currencies to crash relative to the U.S. dollar, the price of oil hit a six year low, and stock markets all over the world were rattled. The Dow fell 212 points on Tuesday, and Apple stock plummeted another 5 percent. As we hurtle toward the absolutely critical months of September and October, the unraveling of the global financial system is beginning to accelerate. At this point, it is not going to take very much to push us into a full-blown worldwide financial crisis. The following are 12 signs that indicate that a global financial crash has become even more likely after the events of the past few days…
#1 The devaluation of the yuan on Tuesday took virtually the entire planet by surprise (and not in a good way). The following comes from Reuters…
China’s 2 percent devaluation of the yuan on Tuesday pushed the U.S. dollar higher and hit Wall Street and other global equity markets as it raised fears of a new round of currency wars and fed worries about slowing Chinese economic growth.
#2 One of the big reasons why China devalued the yuan was to try to boost exports. China’s exports declined 8.3 percent in July, and global trade overall is falling at a pace that we haven’t seen since the last recession.
#3 Now that the Chinese have devalued their currency, other nations that rely on exports are indicating that they might do the same thing. If you scan the big financial news sites, it seems like the term “currency war” is now being bandied about quite a bit.
…click on the above link to read the rest of the article…
China “Loses Battle Over Yuan”, And Now The Global Currency War Begins
China “Loses Battle Over Yuan”, And Now The Global Currency War Begins
Almost exactly seven months ago, on January 15, the Swiss National Bank shocked the world when it admitted defeat in a long-standing war to keep the Swiss Franc artificially weak, and after a desperate 3 year-long gamble, which included loading up the SNB’s balance sheet with enough EUR-denominated garbage to almost equal the Swiss GDP, it finally gave up and on one cold, shocking January morning the EURCHF imploded, crushing countless carry-trade surfers.
Fast forward to the morning of August 11 when in a virtually identical stunner, the PBOC itself admitted defeat in the currency battle, only unlike the SNB, the Chinese central bank had struggled to keep the Yuan propped up, at the cost of nearly $1 billion in daily foreign reserve outflows, which as this website noted first months ago, also included the dumping of a record amount of US government treasurys.
And with global trade crashing, Chinese exports tumbling, and China having nothing to show for its USD peg besides a propped and manipulated stock “market” which has become the laughing stock around the globe, at the cost of even more reserve outflows, it no longer made any sense for China to avoid the currency wars and so, first thing this morning China admitted that, as Market News summarized, the “PBOC lost Battle Over Yuan.”
That’s only part of the story though, because as MNI also adds, the real, global currency war is only just starting.
And now that China is openly exporting deflation, and is eager to risk massive capital outflows, the global currency war just entered its final phase, one where the global race to the bottom is every central bank’s stated goal. Well, except for one: the Federal Reserve. We give Yellen a few months (especially if she indeed does hike rates) before the US too is back to ZIRP, maybe NIRP and certainly monetizing even more things that are not nailed down.
…click on the above link to read the rest of the article…
George Soros Warns “No Exaggeration” That China-US On “Threshold Of World War 3”
George Soros Warns “No Exaggeration” That China-US On “Threshold Of World War 3”
While admitting that reaching agreement between the two countries will be difficult to achieve, George Soros –speaking at The World Bank’s Bretton Woods conference this week – warned that unless the U.S. makes ‘major concessions’ and allows China’s currency to join the IMF’s basket of currencies, “there is a real danger China will align itself with Russia politically and militarily, and then the threat of world war becomes real.”
Much in global geopolitics depends on the health and trajectory of the Chinese economy, was the undertone of George Soros’ comments as he spoke this week, but as MarketWatch reports,
Billionaire investor George Soros said flatly that he’s concerned about the possibility of another world war.…
If China’s efforts to transition to a domestic-demand led economy from an export engine falter,there is a “likelihood” that China’s rulers would foster an external conflict to keep the country together and hold on to power.
…
To avoid this scenario, Soros called on the U.S. to make a “major concession” and allow China’s currency to join the International Monetary Fund’s basket of currencies. This would make the yuan a potential rival to the dollar as a global reserve currency.
In return, China would have to make similar major concessions to reform its economy, such as accepting the rule of law, Soros said.
Allowing China’s yuan to be a market currency would create “a binding connection” between the two systems.
An agreement along these lines will be difficult to achieve, Soros said, but the alternative is so unpleasant.
“Without it, there is a real danger that China will align itself with Russia politically and militarily, and then the threat of third world war becomes real, so it is worth trying.”
And while on the topic, Soros also spoke recently, as ValueWalk notes, on the situation in Europe…
…click on the above link to read the rest of the article…
Money Worries
Money Worries
The cynicism among the informed classes has never been so deep. Even the pompom boys in the cheerleading clubs like CNBC and The Wall Street Journal express wonderment at the levitation of stock indexes and bond values. They chatter about a “correction” of 20 percent being a healthful tonic that would clear away some dross and quickly usher in a new episode of “growth” — or growthiness, which, like truthiness, became an acceptable approximation of the real thing. The truth, as opposed to truthiness, is they no longer believe their own bullshit about growthiness.
The suppression of interest rates and pervasive accounting fraud has thundered through the financial system, and the deformities caused by it have emerged in currency war, currency instability, trade collapse, and political crisis. Years of central bank intervention have stolen the capital of the future to construct a Potemkin economy meant to conceal the sickening gyre of diminishing returns strangling business as usual.
Until it collapses by a great deal more than the wished-for mere 20 percent, more perversities will be piled onto the already existing burden. Is it not a wonder that professionalized interest groups like AARP have not screamed bloody murder over the suppression of interest rates which deprives its members of bank account and bond interest on savings? Instead AARP, like virtually every enterprise in America, has turned to racketeering. Don’t worry, they’ll be gone from the scene soon enough.
…click on the above link to read the rest of the article…
China Considers Launching QE; Shanghai Stocks Soar
China Considers Launching QE; Shanghai Stocks Soar
Nearly two months ago we explained “How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable” in which we cited Cornerstone who reminded us “that from 2007 to late 2008, U.S. fed funds dropped 500 bp, and then the Fed still needed to do QE? The backdrop for China looks a bit similar. We had a credit bubble, they have a credit bubble. We had a housing bubble, they have a housing/investment bubble. Will China eventually have to go down the same path as the U.S., and the Eurozone? … The PBoC will first cut rates to 0%, before contemplating QE.”
To this we added that “once China, that final quasi-Western nation, proceeds to engage in outright monetization of its debt, then and only then will the terminal phase of the global currency wars start: a phase which will, because global economic growth and that all important lifeblood of a globalized economy – trade – at that point will be zero if not negatve, will see an unprecedented crescendo of money printing by absolutely everyone, before coordinated devaluations mutate into uncoordinated, and when central bank actions morph from “all for one” to “each man for himself.”
We may not have long to wait because just hours ago, MarketNews first among the wire services hinted at what we suggested was the endgame.
- *PBOC DISCUSSING DIRECT PURCHASES OF LOCAL GOVT BONDS: MNI
- *PBOC IS DISCUSSING UNCONVENTIONAL POLICIES: MNI
Bloomberg adds more, citing MNI as saying that the Chinese central bank discussing “adopting unconventional policies to rebuild its balance sheet and reinvigorate economy, including making direct purchases of local government bonds from market.”
Of just as we predicted.
…click on the above link to read the rest of the article…
China Could Face “Sharp” Rise In Capital Outflows If Stocks, Economy Lose Momentum
China Could Face “Sharp” Rise In Capital Outflows If Stocks, Economy Lose Momentum
We’ve written quite a bit over the past two months about capital outflows from China. Last week for instance, we documented how the country saw its fourth consecutive quarter of outflows in Q1, bringing the 12 month running total to some $300 billion. Why, beyond the obvious, is this a problem for China? Because pressure is mounting to devalue the yuan as the currency’s peg to the recently strong dollar is becoming costly for the country’s export-driven economy.
Here’s Soc Gen’s Albert Edwards on the subject:
In the current deflationary environment the Chinese authorities simply can no longer tolerate the continued appreciation of their real exchange rate caused by the dollar link.
And from Barclays:
Amid slowing inflation and rising outflows, the costs of limiting CNY weakness are growing – including the unintended effect of placing more stress on CNY market liquidity and interest rates, rendering liquidity easing efforts less effective.
And here is how we summed up the situation last month:
China is suddenly finding itself in an unprecedented position: it is losing the global currency war, and in a “zero-sum trade” world, in which global commerce and trade is slowly (at first) declining, and in which everyone is desperate to preserve or grow their piece of the pie through currency devaluation, China has almost no options.
At issue is the fact that expectations about the direction of the yuan may be contributing to capital outflows and any indication on the part of Beijing that devaluation is in the cards could exacerbate the problem. Now, data from SAFE suggests nearly $24 billion left China in March alone. Here’s more, via Bloomberg:
…click on the above link to read the rest of the article…
Change They Don’t Believe In
Change They Don’t Believe In
The unfortunate consequence of not allowing the process of “creative destruction” to occur in banking and Big Business is that the historic forces behind it will seek expression elsewhere in the realm of politics and governance. The desperate antics of central banks to cover up financial failure can’t help but provoke political upheaval, including war.
It’s a worldwide phenomenon and one result will be the crackup of economic relations — thought by many to be permanent — that we call “globalism.” The USA has suffered mightily from globalism, by which a bonanza of cheap “consumer” products made by Asian factory slaves has masked the degeneration of local economic vitality, family life, behavioral norms, and social cohesion. That crackup is already underway in the currency wars aptly named by Jim Rickards, and you can bet that soon enough it will lead to the death of the 12,000-mile supply lines from China to WalMart — eventually to the death of WalMart itself (and everything like it). Another result will be the interruption of oil export supply lines.
The USA as currently engineered (no local economies, universal suburban sprawl, big box commerce, despotic agribiz) won’t survive these disruptions and one might also wonder whether our political institutions will survive. The crop of 2016 White House aspirants shows no comprehension for the play of these forces and the field is ripe for epic disruption. The prospect of another Clinton – Bush election contest is a perfect setup for the collapse of the two parties sponsoring them, ushering in a period of wild political turmoil. Just because you don’t see it this very moment, doesn’t mean it isn’t lurking on the margins.
…click on the above link to read the rest of the article…
What New Games Can Central Banks Play?
What New Games Can Central Banks Play?
Does the Dollar Hold Enough Attraction to Break Out and Hold at Higher Levels?
Now is the time to begin looking at the US dollar’s re-ascendance in a different light as we approach 1:1 against the euro. Shorter term we have to expect some possible panics around flat global growth in the face of a strong dollar. Historically, as we saw in the 1980s in Latin America, US dollar rebounds lead to blow-ups among the weaker global credits, just at the point where the dollar begins a breakout not seen in decades. But, times have also changed and we should expect this round of the dollar beating up some countries to slow earlier than perhaps what we saw in the days of the symbolic Reagan induced fall of the Berlin Wall.
US dollar credit to non-bank borrowers outside the US – the greatest potential source of dollar-related trouble.
I have been following the dollar vs other FX moves for over 30 years. I was around during the big Reagan dollar rebound of the mid-80s and was on board to buy the Pound at 1:1 to the dollar. In 2000 I was also on board to buy the euro after its post-launch devaluation. And as a shipping analyst I always used the dollar as a guidepost for commodities. To me the Greenspan-Bernanke years were a case study in dollar devaluation. The Currency Wars notion is just a label to me. I agree with the concept. But the practice existed far before the coinage of the term. I always believe in taking a weighted approach to FX exposure, and increasing and decreasing weights as they move relative to each other.
…click on the above link to read the rest of the article…
Why We’re Drifting Towards World War 3
Why We’re Drifting Towards World War 3
The Economist argues that there are ominous parallels between the conditions which led to the first world war and today:
The United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly. Modern Japan is France, an ally of the retreating hegemon and a declining regional power. The parallels are not exact—China lacks the Kaiser’s territorial ambitions and America’s defence budget is far more impressive than imperial Britain’s—but they are close enough for the world to be on its guard.
Which, by and large, it is not. The most troubling similarity between 1914 and now is complacency. Businesspeople today are like businesspeople then: too busy making money to notice the serpents flickering at the bottom of their trading screens. Politicians are playing with nationalism just as they did 100 years ago. China’s leaders whip up Japanophobia, using it as cover for economic reforms, while Shinzo Abe stirs Japanese nationalism for similar reasons.
The New Republic points out that global downturns can lead to war:
As the experience of the 1930s testified, a prolonged global downturn can have profound political and geopolitical repercussions. In the U.S. and Europe, the downturn has already inspired unsavory, right-wing populist movements. It could also bring abouttrade wars and intense competition over natural resources, and the eventual breakdown of important institutions like European Union and the World Trade Organization. Even a shooting war is possible.
The Telegraph notes that the economic crisis in Europe is increasing tensions:
Tensions between European countries unseen in decades are emerging.
(Indeed, Europe is stuck in a downturn worse than the Great Depression.)
…click on the above link to read the rest of the article…
Why The Dollar Is Rising As The Global Monetary Bubble Craters
Why The Dollar Is Rising As The Global Monetary Bubble Craters
Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!
Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?
Heavens no! At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.
Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.
…click on the above link to read the rest of the article…
Currency Wars… Are Not Working
Currency Wars… Are Not Working
While none of the current batch of currency-devaluing Central Bankers would admit that their policies are designed to weaken the currency, enhance competitiveness, and hail a new bright future of growth for their nation (by printing money), it is clear that is the chosen textbook-based path chosen. However, as the following charts show, it’s not working…
Massive devaluation in Japan… economic growth expectations slowing…
Massive devaluation in Europe… economic growth expectations slowing…
And then there’s The US…
(though note the last few weeks’ surge in the USD has sparked some deterioration in the economic outlook).
* * *
Clearly the answer to Japan and Europe’s problem is more devaluation…
THE MONEY WARS
THE MONEY WARS
At some point in the future, those who have the privilege of writing the history about our present day events will find clever turns of phrase to describe our times. If those future scribes have any inkling of what actually transpired I imagine they will be able to clearly communicate these were the years of the ‘Money Wars’.
It certainly is an ingenious way to keep the world’s population passionately quarreling between themselves while the pirates, those who are actually looting the world, are busy scheming and directing the pillage. It is my sincerest hope it all ends on a positive note, one that entails some big unintended consequence for all the plotting parties involved.
While we live through this Great War of Money, the initial battles of which are already well under way, it is fascinating to observe, study and most importantly learn what is going on. Doing so provides an opportunity to examine the flaws in our systems and engage our fellow man in conversation and debate. This in turn has the potential to lead to innovation and solutions. For me any conversation where learning is involved is indeed a worthy one.
But there is also a need for urgency. Sadly this urgency creates fear and heightened emotions which impede our conversations and seem to be fueled in many ways. The burning question eventually becomes, “What should I do?”
…click on the above link to read the rest of the article…
