- Does China Plan To Back The Yuan With Gold And Make It The Primary Global Reserve Currency? (Economic Collapse June 4, 2013):
What in the world is China up to? Why are the Chinese hoarding so much gold? Does China plan to back the yuan with gold and turn it into a global reserve currency? Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar as the primary reserve currency of the planet? Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show. But that isn’t the case at all. The truth is that China doesn’t just want to compete with the United States. Rather, China actually plans to replace the United States as the dominant economic power on the planet. In fact, China already accounts for more global trade than the United States does. So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade? It would cause a financial shift so cataclysmic that it is hard to even imagine. Most of those that write about the “death of the U.S. dollar” usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned. China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States. Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative. But a gold-backed yuan would change all of that very rapidly.
And without a doubt, the Chinese government has already been very busy promoting the use of the yuan in international trade. In a recent note, John McCormick of RBS Group stated the following…
Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago.
A number of factors suggest that the Chinese authorities want to make RMB internationalisation happen by 2015.
For China, having a global reserve currency is not just about economics. It is also about power.
McCormick ended his recent note this way… Continue reading »
Tags: China, Currency War, Dollar, Economy, Global News, Gold, Government, Politics, U.S., Yuan
- “And the award for the most creative excuse for joining currency wars goes to…” (Lighthouse Investment Management, May 13, 2013):
… the Bank of Israel!
- On Monday, Bank of Israel cut interest rates in a surprise decision to 1.5% from 1.75%.
- Also, they are done with watching the Shekel strengthen against the dollar:
“Beginning this year, and in coming years, the Bank of Israel will purchase foreign exchange in order to offset the effect of natural gas production on the exchange rate.”
- Hilarious! The BoI tries to ‘justify’ entering the global currency wars with natural gas production. A top contender in Central Banking Oscar’s for “Most creative excuse for FX manipulation”!
- The Q&A brought up a critical question (not the kind of soft balls lobbed at ECB and the Fed by corrupt and incompetent journo’s): Continue reading »
Tags: Bank of Israel, Banking, Central Bank, Currency War, Economy, Global News, Israel
- China Central Bank Says It Is “Fully Prepared For Looming Currency War” (ZeroHedge, March 2, 2013):
Just in case Lagarde (and everyone else except for the Germans, who have a very unpleasant habit of telling the truth), was lying about that whole “no currency war” thing, China is already one step ahead and is fully prepared to roll out its own FX army. According to China Times, “China is fully prepared for a looming currency war should it, though “avoidable,” really happen, said China’s central bank deputy governor Yi Gang late Friday.” We look forward to the female head of the IMF explaining how China is obviously confused and that it is not currency war when one crushes their currency to promote “economic goals.” Of course, that same organization may want to read “Zero Sum for Absolute Idiots” because in this globalized economy any attempt to promote demand (by an end consumer who has no incremental income and stagnant cash flow) through currency debasement has no impact when everyone does it. But then again, this is the IMF – the same organization that declared Europe fixed in 2009, 2010, 2011, 2012, 2013 and so on.
More on China’s FX troop deployments: Continue reading »
Tags: Central Bank, China, Currency War, Global News, Government, People's Bank of China, Politics
- Forex Flash: The British pound is the next big devaluation story – UBS (Nasdaq, Feb 17, 2013):
Sterling is likely to be the next major currency that depreciates strongly, says Mansoor Mohi-uddin, Head of Foreign Exchange Strategy at UBS Macro Research.
“As central banks tolerate higher levels of inflation, the pound is set to weaken further across the board particularly against our favourite G4 currency, the US dollar” Mr. Mohi-uddin adds.
He concludes: “The GBP seems clearly at risk of following the yen and suffering the next large scale devaluation. As a result, we issued a recommendation that clients buy a six-month sterling put/US dollar call option with a strike of 1.4800.”
Tags: Bank of England, Central Bank, Currency War, ECB, Economy, EU, Europe, Global News, Inflation, U.K.
- Currency Wars Are Trade Wars (Azizonomics, Feb 16, 2013):
Paul Krugman is all for currency wars, but not trade wars:
First of all, what people think they know about past currency wars isn’t actually true. Everyone uses some combination phrase like “protectionism and competitive devaluation” to describe the supposed vicious circle of the 1930s, but as Barry Eichengreen has pointed out many times, these really don’t go together. If country A and country B engage in a tit-for-tat of tariffs, the end result is restricted trade; if they each try to push their currency down, the end result is at worst to leave everyone back where they started.
And in reality the stuff that’s now being called “currency wars” is almost surely a net plus for the world economy. In the 1930s this was because countries threw off their golden fetters — they left the gold standard and this freed them to pursue expansionary monetary policies. Today that’s not the issue; but what Japan, the US, and the UK are doing is in fact trying to pursue expansionary monetary policy, with currency depreciation as a byproduct.
There is a serious intellectual error here, typical of much of the recent discussion of this issue. A currency war is by definition a low-level form of a trade war because currencies are internationally traded commodities. The intent (and there is much circumstantial evidence to suggest that Japan at least is acting with mercantilist intent, but that is another story for another day) is not relevant — currency depreciation is currency depreciation and still has the same effects on creditors and trade partners, whatever the claimed intent. Continue reading »
Tags: Brazil, China, Currency War, Economy, Global News, Government, Japan, Jim Rickards, Paul Krugman, Politics, Russia
- Currency Wars Often Lead to Trade Wars … Which In Turn Can Devolve Into Hot Wars (ZeroHedge, Feb 8, 2013):
Currency War → Trade War → Hot War?
According to numerous high-level insiders, the global currency war is accelerating: Continue reading »
Tags: Australia, Bank of England, Ben Bernanke, China, Currency War, ECB, Environment, EU, Europe, Fed, Federal Reserve, Germany, Global News, Government, IMF, Japan, Jim Rickards, Jim Rogers, Mexico, Nouriel Roubini, Paul Krugman, Politics, Reggie Middleton, Robert Reich, U.S., Unemployment, War
- Please Welcome UK To The Global Currency Wars (ZeroHedge, Jan 23, 2013):
When it was announced in late November that Goldman’s Mark Carney would become head of the BOE (a “shocking” move only Zero Hedge predicted), we said that one has to be insane to be buying the GBP at those levels. Sure enough, it took just two short months before the implications of yet another Goldmanite’s pro-inflationary policies would become apparent. To wit:
- KING SAYS BOE IS READY TO PROVIDE MORE STIMULUS IF NEEDED
- KING SAYS QE WAS CRUCIAL IN AVOIDING U.K. DEPRESSION
- KING SAYS U.K. BANKS SOME WAY FROM CONVINCING MARKETS ON SAFETY
- KING SAYS POUND DROP WAS NEEDED FOR U.K. REBALANCING
- KING: U.K. 4Q GDP ALMOST CERTAINLY CONSIDERABLY WEAKER THAN 3Q
And the punchline:
- KING SAYS REBALANCING NEEDED TO AVOID CURRENCY WARS
In other words, please welcome the UK to the global currency wars. Continue reading »
Tags: Bank of England, Bonds, Central Bank, Currency War, Debt, GDP, Global News, Goldman Sachs, Government, Mark Carney, Politics, Quantitative Easing, U.K.