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Thread: World on threshold of currency wars and creation of a new currency

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    Default World on threshold of currency wars and creation of a new currency

    World on threshold of currency wars
    By Pavel Orlov
    Dec 25, 2012 19:08 Moscow Time


    Japan’s new Prime Minister Shinzo Abe has become the author of another chapter of modern history of the world currency wars. He accused the central banks of the USA and the European countries of steps leading to the strengthening of the Japanese yen and other national currencies against the dollar and the euro.

    Shinzo Abe complained that the European Central Bank and the US Federal Reserve System continued to actively print money, which is causing damage to the Japanese economy.

    2013 will be the year of currency wars, and the country having the weakest economy will be the winner. Most likely, this will be the USA. The US Federal Reserve System has launched 3 programmes aimed at quantitative easing of the national economy and again started money-printing. The reason is clear: the USA wants the dollar to remain the world reserve currency. The point is that the greater the amounts of a certain hard currency on the world market the more difficult it is for partner countries of such an emitter to operate. As you know, the economic laws say that cheap goods are the most competitive goods. Thus, if the US Federal Reserve prints money in large quantities, the Chinese yuan and the Japanese yen become more strengthened, which, in its turn, causes a reverse reaction on the partners’ part. Director of the Analytical Information Department at the RBK agency Alexander Yakovlev says.

    "A strong yen means serious damage for big Japanese corporations. The Japanese economy has been demonstrating no growth for a long time now, and the interest rate of the Central Bank of Japan is currently at a zero level."

    The crisis of 2008 and the Fukushima -1 nuclear disaster seriously undermined Japan’s economy. In fact, Japan has been in a state of recession all that time. Japan’s trade balance deficit has remained unchanged for 6 months now. Hence, the new Japanese Prime Minister is accusing both American and European regulators of manipulating the hard currencies’ exchange rates. However, as it appears, neither the US Federal Reserve nor the European Central Bank is determined to defeat Japan in this war. The two competing currency systems today are the EU system and the US financial system.

    Quite a number of economists believe that the European Central Bank can’t afford to print the euro in large quantities because this can destroy at once several economies of the Eurozone. Director of the Analytical information Department at the RBK agency Alexander Yakovlev says:

    "As long as open global markets exist and competitive struggle on them continues, regulators will do their utmost to make their goods more competitive. Naturally, this will lead to conflicts. This is how the modern currency market works."

    There is only one way out of this situation: the introduction of a new system of mutual payments. There is only one alternative to money in the world today - SDR (special drawing rights). This economic instrument covers the dollar, the euro, pound sterling, and the yen. However, at the G20 summit in New York two years ago this alternative was rejected. At the latest G20 summit in Brussels this issue was raised again but the participants in the discussion failed to reach an agreement on that score. They acknowledged though that the Bretton Woods Agreement had exhausted itself and that the world is on the threshold of creating a new currency.
    http://english.ruvr.ru/2012_12_25/Wo...currency-wars/

    I realise this is from The Voice of Russia but it is consistent with other readings I have done. Global currency wars have actually been going on for at least a few years or more now but they are really intensifying.

    I understand that Japan is about to start yet another round of easing and this will be the third such program in just the last four or so months. Fellow Aussies would understand that our AUD has been artificially inflated by easing programs from central banks around the world which is hurting exporters and trade. The Reserve Bank has been active in trying to mitigate this with lowering interest rates and other interventions but not aggressively, and certainly not enough to bring the AUD down enough.

    What is really happening here around the world is as one central bank launches an easing program to devalue their currency, other central banks respond in same as their currency appreciates and vice versa until everyone is easing collectively! Problem is, it is all becoming markedly less effective as the effects of easing programs diminishes, which is what we are seeing intensifying now.

    I'm reminded of Revelation 6:5 - 6 which reads...

    And when he had opened the third seal, I heard the third beast say, Come and see. And I beheld, and lo a black horse; and he that sat on him had a pair of balances in his hand.

    And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.

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    Further to what I was saying above about the AUD and currency wars is this interesting article from 15 December in Australia's Financial Review....

    RBA has reason to fear ‘currency wars’
    Karen Maley
    PUBLISHED: 15 Dec 2012 00:31:05

    This past week, the Bank of England’s boss officially confirmed what Australian investors have long suspected: global central banks are now deliberately driving their currencies lower to spur exports and growth.

    Mervyn King warned there was a risk of “currency wars” erupting next year as central banks vie with each other to drive their currencies lower in the hope of boosting exports
    .

    But many Australian investors – especially those with exposure to the manufacturing, tourism and mining sectors – say they are already suffering as a result of the world’s currency wars. They believe the dollar’s strength has a lot to do with huge bond buying programs launched by central banks in the United States, Britain, other European countries and Japan, which have artificially suppressed the value of the US dollar, the pound, the euro and the yen.

    In a recent speech, RBA deputy governor Philip Lowe noted that Australia wasn’t the only country faced with this problem. He said that other countries – including Canada, South Korea, Switzerland, New Zealand and some Nordic nations – had also seen upward pressure on their exchange rates, even though these rates were very low by historical standards.

    But analysts argue the problem for many businesses is that low interest rates aren’t enough to compensate for the stronger Australian dollar. When the RBA cuts rates, the parts of the economy that are most interest rate sensitive – such as housing – get the greatest benefit. On the other hand, the strong dollar is causing major headaches in manufacturing, mining and tourism.

    And there’s a risk that their problems could be spreading through the economy. According to the National Australia Bank’s latest monthly survey, Australian business confidence in November slumped to its lowest level since the financial crisis. The mood was gloomiest in Western Australia, with mining companies reporting a slowdown in orders. But firms in the manufacturing, transport, recreation and services sectors were also downbeat about their prospects.

    As a result, there’s a growing chorus of calls for the Reserve Bank to intervene and try to push the dollar lower. Some argue that our central bank should follow the lead of the Swiss central bank which has capped the Swiss franc at 1.20 to the euro, because of concerns that Swiss exporters could be crunched by a rising currency.

    The Reserve Bank hasn’t ruled out intervention, but economists believe the central bank would be deeply reluctant to intervene to drive the Australian dollar lower because, until now, a freely floating currency has acted as an important stabiliser for the economy. But, they warn, the Reserve Bank may change its mind if the dollar remains high even if our economy were to experience a severe slowdown.
    http://www.afr.com/p/personal_financ...NC2u4Lyo5v7NTO

    Begs the question just much longer can this fragile system hold together.

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    It doesn't take much predictive ability to see that 2013 will see the spotlight focused intensively on this issue. All you have to do is read about the global economic control of the AC, then work your way backwards:

    21,345) Everyone needs a universal chip to complete any kind of transaction. Attitude Adjustment and Account Adjustment become synonymous.
    21,344) No more currency needed - your ID/account number will impact your previously established account balance now expressed in electronic "eurawhats".
    21,343) Individual account balances established based on eurakiddingmes that you bring to the clearinghouse.
    21,342) Universal currency established - the Global Bank will tell you what your existing currency is worth, and give you the "new currency" in units called "eurakiddingmes".
    21,341) Cans gets kicked down the roads until the roads run out; cans go over fiscal cliff; Earth renamed "Greece". Aliens from Andromeda Galaxy drop intergalactic tourism rating from "guaranteed good time" to "not responsible for lost items/cannibalism".
    21,340) Supporters of "governess governance" elect only officials who convince them their nations can borrow their way out of debt (in countries where there are still elections); value of currency erodes; families go to market with currency in a 55 gallon Hefty bag and emerge with groceries in shirt pocket.
    21,339) Gold standard abandoned, along with other standards such as "Diligence and discipline are the foundations of success".

    For the sake of brevity, I'll skip steps 2) through 21,338).

    1) Eve persuaded to eat of the fruit of the Tree of Knowledge of Good and Evil.

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    Quote Originally Posted by Raphael View Post
    For the sake of brevity, I'll skip steps 2) through 21,338).
    Oh, Raphael, why don't we just skip 2013. Lord, we're ready to
    Carla

    And when he comes, he will convict the world of its sin, and of God’s righteousness, and of the coming judgment. 9 The world’s sin is that it refuses to believe in me.

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    This has been in the making for a good amount of time (at least in this country since George Bush, Sr.). At first it was going to be the North American Union with the Amero (google and you will find articles on this). It was all ready to be printed and struck up. But it got stopped because the whole world is in the same boat. So now comes the one-worldd currency. Right on time wouldn't you say? I read things like this and under my breath I say, "Come soon Lord Jesus..."
    Be joyful in hope, patient in affliction, faithful in prayer. (Romans 12:12 NIV)

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    China has been using a fixed currency valuation to give them a global competitive edge for a lot longer than a few years. For a long time they even had a second currency for non-Chinese to use when in China, to further create and exploit an advantage.
    Tall Timbers

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    Thanks Steve for keeping us up to date on these complex economic issues. I always appreciate your boiling it down to the salient points. Hopefully 2013 brings Jesus to take us home. Your bride awaits.
    Jesus is coming now at "Any Moment"! Are you ready?

    Romans 10:9 That if you confess with your mouth, "Jesus is Lord," and believe in your heart that God raised him from the dead, you will be saved.

    Praying for the Peace of Jerusalem. Amen.

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    Quote Originally Posted by $teve View Post
    World on threshold of currency wars
    By Pavel Orlov
    Dec 25, 2012 19:08 Moscow Time




    http://english.ruvr.ru/2012_12_25/Wo...currency-wars/

    I realise this is from The Voice of Russia but it is consistent with other readings I have done. Global currency wars have actually been going on for at least a few years or more now but they are really intensifying.

    I understand that Japan is about to start yet another round of easing and this will be the third such program in just the last four or so months. Fellow Aussies would understand that our AUD has been artificially inflated by easing programs from central banks around the world which is hurting exporters and trade. The Reserve Bank has been active in trying to mitigate this with lowering interest rates and other interventions but not aggressively, and certainly not enough to bring the AUD down enough.

    What is really happening here around the world is as one central bank launches an easing program to devalue their currency, other central banks respond in same as their currency appreciates and vice versa until everyone is easing collectively! Problem is, it is all becoming markedly less effective as the effects of easing programs diminishes, which is what we are seeing intensifying now.

    I'm reminded of Revelation 6:5 - 6 which reads...
    It's funny you brought this up because almost every day I get a vision or you know I see.the black horse and hear.it trodding at a fast pace with the scales. Like it is supernaturally running around right now! Maybe not but I swear I envsion this every day!
    Psalm 91 We live in the shadow of the Almighty.........

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    Quote Originally Posted by Raphael View Post
    21,341) Cans gets kicked down the roads until the roads run out; cans go over fiscal cliff; Earth renamed "Greece". Aliens from Andromeda Galaxy drop intergalactic tourism rating from "guaranteed good time" to "not responsible for lost items/cannibalism".
    And the Hitchhiker's Guide changes the entry for "Earth" to read: "No such thing as a decent Pan-Galactic Gargleblaster to be found at any price. Skip this place."


    If voting mattered, they wouldn't let us do it. -- Mark Twain

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    Quote Originally Posted by CarlaL48 View Post
    Oh, Raphael, why don't we just skip 2013. Lord, we're ready to
    . Right you are, Carla. I have been ready for a lllllllooooooonnnnnngggggg time.ing we wont have to wait too much longer.

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    This is a good article that explains what is happening very broadly with the world economy as a result of monetary stimulus. The author appears to suggest there may be a breaking point, at least for Europe, not so much because of stimulus which many countries around the world freely implement, but because of the "monetary dictatorship" that is holding European countries in economic bondage.

    Pritchard doesn't offer any clear outcome on what all this monetary stimulus could mean down the track only to say that while we might be seeing a rally in the markets, the world is still experiencing a 'structural trade depression'. Imo share markets are a poor indicator of the health or otherwise of the global economy. They are rallying only because of monetary stimulus not because of an underlying robust economy at all.

    If people understood what is really going on here in the world of global finances and economics, they would be far more cautious if not alarmed at future prospects of the world economy. There were some calls recently from analysts and economists that the Eurozone crisis was now over or heading that way. But the only reason for the calm in European markets was because the European Central Bank adopted a radical policy of lender of last resort and started purchasing government bonds in bulk to keep interest rates in check. As it were, Merkel (as does this author) has only just come out saying the Eurozone crisis is far from over.

    Like I mentioned in another thread, until something clearly shows otherwise, I don't believe there is any genuine recovery from the global financial crisis. At best it is an exercise in kicking the can down the road as it is popularly stated.


    Stocks to soar as world money catches fire, Calvinst Europe left behind

    By Ambrose Evans-Pritchard
    9:43AM GMT 01 Jan 2013


    The US, Japan, Britain, as well as the Swiss, Scandies, and a string of states around the world, are actively driving down their currencies or imposing caps.

    They are tearing up the script, embracing the new creed of nominal GDP targeting (NGDP), a licence for yet more radical action.

    The side-effects of this currency warfare -- or "beggar-thy-neighbour’ policy as it was known in the 1930s -- is an escalating leakage of monetary stimulus into the global system
    .

    So don’t fight the Fed, and never fight the world’s central banks on multiple fronts.

    Stock markets have already sensed this, up to a point, lifting Tokyo’s Nikkei by 23pc and Wall Street by 10pc since June.
    The Shanghai Composite will continue its explosive rally as China loosens the spigot again. The Politburo is reverting to its bad old ways of easy credit for state behemoths, and an infrastructure blitz, with $60bn of fiscal stimulus as well for good measure. Reform can wait.

    Yes, we all know that China has added $14 trillion in extra credit since 2009, equal to the entire US banking system. It is trouble waiting to happen. But trouble can be deferred.
    As a polar bear, I doubt that such a happy cycle is upon us. We merely have a rally within a structural trade depression.

    The headwinds of deleveraging will return with gale force. The glut of excess global savings that lay behind the great crisis of 2008-2009 -- and that has kept us stuck in the Long Slump ever since -- is still getting worse. The international trading system remains badly out of kilter.

    There is chronic overcapacity across global industry and not enough demand to carry a full cycle of economic expansion, or to reach "escape velocity" as they say these days.

    Until that changes, every global rebound is doomed to disappoint within a few quarters, and that includes the cyclical upswing of 2013.
    Japan’s new premier Shenzo Abe is sweeping into office like Roosevelt in 1933, commanding the central bank to do whatever it takes to defeat deflation, deliver 3pc NGDP growth, and drive the dollar-yen rate to 90.

    The Bank of Japan is already boosting its assets by 7.5pc of GDP this year. It will have to do yet more to satisfy Mr Abe. If he means it, Japan is about to give us all a nuclear monetary shock.

    The Fed is no slouch either. It is printing $1 trillion in 2013, even though the money supply is already catching fire.
    The bond yields that once led headlines no longer matter now that Germany has agreed to let the ECB act as a lender-of-last-resort for Spain and Italy -- on tough terms, of course.
    The euro will reach $1.44, just as austerity bites in earnest, a ruinous mix. As France loses 50,000 jobs a month --and its car industry -- François Hollande will agitate for use of Article 219 (2) of the Lisbon Treaty, exhorting the ECB force down the exchange rate. By then it will be too late. Scorched-earth policies will have destroyed is quinquennat.
    Spain’s jobless rate will ratchet up from 26pc to 30pc as Mariano Rajoy does what he is told, slashing and burning, in the midst of an accelerating housing crash. The anomaly is why the Left -- in Spain, and across Europe -- continues to back a reactionary EMU agenda that sets policy in the interest of creditors and drives youth unemployment rise to 55pc. La trahison des clercs.

    It is always hard in socio-politics to foretell a snapping point. It can come suddenly, by a chance event, like Britain’s Invergordon 'mutiny’ in 1931, or the shooting of French dockers in 1935.

    Yet I see little to disturb Europe’s grim status quo this year. The riots of 2013 will be just as ineffectual as the riots of 2012. Contraction will grind on. Germany's Wolfgang Schäuble will have his way.
    This is the year when it will become clear to many that Europe is in far deeper trouble than supposed; that it risks tipping into irretrievable decline; that it is wasting its precious youth at the worst moment, as the aging crunch nears, when it should have none to spare; that it is resorting to ever more coercive measures and autocratic methods; and all to save a currency that is the elemental cause of the disaster in the first place, and should morally be broken into its democratically-controlled parts.

    There is no place for a monetary dictatorship in 21st Century Europe
    .
    http://www.telegraph.co.uk/finance/c...ft-behind.html

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    First Shots Are Fired in Global 'Currency War'
    By: Jeff Cox
    CNBC.com Staff Writer

    Faced with a stubbornly slow and uneven global economic recovery, more countries are likely to resort to cutting the value of their currencies in order to gain a competitive edge.

    Japan has set the stage for a potential global currency war, announcing plans to create money and buy bonds as the government of Prime Minister Shinzo Abe looks to stimulate the moribund growth pace. (Read More: Japan PM Says BOJ Must Set 2% Medium-Term Inflation Goal)

    Economists in turn are expecting others to follow that lead, setting off a battle that would benefit those that get out of the gate quickest but likely hamper the nascent global recovery and the relatively robust stock market.

    While respective countries would have their own versions, the moves would follow three years of aggressive bond buying from the Federal Reserve as part of its $3 trillion quantitative easing program.

    Though critics worry about the long-term consequences, the three rounds of QE have managed to keep the U.S. economy afloat and have boosted risk assets such as stocks and commodities.

    "Ever since the Fed launched QE2 in August 2010, we have been in the currency-war regime," said Alessio de Longis, portfolio manager of the Oppenheimer Currency Opportunities Fund. "It will continue to be this."

    In a late-2012 announcement, outgoing Bank of Japan leader Masaaki Shirakawa indicated an aggressive easing program that would total 50 trillion yen over the next year or so.

    The move is part of Abe's plan to get the country out of its two-decade deflationary spiral, but has generated mixed reaction.

    "The economic policies of the new administration are set to be centered on loose monetary policy and fiscal pump-priming," Citigroup analysts said in a research note. "However, experience suggests this is unlikely to lead to a sustained revival of the Japanese economy."
    The massive Fed balance sheet expansion has resulted in the U.S. dollar declining about 11 percent against a basket of world currencies since QE began in 2009. In the meantime, stock prices have doubled since their March 2009 lows and the Morgan Stanley Commodity Related Index has gained about 80 percent.

    With the U.S. as its guide, competitive devaluation is expected to accelerate.

    Strategas investment strategist Jason Trennert included the "race to the bottom" as one of his five principle investment themes of the year.

    "Recent actions on the part of the Fed, the ECB, the Bank of Japan, the Swiss National Bank, and the Bank of England all suggest that financial repression
    (or the perpetuation of negative real rates on sovereign debt) is likely to be the most enduring investment theme for the foreseeable future," Trennert said.

    In 2012, global central banks cut interest rates some 75 times in an effort to create conditions that would spur growth.

    Economists, though, expect growth to meander around 3 percent globally this year, a level generally considered to reflect little actual growth at all.
    "So what could cause a market correction over the first half of 2013?" Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said in an analysis. "In our view it will either be 1) a rapid rise in interest rates and a re-run of the 1994 story; or 2) the economy fails to respond to the liquidity, forcing nations to devalue their currencies in an attempt to stimulate growth."
    "It is clear that many nations want/need a weaker currency – should China also feel the need for a weaker (currency)...then the risks of a risk-negative (currency) war would start to grow," Hartnett said. "Gold would rally sharply, but note a rise in gold prices and a fall in bond prices precipitated the 1987 crash."
    "These policies are creating the preconditions for central banks around the world in, say, five to 10 years from now to ask, 'How do we shrink these balance sheets in an organized and gradual manner?'" de Longis said. "History tells us that these large experiments, especially on a global scale, don't end up being unwound in an orderly manner."
    http://www.cnbc.com/id/100377532

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    Quote Originally Posted by Tall Timbers View Post
    China has been using a fixed currency valuation to give them a global competitive edge for a lot longer than a few years. For a long time they even had a second currency for non-Chinese to use when in China, to further create and exploit an advantage.
    China's situation is different and interesting. First, since they are the world's sweatshop, producing many products that no one else produces, and having become the corporate world's outsourcing shop, they have a little more leverage on the currency end than many other countries. That is to say, they can allow their currency to appreciate a bit beyond a fixed rate and still not affect their balance of payments. Simply because the products they produce will cost non Chinese consumers more money with a more valuable Yuan (Renminbi). That is true for any Chinese export that isn't produced elsewhere in the world (and there are thousands). But, China's problem is the huge influx of young people into its labor force each and every year. It has been suggested by some that China's economy has to grow at least 8% yearly just to absorb new entrants into its labor force (and avoid political unrest). That requires China to keep the west and other countries addicted to cheap products, (relatively speaking) and that in turn requires a cheaper currency. So, China will probably continue to resist much official appreciation of their currency exchange rate. They cannot afford to have a few hundred million or simply millions of people without a job. China has to feed the capitalist dragon it has unleashed.

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    Default Opinion: The big challenge as currencies face collapse

    The big challenge as currencies face collapse
    Thanong Khanthong
    January 25, 2013 1:00 am

    The Bank of Thailand is facing one of its greatest policy challenges ever: how it will manage its foreign reserves of around US$200 billion amid the global currency war. For Thailand's reserves - which back the baht currency and international transactions - are mostly backed by international reserve currencies that might become worthless. If the dollar or the yen, in the worst-case scenario, were to become worthless, our reserves would also become worthless. That would be amount to a repeat of the 1997 financial crisis when the baht crashed through the floor.


    Let's examine the latest situation involving all the major global currencies. Kyle Bass of Hayman Capital Management said the yen is toast. At 24 times central government tax revenue, cumulative Japanese government debt has reached a level that ensures financial collapse. Recently he told CNBC that the yen would collapse over the next 18 to 24 months from a sudden swing in expectations. The Japanese government will not be able to rein in runaway debt and Japanese government bond bubbles against the impending rise in interest rates.

    The euro has stabilised so far. But the fundamental sovereign debt problems have not been resolved. The Spanish and Greek banking systems have negative capital. Europe's banking system is worth about $46 trillion, while its gross domestic product is around $17 trillion. This implies that government money won't be able to bail out the banking system. The European Central Bank might end up printing unlimited money to spark off a euro crisis. Greece might seek an exit from the euro zone sooner rather than later.

    And Germany now wants its gold back. Germany's total gold reserves stand at 3,400 tonnes, the second largest in the world after the US. It is seeking to repatriate its gold from the vaults of the Federal Reserve of New York, the Bank of England and the Bank of France. By doing so, Germany is sending an indirect signal to the financial markets that it is also preparing to exit from the euro zone too.

    Germany knows that it can't bail out the entire euro zone. The gold shipped back home to Frankfurt could be used to back the Deutsche mark when Germany eventually reverts to its own currency. The question is whether the central banks still hold Germany's gold or only receivables. If Germany were to leave the euro zone, it would spark a euro crisis of galactic proportions.

    The US dollar is also facing a crisis of confidence. The timing to watch is March onward, when the White House and the Republican-controlled Congress will negotiate the US debt ceiling of $16 trillion. Given the animosity between the Democrats and the Republicans, the conflict might spill over into the financial markets, resulting in a collapse of confidence in the US Treasuries market. If buyers of US Treasuries do not show up and the Federal Reserve can't compensate for all shortfalls, the dollar will tank. A dollar default looks increasingly possible.

    The US's balance sheet looks ugly. The US debt is $16 trillion, equivalent to 100 per cent of the GDP. The US government's budget in 2012 was $3.8 trillion. Tax revenue was around $2.5 trillion, resulting in a budget deficit of $1.3 trillion. But the US off-balance-sheet debt is believed to exceed $80 trillion, which is by far higher than the world's GDP of $60 trillion. In fact, John Williams of Shadowstats believes that the US is creating $7 trillion in new debt every year. Since this is the case, the US Federal Reserve will have no choice but to monetise the government debt indefinitely. The dollar collapse is a matter of time.

    Of the Bank of Thailand's $200 billion in reserves, 50 per cent is denominated in US dollars, 25-30 per cent in the euro, 10 per cent in Asean currencies, 5 per cent in the yen and 3 per cent in gold. This is my own estimate from conversations with BOT officials. If the major currencies of the world, such as the dollar, euro and yen were to crash, the Thai central bank's reserves would lose value in a hurry.

    The way out is to walk away from the current global financial framework. How about putting half of the Bank of Thailand's reserves into a swap agreement with the Bank of China for yuan? The yuan will rise when other global currencies collapse. The central bank then can add more gold and other regional currencies to its reserves as a diversification of risks from the global currencies. Gold should have been accumulated earlier when its prices were cheaper.

    There is not much time left to protect the country's reserves. But it is better late than never.
    http://www.nationmultimedia.com/opin...-30198591.html

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    China tells U.S. to slow money printing presses
    Writing by Paul Taylor; editing by Ron Askew
    DAVOS, Switzerland | Fri Jan 25, 2013 2:23pm EST

    A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.

    Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."

    Jin said he was confident that the Obama administration and Congress would ultimately solve the debate over the so-called fiscal cliff, "but of course the printing machine will have to slow down for people to have full confidence in the dollar".

    China is the biggest purchaser of U.S. Treasury bonds, using its enormous foreign currency reserves primarily to buy U.S. securities as a long-term investment.

    "There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place," Li said.

    Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations' central banks.

    "Certainly, the level of the euro is high and creates some problem," he said, attributing the single currency's recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe's debt crisis.

    Moscovici called for cooperation between various areas of the world "to get to a real and good level of currencies".

    The euro has gained 10 percent against the dollar and more than 20 percent against the yen since last July when ECB chief Mario Draghi vowed to do whatever it takes to preserve the single currency.

    Deutsche Bank co-chief executive Anshu Jain said the euro had appreciated partly because fears of a break-up of the currency area had receded, and more recently because of quantitative easing in the United States.

    The U.S. Federal Reserve announced a third wave of asset purchases last month and has vowed to keep monetary policy exceptionally loose until unemployment falls below 6.5 percent in a drive to stimulate economic growth.
    http://www.reuters.com/article/2013/...90O10620130125

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    It's not so much the warning of currency wars that caught my attention in the following article, but the reference to a term I haven't read outside of a blog, at least I haven't seen it used in the media.

    That being "QE infinity".

    Now what are the likely outcomes from such a policy? The article doesn't mention, only to say it generates uncertainties. Seriously the ultimate end-game to all this printing can only spell disaster. One that hopefully occur after the rapture if not only very shortly prior.


    China’s Yi Warns on Currency Wars as Yuan in ‘Equilibrium’

    By Jeff Black & Zoe Schneeweis
    Jan 27, 2013 10:07 AM ET


    QE Infinite

    Yi, who also heads the State Administration of Foreign Exchange, said he’s concerned about the potential fallout from quantitative easing in the world’s advanced economies.

    “Quantitative easing for developed economies is generating uncertainties,” he told reporters in Davos.

    The foreign-exchange regulator has renewed concerns that China will see fresh speculative inflows of money after the U.S. and Japanese central banks said they would pump more funds into their financial systems.

    “The policies in major economies of monetary easing and low interest rates will boost global liquidity, increase risk preferences in the market and drive speculative funds into China,” SAFE said in a statement on its website on Jan. 25.

    Speaking in Beijing, Lou Jiwei, head of the country’s sovereign wealth fund, said he expects loose monetary policies to continue.

    “When everybody talks about whether the U.S. will have a QE4, I say no,” Lou, chairman of China Investment Corp., said at a forum. “The feature in the future is called QE infinite. Global central banks will adopt an infinite QE policy.”
    http://www.bloomberg.com/news/2013-0...ilibrium-.html

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    This currency intervention from Venezuela is being described by one popular blog as lobbing a nuclear bomb into the currency war.

    Got to say, this currency devaluation exercise is quite impressive.....

    Venezuela Devalues Bolivar by 32% Amid Shortage of Dollars
    By Charlie Devereux and Jose Orozco
    February 08, 2013 4:34 PM EST


    Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy.

    The government will weaken the exchange rate by 32 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas. Companies with operations in Venezuela, including Colgate-Palmolive Co., Avon Products Inc. and MercadoLibre Inc., fell on the announcement.

    A spending spree that almost tripled the fiscal deficit last year helped Chavez, 58, win a third six-term term. The devaluation can help narrow the budget deficit by increasing the amount of bolivars the government receives from oil exports. Chavez ordered the move from Cuba, where he is recovering from a fourth cancer surgery, Giordani said.

    “Any tackling of the massive economic distortions, even if far more is required, is positively viewed by markets,” Kathryn Rooney Vera, a strategist at Bulltick Capital Markets, said in an interview from Miami. “We expected more and more is indeed needed to correct fiscal imbalances and adjust economic distortions, but this is something and there may be more to come.”
    The new exchange rate will begin operating Feb. 13, central bank President Nelson Merentes said.
    http://mobile.bloomberg.com/news/201...er-dollar.html

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    Global currency war could get nastier, warns Brazil's Mantega
    By Alonso Soto and Luciana Otoni
    BRASILIA | Fri Feb 8, 2013 10:13am EST

    The global "currency war" could get even worse if Europe joins the fray, says the man widely credited with coining the term.

    Brazilian Finance Minister Guido Mantega told Reuters European countries should focus on reviving their economies with more investments, rather than trying to weaken the euro to protects jobs as France has suggested ahead of next week's meeting of G20 economic powers.

    "We will continue to have this currency problem unless the global economy takes off," Mantega said in an interview late Thursday. "The solution here is to make their economies more dynamic and jolt them out of stagnation."

    More than two years ago Mantega used the term "currency wars" to describe the series of competitive devaluations adopted by rich nations to bolster their exports amid the global slowdown to the detriment of emerging market nations.

    Since then Brazil has actively sought to depreciate its currency, the real, to protect local manufacturers of everything from shoes to suits and make its exports more competitive. It has taken bold action to curb speculative capital inflows with higher taxes.

    Mantega said that approach was not right for everyone - specially for heavily industrialized nations.

    "It is useless for the European Union to try to get out of the crisis by exporting more to the United States, Asia or even Brazil," Mantega said. "We are battling over the scraps. We are elbowing each other to compete in a very restrictive market."

    "I think the most important discussion at the G20 will be the return of stimulus policies."

    France plans to take its concerns over the euro to the G20 meeting in Moscow, warning that a stronger euro may hinder Europe's painfully slow recovery and ultimately the world's.

    French President Francois Hollande added to fears of a renewed global currency war on February 5 when he called for a weaker euro and urged the euro zone to set a mid-term target for its exchange rate.

    The euro has strengthen more than 8 percent against the U.S. dollar in the last six months, according to Thomson Reuters data. It is trading close to its strongest level in 15 months against the dollar due to improved sentiment about the euro zone bloc that has led investors to flood back in.
    http://www.reuters.com/article/2013/...9170N220130208

    Not could get worse but will get worse.

    But hey apparently a Nobel Prize-winning Canadian economist has suggested a possible remedy. See next post for details...

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    Robert Mundell: New Global Currency May Save The World
    Foreign exchange market
    05 February 12:09 PM

    The future of the global financial system seems to be unclear. Most economies around the globe are currently suffering from multiple shocks, which may result in a doomsday scenario.

    What can happen to the global financial system? Is there a way out of the crisis? Robert Mundell, is a Nobel Prize-winning Canadian economist, seems to have found a solution.
    Central banks around the globe keep cut interest rates down to record-low levels while expanding their money supplies through continuous money printing. While the aftershocks in the form of major inflation aren’t still there, most financiers are convinced that it is high time to create a whole new global financial system until it is not too late.
    New Global Currency

    As the Euro, the Japanese Yen, the US Dollar and other major currencies are suffering from multiple problems, it is time to think about alternatives. Another attempt to create a stable global financial system based on multiple currencies will most likely fail again.

    Mr. Mundell is convinced that a new currency should belong to the entire world instead of a single superpower like the USA.

    The new currency may be virtual and based on other major currencies. It should be easily convertible. Mr. Mundell conventionally called it the “device”.

    Moreover, it is necessary to determine the central bank and the emitter of the new currency. Still, the “device” plan may fail due to possible financial disintegration.

    Robert Mundell says that the probability of creating such a currency within the next 5 years is only 30%. He also concedes that Asia may create a common Asian currency within the next couple of years.
    http://www.profi-forex.us/news/entry4000004384.html

    No worries Rob there's a complete reset on the way which will launch the new global currency in short order, but props for your considerations and insights.

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    good one $teve

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