# Currency Wars Have Begun?



## Aussiejeff (4 August 2011)

First, the Swiss government, now the Japanese. ..



> Japan followed Switzerland in intervening in the foreign-exchange market in an effort to stem an appreciating exchange rate that threatened to damage export competitiveness.
> 
> Japan acted alone in the market, while officials were in contact with other nations, Finance Minister Yoshihiko Noda told reporters in Tokyo today. He also suggested that the central bank may follow with monetary stimulus, saying that he hoped the Bank of Japan would take appropriate action. The BOJ separately brought forward by a day the end of its scheduled policy meeting.
> 
> Switzerland is also contending with a surge in its foreign- exchange rate, unexpectedly cutting interest rates and pledging to boost the supply of the franc yesterday. Both currencies, of nations with current-account surpluses, have advanced as investors sought a haven from the euro-region debt crisis and a deteriorating U.S. economy.



http://www.bloomberg.com/news/2011-...ervening-to-stem-currency-s-appreciation.html

Brazil next on the warpath?? 







> Brazilian Finance Minister Guido Mantega warned Sunday that Brazil could not afford to be left behind in a global game of currency manipulation for competitive advantage.
> 
> “The whole world is fighting for markets out there, and one way to do that is with currency manipulation, by depreciating currency. We cannot be left behind in this game,” he said in an interview with O Estado de Sao Paulo.



http://www.turkishweekly.net/news/120647/brazil-does-not-step-back-in-currency-war.html

There have been currency skirmishes since GFC I, but could these "unexpected" moves by sovereign states without international consultation (and surely a whole lot more of "revenge" devaluations yet to come by those countries already at breaking point) be the tipping point for GFC MkII proper????

What hope for the Lil' Ozzie Bleeder, eh? How will a much lower Yen (and presumably a much lower Brazilian Real in the near future) affect our terms of trade etc? 

*sigh*


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## tech/a (4 August 2011)

Let me see.
Lower interest rates 
Stabilised property market.
Not all doom and gloom.


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## Uncle Festivus (18 January 2013)

The race to the bottom has entered a new era?



> Europe drawn into global currency wars as slump deepens.
> 
> The world is edging closer to all out currency conflict as Europe’s politicians join a chorus of policy-makers across the globe pushing for devaluations to fight for market share.
> 
> ...




http://www.telegraph.co.uk/finance/financialcrisis/9807092/Europe-drawn-into-global-currency-wars-as-slump-deepens.html

Meanwhile in 'Level Playing Field' and 'Free Trading' nirvana Australia, the RBA stands pat as Australians lose their jobs and industry to the better currency manipulators?

The AUD/USD is killing us!


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## notting (18 January 2013)

> EuroGroup chief, has signalled that Europe is no longer willing to be the last economic player holding the toxic parcel of an over-valued exchange rate




Should have said and acted on that 10 years ago!!


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## Uncle Festivus (18 January 2013)

Yes, I think the term 'Toxic Parcel' is rather appropriate for fiat currency, no matter who's currency it is? China can't get rid of USD's fast enough, to our benefit?


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## prawn_86 (18 January 2013)

Uncle Festivus said:


> Meanwhile in 'Level Playing Field' and 'Free Trading' nirvana Australia, the RBA stands pat as Australians lose their jobs and industry to the better currency manipulators?
> 
> The AUD/USD is killing us!




Any attempt by the RBA to manipulate/print AUD would just be laughed at by the rest of the World due to the size of our economy


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## McLovin (18 January 2013)

prawn_86 said:


> Any attempt by the RBA to manipulate/print AUD would just be laughed at by the rest of the World due to the size of our economy




Isn't it all relative?


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## prawn_86 (18 January 2013)

McLovin said:


> Isn't it all relative?




Yes but to devalue the dollar we would need to print at a greater rate then other countries wouldnt we? Mass inflation would probably be an issue with the amount we would need to print.

I could be wrong, macro-econ and money supply isnt my strong point


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## sydboy007 (18 January 2013)

prawn_86 said:


> Yes but to devalue the dollar we would need to print at a greater rate then other countries wouldnt we? Mass inflation would probably be an issue with the amount we would need to print.
> 
> I could be wrong, macro-econ and money supply isnt my strong point




Could copy the Chinese to  degree.  They were able to steralise a lot of the excess yuan by forcing the banks to hold up to 20% capital reserves - the megabank 4 are around the 8-9% mark.

You do rip off your people by pushing the currency below its true value though.  The Chinese people have been ripped of by trillions of dollars with the manipulation of their currency.

It will be interesting to see what happens though 2013.  To keep a currency lower you need to be buying other countries currencies.  At what point would central banks block other central banks from buying their currency?  Might work if you run a CAS, but if you require funding then it would be hard to tell your creditors to stop it.


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## tinhat (18 January 2013)

McLovin said:


> Isn't it all relative?




Australian GDP as a percentage of global GDP 1.2% (ranking, 12).
AUD trades as a percentage of global currency trades 7.6% (ranking, 5)*

This figure is from 2010.

Sources:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
http://en.wikipedia.org/wiki/Template:Most_traded_currencies#cite_note-BIS-1


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## sydboy007 (18 January 2013)

about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months.  Should help to tame the speculators without really causing too much harm to the funds we need.  if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.

Should be a nice earner for the Govt.  along the lines of the bank funding guarantees they made.  1.5B profit from that.


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## FlyingFox (18 January 2013)

sydboy007 said:


> about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months.  Should help to tame the speculators without really causing too much harm to the funds we need.  if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.
> 
> Should be a nice earner for the Govt.  along the lines of the bank funding guarantees they made.  1.5B profit from that.




The real speculators don't need to transfer any money at all. All you would be doing is stopping short term flows in general and preventing investments.

I wonder how many of the big investment banks have shorted the Oz and how many people will becomes the next George Soros when the currency does eventually go under?


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## prawn_86 (18 January 2013)

FlyingFox said:


> I wonder how many of the big investment banks have shorted the Oz and how many people will becomes the next George Soros when the currency does eventually go under?




Maybe you with some options 

The AUD will eventually fall, but i think it will be more an impact of a worsening economy as opposed to strength overseas


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## explod (18 January 2013)

prawn_86 said:


> Maybe you with some options
> 
> The AUD will eventually fall,




Why?

When debt to GDP is so bad in most of the western world I cannot see this.  If we look sideways we are in fact, compared to most other countries, reasonably self contained.  

We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.


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## FlyingFox (18 January 2013)

explod said:


> Why?
> 
> When debt to GDP is so bad in most of the western world I cannot see this.  If we look sideways we are in fact, compared to most other countries, reasonably self contained.




Please, lets not kid ourselves. If it weren't for mining we would be in **** right now. 

Because we live in a global world, we are always going to be exposed to global competition and currencies. The fact that I can easily get goods of services cheaply from somewhere else will always mean that local economy will be under pressure. And in Australia's case, we are so uncompetitive that even if the dollar came back to say 80c, most of our industries could not be saved. 






explod said:


> We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.




For now......


Edit: and plus what prawn_86 said later on


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## FlyingFox (18 January 2013)

prawn_86 said:


> Maybe you with some options




Always the astute businessman ... I haven't forgotten.....


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## Trembling Hand (18 January 2013)

sydboy007 said:


> about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months.  Should help to tame the speculators without really causing too much harm to the funds we need.  if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.
> 
> Should be a nice earner for the Govt.  along the lines of the bank funding guarantees they made.  1.5B profit from that.




Wouldn't work. You don't need to buy and sell the actual currency to move the currency.


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## prawn_86 (18 January 2013)

explod said:


> Why?
> 
> When debt to GDP is so bad in most of the western world I cannot see this.  If we look sideways we are in fact, compared to most other countries, reasonably self contained.
> 
> We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.




Because when financially everything does hit the fan where do you think all the money will be flowing? Certainly not investment into the AUD. People will be taking the funds home to their respective countries if they are required to sell investments.

I dont disagree with your other points, simply the flow of money in another financial crisis will be away from the AUD


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## burglar (18 January 2013)

FlyingFox said:


> ... we are so uncompetitive that even if the dollar came back to say 80c, most of our industries could not be saved. ...




We can export wine to US of A, if the dollar came back to say 80c,


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## FlyingFox (18 January 2013)

burglar said:


> We can export wine to US of A, if the dollar came back to say 80c,




Agreed.... But when wages are some of the highest in the world and under constant inflationary pressure it is difficult to see a way to be competitive.


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## FlyingFox (18 January 2013)

Also it might be all conspiracy theory but Goldman Sachs is calling the AUD short the trade of the century. Makes you wonder. We're a small enough market to be actually manipulated.......


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## explod (18 January 2013)

FlyingFox said:


> Also it might be all conspiracy theory but Goldman Sachs is calling the AUD short the trade of the century. Makes you wonder. We're a small enough market to be actually manipulated.......




Golmanransachs will be doing the opposite to that published.


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## FlyingFox (20 January 2013)

explod said:


> Golmanransachs will be doing the opposite to that published.




Perhaps. The opposite would be that the AUD goes to 1.20 or 1.30 ... That is a not a pretty place to be for the Australian economy.....


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## explod (20 January 2013)

How long before Central Bankers start to fight ?

Is the bundesbank's request for gold repatriation a start?

The following with thanks and acknowledgement to today's "Privateer Newsletter".  http://www.the-privateer.com




> On Friday, September 18, 1931, the head of the Netherlands
> Bank telephoned the Governor of the Bank of England, Mr Montagu Norman.  He asked Mr Norman if it
> was safe for him to continue to hold the Pound Sterling.  Mr Norman replied with an unqualified assurance
> that England would remain on the Gold standard.  On Sunday, September 20, 1931, the Bank of England
> ...


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## CanOz (20 January 2013)

Too true Explod...

I reckon the RBA is in a little pickle. To increase exports they need a weaker dollar, like the US. If they reduce rates that will kill the attraction if the AUD for the carry trade, but create a huge bubble on an economy already full of froth and not yet finished DE-leveraging. They could hold US/EU debt to de-value, but they would need to borrow to lend, so that's not a winning bet. 

Everyone else is playing the game, except Australia with higher rates and lots of debt.

Bit of a pickle really.

CanOz'


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## FlyingFox (20 January 2013)

explod said:


> How long before Central Bankers start to fight ?
> 
> Is the bundesbank's request for gold repatriation a start?
> 
> The following with thanks and acknowledgement to today's "Privateer Newsletter".  http://www.the-privateer.com




Soon, if it has not already started. Europe is finding the austerity route hard.

Nice article. It is due to the adoption of certain economic policies (namely spending borrowed money) that this has to occur. Governments figured out that they could spend borrowed money and by debasing currency you have less to pay. Therefore their policies of inflation and growth with gen next having to pay (gen next is becoming ever smaller). By debasing your currency you are assured inflation (and growth) at least on paper anyway.

Why do you think deflation is such a dirty word among economist etc? If deflation occurs for any sustained period of time , it all falls apart very quickly.


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## FlyingFox (20 January 2013)

CanOz said:


> Too true Explod...
> 
> I reckon the RBA is in a little pickle. To increase exports they need a weaker dollar, like the US. If they reduce rates that will kill the attraction if the AUD for the carry trade, but create a huge bubble on an economy already full of froth and not yet finished DE-leveraging. They could hold US/EU debt to de-value, but they would need to borrow to lend, so that's not a winning bet.
> 
> ...




Indeed. Can't see a way out of this pickle unfortunately.


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## CanOz (20 January 2013)

FlyingFox said:


> Why do you think deflation is such a dirty word among economist etc? If deflation occurs for any sustained period of time , it all falls apart very quickly.




Exactly, the US has no option but to inflate their economy, same as Japan (only now are they going to actually do it).

CanOz


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## FlyingFox (20 January 2013)

CanOz said:


> Exactly, the US has no option but to inflate their economy, same as Japan (only now are they going to actually do it).
> 
> CanOz




Agreed. The issue is that the strong population and demographic growth that supported these policies are reversing and not providing the multiplicative effect they did in the past. Long term sustained growth under the current model is almost impossible to achieve. Atleast the US has the option to "import" people.....


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## Aussiejeff (21 January 2013)

FlyingFox said:


> Agreed. The issue is that the strong population and demographic growth that supported these policies are reversing and not providing the multiplicative effect they did in the past. Long term sustained growth under the current model is almost impossible to achieve. *Atleast the US has the option to "import" people.....*




...and when it's China's turn?....will they import "people" too?


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## CanOz (21 January 2013)

Aussiejeff said:


> ...and when it's China's turn?....will they import "people" too?




Actually china is not in as much peril as Japan, which will end up with one retiree for every working age person in 30 years, or so. China still has the aging pop thing though.

The US though, is in the best shape for the future if they continue to increase thier population while improving education for Hispanics.

CanOz


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## FlyingFox (21 January 2013)

Aussiejeff said:


> ...and when it's China's turn?....will they import "people" too?




China's working population (or the demographic dividend) is peaking at the moment (2008-2012). Their working population is on the decline now and due to the one child policy, they will start seeing much faster decline than say Europe. Japans peak was near 1990. So as you can see, the real problems will not manifest themselves for another 20-30 years; which is also how long it will take for any current efforts to increase the population to make an economic impact.

See this link for some nice graphs http://www.china-europe-usa.com/level_4_data/hum/011_2.htm.


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## CanOz (21 January 2013)

FlyingFox said:


> China's working population (or the demographic dividend) is peaking at the moment (2008-2012). Their working population is on the decline now and due to the one child policy, they will start seeing much faster decline than say Europe. Japans peak was near 1990. So as you can see, the real problems will not manifest themselves for another 20-30 years; which is also how long it will take for any current efforts to increase the population to make an economic impact.
> 
> See this link for some nice graphs http://www.china-europe-usa.com/level_4_data/hum/011_2.htm.




Actually in China, Seniors as % of the population will increase from 8.4% in 2010 to 16.2% in 2030 to 23.7% in 2050 (OECD)...This is normally reflected in a ration called the Dependency ratio, respectively 13.6, 30.2 and 48.

Japan on the other hand...in 2050 will have a dependance ratio of 94.9%, Italy 98.5% or only slightly more than one member of the labor force for each Senior...scary. There are many other countries with similar forecasts.

Interesting side topic but very relevant to the economic discussion. 

By the way this and many other stats are presented well in Jack W. Plunkett's book, The Next Boom.

Cheers,


CanOz


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## Aussiejeff (21 January 2013)

The mind boggles as to how world economies will cope with this massive population aging problem from around 2020-2050. That's starting ONLY 7 very short years from now, folks.

Hmmm. I wonder, do the world's learned leaders have a 20 year plan in hand to cope with this looming economic catastrophe?

Can the leaders of relatively closed societies (that is, as far as allowing mass numbers of younger foreigners to immigrate there) such as Japan & China and even India, Pakistan etc open up to mass immigration?

Maybe the next 24 hrs is far enough to consider.....lol :1zhelp:

Chances are odds-on I wont be around to see whether 2050 is a very good year or not anyway. So good luck to those that are heading that way...


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## CanOz (21 January 2013)

Aussiejeff said:


> The mind boggles as to how world economies will cope with this massive population aging problem from around 2020-2050. That's starting ONLY 7 very short years from now, folks.
> 
> Hmmm. I wonder, do the world's learned leaders have a 20 year plan in hand to cope with this looming economic catastrophe?
> 
> ...




I really don't think its a doomsday sort of scenario. Humans have a remarkable ability to overcome challenges...besides there will be a big plague or something that wipes out a bunch...survival of the fittest!

CanOz


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## FlyingFox (21 January 2013)

Aussiejeff said:


> Hmmm. I wonder, do the world's learned leaders have a 20 year plan in hand to cope with this looming economic catastrophe?




Print money! Just my personal theory on this. 



Aussiejeff said:


> Can the leaders of relatively closed societies (that is, as far as allowing mass numbers of younger foreigners to immigrate there) such as Japan & China and even India, Pakistan etc open up to mass immigration?




I don't think they will have a choice but there might not be enough people around anyway.




CanOz said:


> I really don't think its a doomsday sort of scenario. Humans have a remarkable ability to overcome challenges...besides there will be a big plague or something that wipes out a bunch...survival of the fittest!
> 
> CanOz




While I do believe what your saying is true, we will have some periods of great hardship. May just be unavoidable.


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## explod (24 February 2013)

I think that this week is going to be tumultuous, We will see. the following from  Harvey organ.



> GoldCore Insight - Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold
> Currency wars are probably one of the greatest risks posed to the wealth of nations today.
> In September 2010, Guido Mantega, Brazil's finance minister, warned that an "international currency war" had broken out, as governments around the globe peg their currencies and devalue their currencies against each other.
> His comments were echoed by senior Russian and Chinese officials.
> ...




http://harveyorgan.blogspot.com.au/


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## sptrawler (25 February 2013)

I was sitting in Phuket airport just after the GFC(with my wife). I started chatting to guy next to me who happened to be an accountant.
Well as could be expected we talked about the imploding financial system.
I said, it's only money, numbers on spreadsheets. They will just print more, destroy more.
He was aghast and said this wasn't sustainable, I thought what a geek, but now I can see where he was coming from.
If money is just numbers and the government can be given carte blanche to just keep printing it.
Why can't everybody just demand more of it?
Why can't pay demands be outrageous, price increases be outrageous? Just print more money.


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## FlyingFox (25 February 2013)

sptrawler said:


> I was sitting in Phuket airport just after the GFC(with my wife). I started chatting to guy next to me who happened to be an accountant.
> Well as could be expected we talked about the imploding financial system.
> I said, it's only money, numbers on spreadsheets. They will just print more, destroy more.
> He was aghast and said this wasn't sustainable, I thought what a geek, but now I can see where he was coming from.
> ...




They can be; for example in Zimbabwe. The problem is that things have different inertia. Wages have a problem keeping up with inflation rates of 3-4% and are reviewed annually. Imagine if you're having inflation of 8-10%?

Also different assets have different inertia. Anything not linked to a reserve may not keep up with inflation mainly because wages and labour costs will not be able to keep up. Supply and demand.

Personally my two biggest gripes with printing is that it devalues savings and it devalues labour. There was a study somewhere about wages of American workers and they calculated that the average male worker is no better off than they were 20-30 years ago if you account for inflation.


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## sptrawler (25 February 2013)

FlyingFox said:


> They can be; for example in Zimbabwe. The problem is that things have different inertia. Wages have a problem keeping up with inflation rates of 3-4% and are reviewed annually. Imagine if you're having inflation of 8-10%?
> 
> Also different assets have different inertia. Anything not linked to a reserve may not keep up with inflation mainly because wages and labour costs will not be able to keep up. Supply and demand.
> 
> Personally my two biggest gripes with printing is that it devalues savings and it devalues labour. There was a study somewhere about wages of American workers and they calculated that the average male worker is no better off than they were 20-30 years ago if you account for inflation.




This is the problem, money has to be stored in an appreciating assett or it depreciates.

That is why I believe, money has to be moved from one assett class to another, just wish I could time it right .lol


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## FlyingFox (25 February 2013)

sptrawler said:


> This is the problem, money has to be stored in an appreciating assett or it depreciates.
> 
> That is why I believe, money has to be moved from one assett class to another, just wish I could time it right .lol





Agreed. Timing is everything. However, macroeconomically, there are not many appreciating assets around for the long run.

Moreover, the US dollar, the world's reserve currency is actively being attempted (and I use the word attempted because I do realize that printing money may not have a direct impact on inflation) to be manipulated. 

What do you move to in this case?


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