Currency Wars Have Begun?

[FlyingFox]

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.......

 

[explod]

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.

 

[FlyingFox]

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.....

 

[explod]

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
officially abandoned the Gold standard.

There are huge numbers of parallel historical examples. The US government and its central bank declared
de facto bankruptcy in 1933 when it confiscated privately-held Gold and made the ownership of Gold illegal
for Americans. It did so again in 1971 when it refused to honour its pledge to redeem the US Dollar in Gold
for anyone whether American or not. Central banks do not trust each other because their core function is
the debasement of money. Those who run the central banks know this. They know what they do and they
know what all their “colleagues” in all the other central banks are doing. In the sense that there is “honour
among thieves”, there is “honour” among central bankers too. As a rule, they keep this knowledge to
themselves. They will not expose the actions of their fellow central bankers because they do not want their
fellow central bankers to retaliate in kind.

 

[CanOz]

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'

 

[FlyingFox]

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.

 

[FlyingFox]

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'

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

 

[CanOz]

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

 

[FlyingFox]

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.....

 

[Aussiejeff]

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?

 

[CanOz]

...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

 

[FlyingFox]

...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.

 

[CanOz]

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

 

[Aussiejeff]

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...

 

[CanOz]

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:

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

 

[FlyingFox]

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.

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.

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.

 

[explod]

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.
The G20 said last week that there would be no currency wars and some central bankers such as the ECB's Mario Draghi have recently dismissed talk of "currency wars" as excessive.
Sir Humphrey, the wily civil servant in 'Yes Prime Minister', always stressed how important it was “to never believe anything until it is officially denied.”
Competitive currency devaluations are in effect a continuation of currency debasement. Debasement is simply the devaluing of one's currency or money. In ancient and medieval history it used to be done through the clipping of gold and silver coins.
Today it is done through excessive money creation through the printing of, and indeed the electronic creations of billions and billions of dollars, pounds, euros and other fiat currencies. Indeed, today central bankers are creating billions and billions of electronic money simply by pressing a few buttons on a computer.
Currency wars are set to deepen as most industrial nations in the western world are close to insolvent and look on the verge of recessions – potentially deep ones.
The fiscal situation of the U.S., the largest economy in the world, is appalling with the national debt having increased from $5.7 trillion in 2000 to over $16.5 trillion today.
Besides the U.S. national debt of over $16.5 trillion, the U.S. has off balance sheet debt or unfunded liabilities of between $70 trillion and $100 trillion.
The U.S. will never be able to pay these debts back and so it will attempt to inflate them away through currency devaluation. This poses risks to the global reserve currency status of the dollar - especially as the world moves to a multi polar world where India, Russia, Brazil and China exert their increasing economic and political power.

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

 

[sptrawler]

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.

 

[FlyingFox]

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.

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.

 

[sptrawler]

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