Elaine Meinel Supkis
More information is now spilling out of the cave where the G7 dwarves met. Seems, as I predicted, the dwarves are not so united after all. Indeed, they are swinging hammers and axes at each other. The bank melt down is to be blamed on the Chinese Dragon who sent some observers to this confederation meeting. Hu needs to be entertained as he whacks rivals in the shins at home. HAHAHA. Turns out, the US vetoed condemnation of the weak US dollar. HAHAHA. Everyone wants BIGGER trade surpluses with the US. And reality be damned.
The dollar fell to an all-time low against its major trading partners after the Group of Seven failed to address the record decline following a meeting of finance officials.
The policy makers, representing the U.S., U.K., Japan, Germany, Italy, France and Canada, stuck to language in prior statements by saying ``excess volatility'' in currencies is ``undesirable'' and that currencies should trade in line with fundamentals. They also intensified calls for China to let its currency strengthen, during the Oct. 19 gathering in Washington.
``The statement gives the market a green light to sell the dollar,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey, which has about $250 million of funds under management. ``With no comment from the G-7 about its weakness, the dollar could decline to $1.45 per euro in a month.''
OK: no one believes me, it seems. The problem isn't the yuan. It is the yen. I can't understand why this is so hard to understand. We don't talk about the yuan 'carry trade' because there is none. China's interest rates are in line with the rest of the world. China, like the rest of the world, has inflation. China can see the value of the yuan rise if the US and Europe wish to hold Chinese yuan but we don't hold hardly ANY yuan in our own FOREX reserves.
The game is, if one wants a weak currency, they must buy the currency of their trade rivals and then hold them. Ergo: if Europe and the US want the yuan to be strong, they must ask for lots and lots of yuan and then HOLD THEM. This poker game is laughably easy to understand. But they don't want any yuan or yen. Europe and the US want the world to do the way we made Germany and Japan do it with first, the Bretton Woods II Accords and the Plaza Accords. In these cases, the US, as the world's reigning empire, ordered everyone to weaken the dollar vis a vis their currencies and so they did. the Plaza Accords caused Japan to go into this huge balloon which pretty much destroyed their domestic economy.
Germany used its surplus wealth created by the sudden hike in the DM to reunite Germany after bribing Russia to remove their troops. So Germany didn't have a balloon like Japan.
The US, when the dollar became strong again after the curious and bizarre Asian Currency Crisis went off on a tear and had the Dot Com bubble. The following Wall Street/housing bubble was not due to a good currency situation, it was pure hokum, Greenspan's 1% interest rates driving the bids on stocks and assets.
So here ends the latest chapter in Snow White and the G7 Dwarves: everyone wants a strong dollar except the US and so the dollar is weak. But they can't say a thing about this so they attacked China, as per always.
The yen rose against the 16 most-actively traded currencies this week as a decline in global stocks prompted investors to sell assets funded by loans in Japan. A report this week is forecast to show existing home sales in the U.S. fell to the lowest since 2001 in September.
Ah! This pleases me no end! I said, when the Japanese boasted that China's FOREX reserves couldn't stop them from raising the value of the yuan no matter what, the Chinese were helpless, I said, China would counter attack with tremendous speed. And here is the proof. All it takes to move currencies is to join a rush and then give a good push in the right direction. So if the playing field is tilting towards a stronger yen, all China has to do is pump a small surge into the mix and this gives the yen more momentum to move where the Chinese want it to go: UP AND UP. This is a war between China and Japan. China thought Japan would help them stop the barking in the West. But Japan joined so China upped the value of the yen in retaliation.
I expect the Japanese to take countermeasures on Monday though what they may be, I can't tell yet. Another threat to get nuclear arms? Or will they play footsie with the seperatists in Taiwan? Can't wait to see.
European finance ministers this weekend failed in their bid to slap down the United States for allowing the dollar to plunge to record lows against the euro. US Treasury Secretary Hank Paulson vetoed French, Italian and German proposals to use the final statement from the Group of Seven (G7) finance ministers meeting to warn of the problems that are facing Europe due to the falling dollar.
Sooooo....seems the disgruntled dwarves in Europe are in a bad mood. They wanted Dopey, of Goldman Sacks, to do something, anything, to make the dollar stronger. IE: tell Bernake, there was no BLOOD IN THE STREETS but it was all a farce and he should raise interest rates. But of course, right on the heels of the G7 grumbling and growling at each other, the US stock market was fed a poisoned apple made by the Wicked Queen and it keeled over, dead. This sudden death alarmed everyone. But did it stop them from wishing for a strong dollar?
Nope. They all want to export to the US. They don't care the US has the world's biggest trade deficit, bar none. They don't care we are going bankrupt. They don't care that a currency cannot, just CANNOT be 'strong' of the trade deficit is over 6% a year, every year. Over 1%+ for every year for 35 years. Normally, when this happens, a currency is hammered mercilessly. But not in this case. Everyone is seeking trade advantage via weak currency vis a vis the dollar. A strong yen is useless since Japan won't let in any imports in any way, shape or fashion. If they have to tax their people at 60% and then raise the sales tax to 17%, they will do this.
But low-tax USA is a great destination! China finds this all very funny. We like to imagine, China wants us to be the destination of all they produce. China has a very LONG history of being the world's top manufacturing power and demanding gold for goods. They know what money really is. Note that since they loomed larger in the world's economy, they and India, another gold-loving civilization, the value of gold has shot to the heavens. Not the dollar.
From the Telegraph:
The ministers limited their currency comments to a warning to China to allow its currency to appreciate. They ordered the Asian giant to let the renminbi rise faster, amid concerns its peg against the dollar is one of the root causes of instability in global markets. Having sent only a skeleton team to the meetings, the Chinese government is not expected to respond.
ALL currency markets are manipulated. The problem for the dwarves manipulating currencies is that a DRAGON is not only doing this too but now a RUSSIAN BEAR has joined and between them, they control almost half of the world's FOREX reserves. Which they are using artfully and I suspect, in tandem. If the G7 imagine they, alone, can conspire, they are stupid. Others outside the Dwarf Mini Hut also can do this. Dragons are known for their craftiness, for example. And Bears may hibernate but when they are awake, they can pry open windows, doors, rip them off the walls and enter and eat. All we need now is some crazy Persian cats coming along, clawing everyone's noses.
From the Telegraph:
The G7 communiqué said: "Our response to recent financial turbulence must be based on full analysis of its causes."
Despite the rise in oil prices to a record high above $90 a barrel this week, the statement did not urge oil cartel Opec to raise its production levels.
HAHAHA. Analysis: we can't ask Saudi Arabia to pump more oil! They CAN'T!!!! Oh my god. And we can't ask Iran Kitty to pump more oil which is why it is laughing at us now. Ouch. And Russia? HAHAHA. Oh, no! They are...with the Dragon! So far, threatening this bear with missiles has been a miserable failure. I wouldn't put it past Putin to use his FOREX reserves and Sovereign Wealth Funds to hammer the dollar and raise the value of the euro. Kill two dwarves with one, big stone. Who needs finesse?
Will the dwarves learn any lessons? Is the moon green cheese? I can't wait to see what happens next.
European Central Bank officials said food costs and record oil prices are fanning inflation pressures in the 13 euro nations, suggesting they may support further interest-rate increases.
``Inflation risks have increased recently'' and the ECB will ``have to counter these risks should they materialize,'' said Germany's Axel Weber in an interview today after a meeting of the Group of Seven nations in Washington. Austrian colleague Klaus Liebscher said the threat of faster inflation is ``significant.''
The ECB shelved a planned rate increase in September after the U.S. housing recession caused a jump in credit costs. While G-7 finance ministers and central bankers said Oct. 19 the market rout threatened to drag down growth, President Jean- Claude Trichet said they agreed on the need to ``remain vigilant'' on global inflation.
Paulson claims there is no inflation in the US! Japan has negative inflation. But Europe is inflating! Of course, the US and Japan are both lying bastards. If Europe wants no inflation, they should destroy the income of the working classes, starve people to death, let raging storms wash thousands of people out to sea while doing nothing, etc. Imitate the masters! Of course, labor unrest in Europe is growing ever sharper. The more they imitate Japan and the US, the more likely the Bastille will be stormed and the heads of the right wingers put in power due to fear of Muslims, will end up on pikes, not turnpikes.
Group of Seven finance ministers and central bankers said the credit-market rout will slow economic growth and strengthened calls for China to let its currency appreciate.
``Recent financial market turbulence, high oil prices and weakness in the U.S. housing sector will likely moderate'' the global expansion, officials said in a statement after meeting in Washington yesterday. ``Our overall economic fundamentals continue to be strong and emerging markets are providing critical impetus.''
When I read this, it was obvious, the brave face plan is in place. You have nothing to fear but China! Yes, I can see that message. Of course, the Japanese are terrified of China. But their latest games made it worse for them, not better. If China forces the value of their precious, poor yen upwards vis a vis BOTH the dollar AND the euro, this kills their whole profit margin and thus, they will genuinely end up in a depression.
The 'strength' of many world markets is based on selling to the US while not buying from the US. To the tune of $700+ billion a year. Impossible.
The G-7 set aside differences over the dollar's drop to a record low against the euro, sticking to past language in saying ``excess volatility'' in currencies is ``undesirable'' and that they should trade in line with fundamentals. Other than the yuan, no specific currency was mentioned.
I include this to show how this story has morphed over the last three days. Why would the creators of the world FX trade system hate 'volatility'? If they hate this, they should control their own currencies! This means ending thost stupid off shore pirate organizations that spend much of their misbegotten time, playing shuffleboard with coins. The insane and utterly useless shifting of funds from account to account accounts for much of this 'volatility'! The cure?
Every nation must hold about $1 trillion in FOREX reserves. Note how the yuan is NOT volatile! It is 'stable'! Yet it is the only currency criticized! I have said this before: make up your minds, guys! Do you want Safety or Risky? Risky makes wealth and breaks hearts as she destroys as swiftly as she creates. Poor Safety is slow, easy, quiet and no one gets rich but no one blows up and dies.
With investors marking the 20th anniversary of the 1987 crash this month, here's a look back at how that episode compares with other notable drops in the Dow Jones Industrial Average, from the crash of 1929 to the 2007 credit meltdown.
An unusually high degree of risk taking across asset classes made recent financial market turmoil all but inevitable, former Federal Reserve Chairman Alan Greenspan said on Sunday.
"The financial crisis that erupted on August 9 was an accident waiting to happen," Greenspan said in a speech on the sidelines of the International Monetary Fund and World Bank meetings. "Credit spreads across all global asset classes had become suppressed to clearly unsustainable levels."
"Something had to give."
The gift that keeps giving! Greenspaniel can't shut up, can he? Arf, arf! He happily points his cute little nose at allllll the messes HE made and then barks at us, wagging his little stubby tail, his rear haunches writhing with joy. 'Puppy made a BAD mess!' he says in dog body language.
Well. 'BAD DOG. GO TO YOUR BED!' I yell, but he ignores me.
"If the pernicious drift toward fiscal instability is not arrested and is compounded by a protectionist reversal of globalization, the current account adjustment could be quite painful for the United States and our trading partners," he warned.
The current account gap swelled to more than 6 percent of U.S. gross domestic product last year, leaving the United States reliant on foreign capital to finance that deficit.
"At some point, foreign investors will balk at increasing their share of dollar denominated assets in the portfolios they hold," he said, adding the recent dollar decline is an indication that America may be nearing that point.
Thank you, naughty puppy. The US doesn't plan on going 'protectionist'. The plan is to go BANKRUPT. Thank you. Instead of reining in our appetites for imports, we will import until we can no longer import. And China decides when that happens. This is when they shut the door in our faces and tell us, they are no longer interested in selling for dollars. They are looking for gold or other goodies. And this day isn't in the far future, it is in the nearer future.
The fact that less than one week after Japan boasted, they will boost the value of the yuan while the Chinese couldn't do anything about the yen, and then the yen, not the yuan, shoots up in value means our own free ride is ending.
This should be painfully obvious now. Again, thank you, Greenspaniel, bad boy, bad, bad boy.