China, Japan And Korea Sign New Monetary Union Accords

May 4, 2008

Elaine Meinel Supkis

Big news, so we won't see it in the US: China, Japan and South Korea have finalized the second stage of their currency unification project! The euro has blazed this path quite clearly. The IMF and the US hates this development and tried mightily to stop it. But we have no 'leverage' anymore. This union is the joining up of the world's biggest FOREX reserves and will be used to build a huge financial fortress to protect Asia if the US decides to cheat them by either devaluing the dollar against their currencies or going bankrupt! Japan was tempted for a year to side with the US and Europe against China's currency but last summer showed how the Chinese soundly defeated the Japanese in this matter. Japan surrendered last September and now is joining China against the other G7 partners. And I predicted this! HA.

Statistical Releases and Publications Scheduled for the Next Six Months from April to September 2008

The release of "Foreign Exchange Rates (Monthly)" will be stopped as of April 2008. (March 31, 2008)

First off, a Russian reader alerted me to this notice at the Bank of Japan's official web page. I read their press releases a lot but fell behind this week due to all the breaking stories. Well! Just like the Bank of England unilaterally deciding to keep the information about banks seeking help because they are insolvent or the private bankers of the Federal Reserve last year unilaterally deciding to hide the M3 statistics from us even as they still collate these numbers, so it is with the Bank of Japan! In this case, unlike England trying to prevent bank runs by withholding vital information or the US hiding inflation by hiding vital information, Japan is hiding CURRENCY information vis a vis the dollar, I might add. So this news alerted me the other day that something big was about to happen in the currency news markets. And it happened yesterday.

East Asian finance chiefs move closer to regional foreign exchange reserve swap

Finance ministers of China, Japan and South Korea took one step further on Sunday towards a regional foreign exchange reserve swap arrangement.

"We reached an agreement on several key elements of the CMI Multilateralization," finance chiefs of the three East Asian countries said in a joint statement after they met on the sidelines of an annual meeting of the Asian Development Bank (ADB).

The CMI, or the Chiang Mai Initiative, is a regional financing arrangement agreed by finance ministers of ASEAN (Association of Southeast Asian Nations), China, Japan and South Korea in 2000 to prevent a recurrence of the 1997-1998 Asian financial crisis.

Under the scheme, the central banks of participating countries can swap foreign exchange reserves to counter speculative moves on their currencies.

CMI Multilateralization is the next step, as has been agreed at the last finance ministers' meeting of ASEAN and three East Asian countries in Japan's Kyoto last year, which would be moving from the bilateral system to a multilateral one.

The proposal holds that by setting up a common pooling reserve, in which each country would input an amount of foreign reserve under a single agreement, any country in the framework could draw from the fund to cope with short-term liquidity difficulties.

I have been rather deeply involved in Asian politics for most of my life. My father, since WWII. It is very interesting, watching the people of Asia rebuild and reformulate themselves. The madness of the Japanese empire has been replaced with a sense of sly rebuilding of a Greater Asian Co-Prosperity Sphere. Previously, the Japanese were extremely arrogant and brutal and tried to build this via military conquests. Now, they have wised up and are using diplomacy. Over the last several years, I have praised Hu, the leader of China, for his many successful diplomatic initiatives.

The recent dust up over Tibet was a big test. The Chinese leadership first retreated into snarling and snapping at the Tibetans. But now, they are organizing meetings with the Dalai Lama and so he has won something out of this. But the Chinese won, too. They let it be known, they will not let their nation be ripped to shreds by the West. This was a test of strength Indonesia, China, Pakistan, Iran and many other nations being ripped apart understand very well. So overall, I would say that China is now ahead of that game, not behind.

Back to the rising Asian currency Zollverein that is slowly being built: this process began in earnest after the Great Asian Currency Crisis. When Japan folded itself into a real depression in the 1990s due to the US recession of 1990 caused the Japanese Bubbles to pop, the flow of money and trade in Asia was hit very hard. Monetary speculators had to drop the strong yen and seek their fortunes elsewhere as the Bank of Japan dropped interest rates rapidly to zero. This was before the notorious 'Japanese carry trade.' Japan began to build one of the biggest FOREX reserves in the world during this time. Their notion to park many US dollars in their FOREX accounts was a novel innovation. Even they couldn't see how this would create the 'Japanese Carry Trade.' All they knew was, it made the yen weaker and weaker.

All the other trade partners with the US, having huge surpluses, didn't accumulate dollars in FOREX reserves like Japan. They celebrated roaring stock and property markets with glee. Then the global traders began to sell, not buy, these Asian currencies. Simultaneously. This was because the Federal Reserve dropped interest rates just like Japan and the US stock market took off like a rocket...AND the Nikkei FELL. So Japanese investors, cut off from decent interest rates at home, first parked their loot from their trade surplus with the US in other Asian countries or in the US stock markets. We had a huge bubble form here, when it popped, it never quite returned. At the height of the last bubble, if you key in inflation figures, was significantly lower than the Dot Com bubble.

My cartoon from July, 2007, concerning Japanese trade with China.

The flood of foreign investment in Asia collapsed rapidly and the US stock market ballooned just as rapidly. So we had a vast crisis in Asia while the US went hog-wild. There was really no need for a Japanese Carry Trade in 1998. But the fix for the Asian Currency Crisis created the Japanese Carry Trade. Which took off AFTER the US stock market bubble burst! From 1998, with the IMF saving Asian economies in their usual brutal fashion, to today, world markets have been utterly transformed. Back in 1998, China was still a struggling second tier economy. Japan was floundering in a depression. The US budget deficit vanished in a puff of smoke and this particular flood of red ink ceased. All systems seemed to be evolving rapidly with the US in full control of Asia's economic fate. Then the Dot Com Bubble broke. Greenspan panicked and dropped interest rates rapidly starting in 2000 and the selection of Bush as our dictator. The fatal US economic bubbles that mirrored the 1990 Japanese bubbles, began. Both the US and Japan had super-low interest rates. But Japan had a gigantic FOREX reserve which doubled in size every 2 years! So they were hoarding dollars. They used the Bank of Japan to issue credits [NOT SAVINGS] to buy US dollars and hold them so the yen would be weak! Investors and speculators were then welcomed to come to this new banking entity and borrow money at super low rates! So Japan flooded the world with new loans while hoarding dollars which they bought...with loans they issued themselves!

To do this, BOTH the government of Japan and the government of the USA had to overspend their budgets. This produced an epic amount of Japanese government bonds and US Treasuries. Which Japan bought! Both the US bonds AND their own. This way, they further weakened the yen. China began to imitate all this starting in 2000. They built up their FOREX reserves, they bought US government bonds and debts and they stored all this in a warehouse bank and weakened the yuan! This began a political process of non-stop howling and raging in the US and Europe. Which Japan gleefully joined.

For Japan is part of the Inner Sanctum, the Banking Security Council of the planet Earth: the G7. This group worked under the wing of the US victors in WWII. The US, to fight the Russian and Chinese empires, decided in 1948 to rebuild all the empires we were battling for 150 years and thus, create a hyper-empire. This is the present system. The other empires were all defeated or bankrupted by 150 years of endless global wars. The US was flush. So we decided to pay for 90% of all the costs of the military power of the G7 nations and we also decided to let them flood us with imports so their economies would grow. This way, they would be our buddies and would be strong against communism.

This scheme worked perfectly until the high costs of running a global empire protecting our G7 buddies began to bankrupt us. Since they paid less than 10% of the costs and were finally over 60% of global economic power, the US began to flounder and sink under the weight of all this. The G7 allies continued to pour their exports into the US markets and the US tried various tricks to fix this like dropping the gold standard, debasing the currency and devaluing the dollar like crazy. Inflation took off in the US. The end is obvious: we will go bankrupt. But the one thing that can save us, dropping the idiotic idea we can patrol the planet at our own expense, still is the untouchable item on our agenda. We are spending more and more, not less and less. Our military costs are greater than the costs for military for the entire planet! This is pure insanity.

Japan loves this. And nickels and dimes us in negotiations over payments to the US military. It is at only #2 billion a year, a laughable sum. And they screamed like bloody Mary while negotiating this. They wanted us to pay for defending them by taking more loans with them! So...last summer, the G7 had a series of hysterical meetings whereby frightened allies tried desperately to figure out how to keep this goofy status quo going. They want the US to run up giant trade deficits with THEM and protect them militarily while paying all the costs.

Here is my July 4, 2007, story about all this:

Japan and the oil pumping Arabs are hosing the planet with liquidity. This liquid is red ink mostly from the USA. But the flood of money pouring into the coffers of these two entities far exceeds any trade so where does it come from? Time to talk about magic numbers and infinity! Also, Writers assure us that a weak dollar is a good dollar but doesn't explain how we can kill the dollar faster than Japan can kill the yen. And reporters continue to try to understand hedge funds. They are getting more and more suspicious as hedge fund hell hounds foam at the mouth, bite investors and then die suddenly. And Moody's raises Japan's credit rating.

Here is a cartoon from July, 2007, showing Rato the Rat chewing out China about currency issues and interfering with IMF powers to pry into China's affairs:

Here is my July 22, 2007 story about the IMF trying to twist China's arm while assisting Japan and the US to do goofy currency games and schemes.

Sometimes very small matters that barely make the news end up determining the fates if billions of people's lives. I sense the arcane banking accords, the Basel II understandings and the Pillar I, Pillar II and Pillar III developments are part of the triggering mechanism that is going to play a key roll in the coming financial and political confrontation of the depressed and dying US and Japanese economic systems. As I keep pointing out, the world's #1 and #2 economies cannot both be running dying currencies simulatneously without explosive results. Today, I am going to compare an interview with the head of the Chinese delegation to the IMF and the head of the IMF itself. Ouch! They tell totally different stories about negotiations!

So they all decided CHINA should fix this. By cutting China's trade and strengthening the yuan, Japan and Europe could continue to flood the US with exports but China would bite the bullet. So the IMF, the World Bank, the EU and Japan all howled, with the US, at China. In the US, most economic bloggers were fixated on the need to raise the value of the yuan. So by spring, China began to raise the value of the yuan. Instead of supporting this and expanding it so the US ceased our trade deficit and overspending, everyone redoubled their howling at China. The more China raised the value of the yuan, the more everyone screamed at China! There was NO REWARD.

When China protested and pointed out the obvious: Japan's weak yen against the dollar and the euro was an even greater problem, everyone told China to shut up. Japan was very, very happy about this and merrily flooded the currency markets with trillions in red ink. This money was used to balloon not only world stock markets but gold markets, commodity markets, property sales, mergers and acquisitions, everything that could be bought was sold at astronomically rising prices. Because this flood of Japanese loans were heading rapidly towards infinity. By July, Japan was openly teasing China about this. They even boasted, they would drop the yen to 130 to the dollar by October. China blew up and began countermoves which worked since the yen rose in value to a peak of 89 yen to the dollar before the Japanese surrendered to China. This meeting yesterday is them signing a peace treaty with China. Now, China and Japan will be playing on the same team. AGAINST THE US.

Here is my July 8, 2007 report:

I found yet another interesting international agency that is filled to the gills with economists and political personages. The Bank for International Settlements moves in synch with its fellow school of fishes. It doesn't deviate in any significant way but it does have staff who admit they have very little idea, what is going on and where it will all end up. This, I presume, is due to a childish level of naivety and a total lack of understanding the nature of empires and what caused them to collapse and how others may look friendly but are really rivals seeking advantage and even killing off fellow countries and economies in this pursuit for dominance. Here is the annual report of this latest group of internationalists seeking to see the future.

Readers sometimes email me about my reports not explaining things thoroughly. This BIS report is one that everyone should carefully read. Like all the international systems we have today, it was set up to rebuild Japan and Europe and now exists to keep the status quo running...a status quo that is destroying the US economy. This is very simple: Europe and Japan benefit if the US is forced to pay the price of the G7 alliance! They won't change unless we force them to change. But we don't want to stop, either. We imagine the IOUs we are building will never be billed to us. We will have infinite debt! But this is false and already is causing global inflation and the collapse of the entire G7 banking system. This is why yesterday's meeting is so ominous: JAPAN, CHINA AND OTHER ASIAN EXPORTERS ARE PREPARING FOR THE LOOMING US BANKRUPTCY AND ECONOMIC COLLAPSE!

Let's go back to last September. The yen is now very strong. The Japanese Carry Trade has utterly vanished. Since late July, the G7 banking system has collapsed due to 'no liquidity'. NO ONE bothers telling us who generated all the previous liquidity, of course. This is simple: THE TOP G7 BANKERS ARE ALL LYING BASTARDS. They lie about everything. Note how, on a weekly basis, I bring news about these guys either lying about obvious facts and figures as well as their pathetic attempts at hiding information by curtly telling us that we have no need or any right to know anything!

SEPTEMBER 20, 2007: Japan and China's Banks Have Secret Meeting Yesterday!

Today, we must discuss Risky and Safety, the devil and angel within all of us. The Bank of England is accused of NOT hiding bankruptcy at Northern Rock. Seems the politicians want the public kept in the dark. The drop in US interest rates roil world banks and suddenly, Japan and China called a truce and had a very SECRET meeting to discuss the US banking system and the world FOREX markets and Saudi Arabia threatens to drop the dollar as reserve currency but I bet the Dragon will visit the king there and have further discussions. Gads, the US and UK empire is collapsing and the wars we are losing are causing world oil prices to rise and are we ever in a bad fix here! And the Chinese will fix this, for certain.
*snip*
The fantasy that banking would be more stable and safe if it is SECRET is the key to the business of making wealth out of thin air: the magicians can't operate in the open, they have to have darkness surround their actions! This is true about all wealth-making systems. For example, people who do the actual digging up of wealth in the form of minerals in the earth must go into dark caves and deep pits and do very dangerous work. Some of the most poorly paid people on earth are the army of semi/full slaves who are at the very roots of the wealth system. They die terrible deaths, digging up the gold, silver, coal, iron, diamonds of this earth. Aside from them, there are the farmers who labor in foul or fair weather, doing hard labor who produce the other half of wealth. And then the artisians, vacillating between slavery and guild powers, taking all the raw materials and crafting them into tradeable goods: the basis of civilization

I knew that the Japanese would resume negotiations with China over forming an all-Asian currency union. They hoped to leech off of the US system forever. But when the entire US banking system began its huge collapse last summer, they could see the writing on the wall. So long as Japan defied China and demanded China play the G7 game, China would buy yen and get others like Iran to force Japan into doing business in yen, not dollars. Since Japan signaled their surrender last month, the value of the yen has dropped and Japan has become very, very mute within the G7. A series of high-profile Chinese flew to Tokyo and had very secret meetings. The Japanese treated the Chinese with great respect including ceasing their nationalist actions like worshipping war criminals who massacred Chinese. Now the negotiations are bearing fruit. For China.

Here is another story about this meeting last September, 2007:

From the above article, the official news story:

Bank of Japan Governor Toshihiko Fukui met with his Chinese counterpart Zhou Xiaochuan on Thursday to discuss a wide range of international economic and monetary issues, BOJ officials said.

Although the BOJ officials did not disclose the details of their talks, the U.S. subprime mortgage crisis and its repercussions across the world are believed to have been high on their agenda.

Fukui briefed Zhou, governor of the People's Bank of China, on why the BOJ decided not to raise interest rates at its Policy Board meeting Wednesday as well as his take on the outlook for the Japanese economy, according to the officials.

At first, Japan pretended they had no problems when the other G7 banks were collapsing. Then the real truth came out. Japan is being hammered by all this. China also holds a lot of crummy US paper. But China also holds the world's biggest FOREX reserves which are probably about $1.5 trillion now. After September's secret meetings, Japan began to raise their own FOREX reserves to over a trillion dollars, too. Now, both working in tandem, can control the value of the dollar and protect their investments. But only if they work together! I said this last year: Japan can't float the US Titanic by itself. It needs China to do this.

Finance ministers of China, Japan and South Korea also agreed to continue support for the Asian Bond Markets Initiative (ABMI), aiming at the development of bond markets in the ASEAN+3 countries.

"We believe that the ABMI has contributed to recent bond market developments in the region both by accelerating market reform of each country and stimulating policy cooperation among the ASEAN+3 countries," the three finance chiefs said in the statement.

The Dragon is very happy today, I might add. They won this long struggle with Japan. Japan is now aboard their boat and won't stray again. Last fall, I pointed out that a huge shift has happened: China and Japan do more trade with each other than either does with the US! This is a historic and important shift!

Here is my commentary about all this, from my September, 2007 story:

Oh, this is when I really wish I was a ghost who could walk through walls! To enter the Top Secret Vault run by the Dragon to hear what that creature said to Miz Japan! What did they talk about? The world banking system?

HAHAHA! I have an ugly feeling, I know what was said. 'We want Taiwan. You want Safety. America's navy is doomed if they go bankrupt. We can bankrupt them any time we wish now. You know this and you know what your fate is,' snarled the Dragon.

'So sorry! We, the LDP, want to keep ruling Japan but we might lose power! We want peace with you, dear Dragon. How can we do this?' says Miz Japan, flirting behind her open fan and holding her sleeve very cocquettishly.

'Between us, we hold over $12 trillion in US wealth, money, bonds, stocks and other things,' says the Dragon, hauling out its acabus and clicking the wooden markers up and down as it adds up everything. 'I don't like losing this investment. I doubt you want to lose, either. As you know,' continued the Dragon, giving Miz Japan a very dark look, 'I have an interest in buying yen suddenly. But if you want to cooperate with me, we can keep the foreign demon bank accounts running for a while longer but you must do as I say and not run off and double deal me when the G8 meet, understand? No more calls for me to change the value of the yuan and we will let the yen drop in value against the dollar again.'

Here is my July 16, 2007 story about how China became the world's #3 economy. The cartoon is from then:China Will Be World's #3 Economic Power This Yea

History is the story of the rise and fall of empires. Most economic web pages like to track money making opportunities. Mine is all about the earth, humanity and history. We are a speck around one of the smallest stars in the galaxy and our galaxy is very small compared to all the others moving near us, all flying towards some unknown fate in the future. We are seeing the slow degrading of the US global empire and like all previous imperial collapses, ours will shake the power relationships of the world. Proof that the world is seeing a profound change is the news today that China is displacing Germany as the world's #3 economy. As far as industry is concerned, it has displaced the US already. This is very significant news.

Here is the news from ASEAN's headquarters concerning this new deal:

China, Japan, South Korea, ASEAN Agree on Wider Currency Swap Arrangements

An ADB analyst remarked that Wednesday's accord was a step towards setting up an "Asian Monetary Fund," although such an institution might never actually be created. In a joint press conference, the 1O ASEAN and three East Asian financial ministers also called for a review of the quota of Asian countries in the International Monetary Fund (IMF) "to properly reflect the current realities and their relative positions in the world economy." The 13 ministers said an economic surveillance system would be put into place along with the Chiang Mai Initiative framework, to detect irregularities early and apply swift remedies. They also said a collective decision-making mechanism would oversee the current system of bilateral swap arrangements "as a first step towards multilateralization."
*snip*
However, when asked if they were setting up an Asian Monetary Fund, Japanese minister Sadakazu Tanigaki replied, "only the Chiang Mai Initiative was discussed". The ministers said the initiative had been very helpful in maintaining the financial stability of Asian countries even if there had been no repeat of the 1997 crisis. Masahiro Kawai, special adviser to the ADB president, who monitored the ASEAN-plus-3 meeting, said the ministers wanted to increase the effectiveness of the Chiang Mai Initiative which now covers 16 bilateral swap arrangements. He called it a "step towards multilateralization," adding that a "de facto Asian Monetary Fund," may eventually be created.

See how they do a frontal assault on the IMF? The IMF is going broke, of course. For it is based on the dollar. As the dollar dies, the IMF dies. This new Asian group is going to replace the IMF...IN ASIA. They probably talk about how the IMF is an imperialist organization that works only to enforce European and American domination. Which is a correct reading of its organization and goals! Now, either the IMF moves to Asia or it dies in Europe as the dollar sinks it. The contradictory nature of the euro shooting up while the dollar dies will accelerate! Europe can't afford this much longer. So either the Europeans play ball with China or they get cut out of world export markets.

Also, this article mentions the Chiang Mai Initiative. We should look at that, too. When the US refused to negotiate with North Korea and threw that mess into China's lap, China fixed everything and showed Asia, who was the real boss. In this monetary business, the same process is at work. The US has flung the dying dollar into Asia's lap. The Japanese simply tried to keep it strong. The Chinese will lock it out. Below is a study from South Korea examining the new initiative, written in 2000.

Here is a cartoon from July, 2007, about the sudden demand by Iran that Japan pay in yen instead of dollars:

Beyond the Chiang Mai Initiative:
Rationale and Need for Decision-Making Body and Extended Regional Surveillance under the ASEAN+3 Framework+

Yung Chul Park*

After the financial crisis touched off in July, 1997, Japan proposed creation of an Asian monetary fund as a framework for promoting financial cooperation and policy coordination in the region, which would help Asian economies prevent and manage better future financial crises. Although the proposal received a positive response from a number of East Asian countries, it was shelved at the objection of the U.S, EU, and the IMF. The idea was revived again early this year when the Finance Ministers of ASEAN countries plus China, Japan, and South Korea (ASEAN+3) agreed in May 2000 to establish a system of swap arrangements within the ASEAN+3 countries in what is known as the Chiang Mai Initiative (CMI). It involves (1) an expanded ASEAN Swap Arrangement (from 5 members to 10) and (2) a network of bilateral swap arrangements among ASEAN countries, China, Japan, and South Korea. The CMI swap arrangements will provide liquidity support for the member countries that experience balance of payment difficulties in order to prevent an extreme crisis or systemic failure in a country and subsequent regional contagion as occurred in the recent Asian financial crisis.

The objective of the study is to present a blueprint for a new network of bilateral swap arrangements (NBSA) in East Asia which will help stabilize financial markets and exchange rates through appropriate provision of liquidity assistance. As the title of this study indicates, the proposal made by this study goes beyond the agreed basic framework of the Chiang Mai Initiative. In order to propose an operational framework for consolidating the existing and proposed bilateral swap arrangements, this study will specifically focus on the issues of how the NBSA will be more efficiently and effectively managed to achieve the goal of the CMI. Attention will be paid to rationale and need for decision-making body and extended regional surveillance for better management of the NBSA.

Note that Japan launched this! Also, look at how the IMF reacted. They hated it. Loss of power! At first, Japan tried to host this new system. Europe was way ahead, they already launched the euro at this same time! Japan wanted to play catch-up. But China was very suspicious.

There has been an emerging consensus in East Asia that East Asians must join forces to establish regional financial arrangements which will help them fend off speculative attacks and, in so doing, stabilize the East Asian financial markets. However, it is still at an early stage and it is not altogether clear at this stage whether they will be able to successfully negotiate the creation of such arrangements, given the different interests of different countries with respect to regional financial cooperation. Details of the swap arrangement mechanism among the ASEAN + 3 countries will have to be worked out, and at this stage it is too early to tell whether the thirteen countries will be able to design a scheme acceptable not only to ASEAN member states but also to China, Japan, and Korea. In order to help speed up the negotiation process, this paper presented a blueprint for a further development of the CMI.

For 7 years, the negotiations have been running and all parties have tried every trick in the book to thwart each other. This affair could be settled only if one or another party gained enough economic and MILITARY power to force the others to change course. This happened only this month. The other nations are finally admitting the US is going bankrupt, our military is dysfunctional, the attempt at dismembering China has failed and the US is a dying economy. Now, Japan and South Korea must play with the Dragon of China. They have no choice. It is that, or sink with the USS Titanic.

East Asia has a long way to go before formalizing, and putting into effect, the Chiang Mai initiative and launching other types of cooperative mechanisms. In this regard, Japan should be able to provide leadership in papering over the differences among the East Asian countries that are likely to emerge in the negotiation process. In addition, most of all, Japan should be prepared to provide a large share of the resources needed to facilitate regional financial cooperation without dominating the other countries.

Finally but most importantly, Asian regional initiative should contribute to the stability to the international financial system, as the Asian Development Bank has done for global development finance for over 30 years. A first requirement for achieving cooperative evolution with the rest of the world is for East Asians and outsiders to consult actively and candidly, perhaps with the United States in APEC and with Europe in ASEM (the Asia-Europe Meetings). East Asians need to tell the international community clearly what they are motivated to do, how they develop action plan, and how they believe it fits in with global systems. Outsiders also need to listen carefully and support them, if possible, in an outward-looking direction (Bergsten, 2000).

Japan was unable to 'paper over differences.' China fixed these by sheer power accumulation. They have the world's biggest FOREX reserves, by far and away. They have one of the biggest economies. They certainly have one of the biggest populations and their military is catching up with the US in significant ways unlike most of the world which is not bothering to even try. China's rise is meteoric. The US is obviously floundering and falling into a pit. This Korean analyst was operating under the Old System. Note how he thinks China and Japan should consult with the US and Europe! HAHAHA. And not be secretive! HAHAHA. And they should explain clearly what their ultimate plans are! HAHAHA. Well, I know all this but few people bother reading me. One doesn't have to be a genius to figure out what will happen next and what the plans are.

Like most Asian commentators and analysts working for Western imperialists, he thinks the best route is appeasement and bowing and scraping before the Great Imperial Powers. But the new rulers in Asia would rather die than do this. First, you lose face. Second, the West has this nasty habit of kicking people in the face. We respond only to coarse and obvious goads and restraints.

Here is the news for one of the earlier joint initiatives which Japan thought, gave them an upper hand with China;October 17, 2005 SIGNING OF THE SECOND BILATERAL SWAP ARRANGEMENT BETWEEN THE PEOPLE’S REPUBLIC OF CHINA AND THE REPUBLIC OF INDONESIA UNDER THE CHIANG MAI INITIATIVE – SECOND STAGE

February 24, 2006 Signing of the second Bilateral Swap Arrangement between Japan and Korea under the Chiang Mai Initiative

The Bank of Japan, acting as the agent for the Minister of Finance of Japan, and the Bank of Korea (BOK), today, signed a second bilateral swap arrangement (BSA) under the Chiang Mai Initiative (CMI). The agreement will enable both countries to swap their local currencies (i.e., Korean won or Japanese yen) against US dollars. Under the agreement, Japan commits USD 10 billion while Korea commits USD 5 billion.

Japan’s Bilateral Swap arrangements under Chiang Mai Initiative

Japan has reached the bilateral swap arrangements under the Chiang Mai Initiative with the following countries:

(1)
The Republic of Korea

- Japan has concluded a one-way US dollar-won swap arrangement up to $2 billion on July 4, 2001, in addition to the $ 5 billion swap arrangement under the New Miyazawa Initiative.

(2)
Thailand

- Japan has concluded a one-way US dollar-baht swap arrangement up to $3 billion on July 30, 2001.This arrangement expired in July 2004.As of January 2005, Japan has agreed to conclude a two-way swap arrangement (US dollar-baht and US dollar-yen) up to $ 3 billion.

(3)
Philippines

- Japan has concluded a one-way US dollar-peso swap arrangement up to $3 billion on August 27, 2001.

(4)
Malaysia

- Japan has concluded a one-way US dollar-ringgit swap arrangement up to $1 billion on October 5, 2001, in addition to the $ 2.5 billion swap arrangement under the New Miyazawa Initiative.

(5)
China

- Japan has concluded a two-way yen-renminbi swap arrangement up to the equivalent of $3 billion on March 28, 2002.

(6)
Indonesia

- Japan has concluded a one-way US dollar-rupiah swap arrangement up to $3 billion on February 17, 2003.

(7)
Singapore

- Japan has concluded a one-way US dollar-Singapore dollar swap arrangement up to $1 billion on November 10, 2003.

Back then, Japan was very busy tying together all its neighbors. Then, Japan decided it was time to go after China with the help of the US and Europe in 2007. But this failed miserably. Now, all that work by Japan is being usurped by China which is using all this to build a Sino-centric system. By the way, below is an old article from last year where I struggle to explain all these forces. It is a good article to review:

JULY, 2007--Bank of Japan Opens The Equity Taps:

Japan and the oil pumping Arabs are hosing the planet with liquidity. This liquid is red ink mostly from the USA. But the flood of money pouring into the coffers of these two entities far exceeds any trade so where does it come from? Time to talk about magic numbers and infinity! Also, Writers assure us that a weak dollar is a good dollar but doesn't explain how we can kill the dollar faster than Japan can kill the yen. And reporters continue to try to understand hedge funds. They are getting more and more suspicious as hedge fund hell hounds foam at the mouth, bite investors and then die suddenly. And Moody's raises Japan's credit rating.
*snip*
Europe and the US and even China are turning off the taps. This is fancy talk for raising interest rates. But a miracle happens that is equal to Jesus and the bread and fish or as I like to say, his catering lox and bagels when he gave the Sermon on the Mount. Namely, out of six fish, six bagels and some cream cheese, he conjoured up, being a wizard, enough food to feed an army of people. So it is with money. How is this stuff created?

Well, it is 'fiat' chits set up to tell us the relative value of various objects and services and then everyone trades this IOUs and since this system automatically creates inflation, the government tracks who is promising whom and then adjusts intrest charged for holding money OUT OF THE SYSTEM. This is called 'interest' and the money kept out of the system is called 'savings'.

So, when there are too many IOUs on paper floating about, prices rise because people bid up the value of assets and purchases and the IOUs lent out by the savers begin to cause their savings to shrink in value so they cease saving and inflation shoots higher as no one is saving.

So, the entire fundamental basis of an economy rests upon the idea that enough people will be tempted to save money rather than send it out in to the economy. But the US is in a negative savings rate right now and on top of this, the US is the global empire and so, it can and does create global inflation when the government drops interest rates so low, no one bothers saving any money.

Well, the fiction for the last 7 years, ever since the US decided fiat money was free and gave out fist fulls of it at 1% interest, the story line cooked up by the crooks doing this was, Japan and China like to save. Well, this was a lie. And like all lies, takes time and patience to expose and undo. Now the whole planet knows that NO ONE ON EARTH is saving much of anything. Everyone is spending which is why the global economy is 'booming'. File this under 'DUH'.

The US should have shut down the Japanese Carry Trade the minute it was beginning to be exploited as a back door for flooding the US with debt. But it worked alongside the super-low rates of the Fed to goose our markets higher and higher. The Fed is supposed to stop inflation which means stopping wild lending. Instead, the Fed encouraged and enabled this. And our corrupt politicians refused to understand how all this was connected with our trade deficits and our government overspending. They STILL refuse to understand. But the game is going to end soon. This is why the many secret and open meetings in Asia are accelerating and they are madly building a New World Monetary Order that is NOT based on the dollar! And I am betting that all the oil pumping nations will try to join this new system! All Sovereign Wealth nations will be forced to join or lose all their wealth when the dollar tanks.

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[Christian W]

The Gulf states are also about to launch their own currency union soon.

---

This article from the Guardian points out how powerful Sovereign Wealth Funds may be soon:

"The consultancy Global Insight said sovereign wealth funds had grown 24% for each of the past three years. If they continued to expand at that pace, they would exceed the economic output of the United States by 2015, and the European Union by 2016, it said in its annual Sovereign Wealth Fund Tracker."

http://tinyurl.com/5dxbul

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[Michael]

HOW MANY WRONGS DOES IT TAKE TO MAKE ONE RIGHT?

"In the long run, we are all dead."
- John Maynard Keynes [when asked about the long-term consequences of intentionally using deficit spending to reflate the economy during the Depression]

"What has Posterity ever done for us?"
- Ronald Reagan [when cautioned about paying for current tax cuts and military expansion with debts to be passed on to future generations]

WRONG #1: The "financial system" [nowadays just about everyone from the Fed and Treasury on down to your local bank, mortgage company, and county pension fund] makes its living off creating and passing credit around, so it expands credit as fast as it can with no internal controls. Most players are both borrowers AND lenders in an out-of-control frenzied process, including the American worker/consumer (who seeks leverage by borrowing more than she/he lends, just like everyone else).

WRONG #2: The former "international currencies" prove too restricted for planetary trade expansion (not enough gold, the English Pound destroyed along with the English economy by empire & WWI). The Dollar takes over - Americans swell with nationalistic pride at this further proof of "American exceptionalism" (the belief - similar to the Israelis - that God has chosen us and given us special powers and a different set of rules to play by than everyone else). The Federal Reserve becomes the Central Bank of the world.

WRONG #3: The U.S. government ramps up intentional deficit spending (started as a temporary attempt to fix the Depression) during WWII to more than 100% of GDP, and afterwards there is no more talk - ever - of paying off the National Debt (which previously in our history was always considered temporary and always paid off). Post-war expansion and prosperity (contrasted with the Depression) is considered prima facia proof that more debt = more prosperity. War, debt, and prosperity are thereafter "known" to be inseparable (hence, Korea, Vietnam, The Cold War, Israel, Iraq, Iran, China, etc, etc, forever).

WRONG #4: Japan and Europe recover from the war, we start running low on resources and cheap labor, third-world countries start developing, and Communist countries turn capitalist. We no longer "own" the exclusive right to prosperity (or the pursuit thereof), and we will have to pay for resources and goods we import. Since we want more than we can pay for, we print more and more Dollars and exchange them for stuff then borrow them back again. Our trade deficit - yet more debt - also becomes permanent.

WRONG #5: Regulations, restrictions, and oversight adopted in the first half of the 20th Century to stabilize the "financial system" are dismantled in the second half as the Austrian/Chicago school of laissez-faire entrepreneur-worshipping anti-labor anti-consumer anti-environment "Wealth is God" Republicans take over the Presidency, the Congress, and the Fed. The American workers/consumers get on board, as do the governments and people of all the other countries. Screw the Club of Rome, there is no such thing as limits to growth; there is going to more and more of everything - based on freer and freer credit and more and more debt - and everyone is going to be richer and richer and happier and happier!!

WRONG #6: To mask to fabulous rate of growth of the government debt, and to undermine the (anti-entrepreneurial) social safety net by claiming the Social Security Trust Fund is "just worthless IOUs," the surpluses in the SS Trust fund are loaned to the government and spent as if they were genuine income (when they are really more debt), but because kept off-balance-sheet they appear to reduce the size of the reported annual deficit and accumulating National Debt.

WRONG #7: As the inevitable ponzi-level cheap-credit party starts collapsing like a house of cards, the agreed-upon solution by the entrepreneurs and Government in the G7 world is CREATE MORE CHEAP CREDIT - IF THAT DOESN'T WORK CREATE FREE CREDIT - PRINT MONEY!!! Worry about a bigger collapse down the road? What about posterity? Talk to Keynes and Reagan, we're busy saving our asses this week from the consequences of our decisions last week.

And the strange thing is, all this wrong DOES MAKE A RIGHT. Because, it's not dictatorships and Communist societies who are doing this - it's democratic countries, who have the clear support of the their workers/consumers. In fact, it's the workers/consumers who are most loudly demanding more cheap credit to maintain their accustomed (and aspired-to) lifestyles. This completely self-destructive system (in the long term) is beloved of the workers/consumers, who live in the short-term, select politicians to make them feel good in the short term, and will support any oligarchical financial power for central banks and private business if they just keep the cheap credit coming.

WHAT MUST WE CONCLUDE?: The fiscal and trade deficits, the National Debt, consumer debt, the Carry Trade, Fed money-printing, inflation, and always war somewhere (and/or terrorism at home), will continue as long as the system can be sustained. The workers/consumers are not going to "revolt" against the system just because it makes the oligarchs richer than them - they love the system and identify with the oligarchs ("that's going to be me someday"). If the house of cards were to collapse completely (massive deflation, business cycle bust, massive unemployment), if "revolution" were to be even slightly considered by the workers/consumers (highly doubtful), the War option would just be seriously cranked up to unite everyone behind the oligarchs to "fend off the horrible foreign hordes who created this whole problem and now want to come steal our hard-earned riches from us out of jealousy." It works every time.

[GK]

The movement of the world's financial power to Asia the the mega story of the century and you have seen through the haze of US/British media/imperial propaganda to call it.

The western IMF sold off 400 tons of their gold in April to help complete the transfer of power to the Asian IMF.

I predict the new Asia IMF will do the Volker interest rate hike that will collapse the US treasury market as the last of the worlds money floods to Asia to get the high interest rates.

The US/British empire will try to sell debt to fund consumption and $1 Billion per day for wars and this will fail so they will print money and then we go Zimbabwe.

I have an aunt who married a man from Kenya and she does micro-finance with people in Zimbabwe. Their rents are $7 billion per month.

Last year the Zimbabwe stock market was the best performing in the world rising 600%.

So the best part of the collapse of the US currency will be the soaring stock market. HAHA!

The ultimate trick to loot the country. Don't worry, everything is great, Dow Jones goes from 13,000 to 40,000 in 18 months. Yahoo!

[Anthony]

i guess the rest of the planet simply move on without us.

http://www.hindu.com/2008/05/05/stories/2008050556181400.htm

Foreign Ministers of Brazil, Russia, India and China to meet

NEW DELHI: Foreign Ministers of Brazil, Russia, India and China (BRIC) will meet exclusively for the first time in the Russian city of Ekaterinburg on May 14 with economics and cooperation at multilateral fora topping the agenda.

A meeting of Foreign Ministers of Russia, India, China (RIC) will take place at the same venue the next day as a follow-up to their regular interactions, the latest being in Harbin, China, last year. Although the BRIC Foreign Ministers have discussed the prospects of mutual cooperation on the sidelines of the United Nations General Assembly, the agenda here will be solely focused on promoting the concept of BRIC, first articulated by Goldman Sachs in 2003.

[OC]

Elaine,

When u're right - u are so right:

'13 Asian nations agree to set up US$80b crisis fund'

http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/345554/1/.html

'Chinese President Hu calls for friendship with Japan'

http://www.channelnewsasia.com/stories/afp_asiapacific/view/345516/1/.html

[Phil the thrill]

This plus the PBoC encouraging Chinese to buy gold as an investment... very interesting, especially as China is the world's largest producer of gold now.

In the forthcoming fiat chaos, china will have the greatest power on the price of gold with respect to both USD and Yuan... this will prove decisive when it defends the Yuan from appreciating against the price of gold, aka the new reserve currency.

[Elaine Meinel Supkis]

Michael: BRAVO. A great summation of what I and so many other outsiders strive to say, over and over again! I salute you.

Everyone else: you are all 100% correct. Thanks for the news links. I searched for several hours for more news and didn't get those stories. Will read them.

We had to deal with a bad thing today: our lovely Haflinger horse from Austria had to be put down due to his rear right leg breaking. It was a very difficult day for me. I dug his grave myself.

[Phil the thrill]

Elaine, you agree with my theory vis a vis gold in china? It's very interesting to read the PBoC's stance on the "microeconomic benefits" of Chinese citizens owning gold...

[Royal Dutch]

excellent article and mike and gk are right on the money save the part about reagan. Hindsight is 20-20 this has been in the works for a long time I have wondered when the gold selloff will be completed? and what are the reserves? after that they will toss a match in the pyre. No revolution thank god, but you will never see a poor man rise up unless a rich man is standing behind him with a stick. good news is we get to sit out ww3, bad news is we will fight each other off before the benevolent will send in the liquidation teams. anybody want a job as a gravedigger?

[blues]

How often do I have to say this? In the end, primitive economics rules. Do you have the factories? do you have the trained and disciplined workers? Do you have the basic infrasructure? If not, thou art fukt! Have these things, and you can walk! Without them, you will die. Play all the stupid shell games you want. It will matter not.

What the fuck have we been doing? Sleepwalking. Having spies playing games? Well that will surely not cut it! Having big bombs? Will NOT cut it. Make your way, or someone ELSE will make it for you. And you will NOT like where you end up. We can keep the bomb factories open 24/7, while the steel mills die? WHAT A FUCKING JOKE!!! Bad move, assholes. Fatal move. An "economy" is a SYSTEM, not a "sector." No system, no power. So sorry 'bout that. Another very very very hard lesson to be learned AGAIN.

[Phil the thrill]

OH, but hillary and obama are gonna push reboot on the US economy through a new-new deal...

sadly, they overlook the asian economies tearing our export market to shreds.

whoops!

[Rascist]

Just what we need more of... a nigger and a dyke on the leash of a jew.

[Phil the thrill]

ah, the agent-provocateurs have arrived just on schedule!

[Karmaisking]

OK, now is the time to start shutting up. I don't like you getting it so right. We are entering a dangerous phase. Let's start talking sports...how about the playoffs?

[Elaine Meinel Supkis]

Racist is probably an undercover plant who is NOT what he is pretending to be. Ever since my blog was featured in an Israeli news service concerning my contention that Israel is practicing blatant ethnic cleansing, I get all sorts of queer trolls. I can see where they are posting from and it is usually Israel.

Sad, isn't it?

[PLovering]

Imagine that. Israeli trolls.

Supkis and Carter, known by their adversaries.

[Paul S]

The media.They operate more like a propaganda arm than a "news" outlet. BUT, when their usefulness is over, they will be purged a la Stalin in the 1930's. Elaine, your description of Repugs is good, but may I add supreme arrogance and total incompetence to the description? I can't wait to hear how--when it is too late and even lying won't cover it up, the propaganda ministry will "spin" this. I think it will go something like,we Republicans caused this (along with some Democrat friends), BUT we are your only hope out of this, so for better or worse, you are stuck with us. Or maybe they will just mobilize HA and institute "controls" over people who know too much and/or are foolish enough to not keep their mouths shut. If you look at some of the domestic 'security' provisions that are out there, it gets a little frightening. THAT doesn't get much press coverage either. The crooks who caused this mess will NEVER admit their mistakes; they will just put the hammer down on anybody who dares point it out.

[AA]

Elaine -- from a big picture view point, on one hand it seems you are concluding that China/Asia are doing this to prop up the US economy to protect their investment, but on the other hand the dollar is essentially toast. Which is it? Will they let it crash or not? Confused...

[Buffalo Ken]

I'd just like to say that I appreciate all the effort that goes into this blog and the wisdom plus insight that are shared (both in the articles and most of the comments).

Perhaps the US of A is just too sick to save. Perhaps it is time for D.C. to be diminished for the good of the rest of the world. Perhaps the folks in the US of A need to better understand suffering so that we can "grow up" collectively.

I don't know, but all the signs seem to be pointing to major quantum-shift changes just around the corner and the corner seems to be getting mighty close. Personally, I'm trying to localize.

Anyhow, regards to all - Ken

[Elaine Meinel Supkis]

AA: the currency union is to prevent BLOW BACK. Blow back from the dollar collapsing or the Arabs, pirates or EU guys dumping dollars into Asia to clean out their own bank vaults, just for example.

As a united front, they can SUPPORT the dollar while not endangering their own currencies vis a vis the army of Buffet wannabes who want to make a killing by flooding various FX markets.

Germany, on the other hand, is barely keeping the euro going, many Germans are getting fed up with it and want the old DM back.

[AA]

Thanks Elaine - now it makes sense.

[CK]

Invade the world
Invite the world
In Debt to the world
This is a quiz?
The invade the world part is looking like a failure
The invite the world ... 50/50 right now.
The invitees who made money in construction are returning home, those who made money in nursing, lawn maintainence, food service are not leaving.
The indebt to the world part of the strategy is working charmingly.
Yesterday I read somewhere that Paraguay's new maximum presidenté is desirous of signing extradition treaties with various nations.... there goes the extancia in Paraguay that our current Dogé's family "invested in." Although it ( the ranch ) still sits over the largest fresh water aquifer in the Western world.
The Euro is a paper currency, so is the yen, so is the yuan. Yes the current Chinese establishment is currently smarter than the current American establishment ( not hard to do considering the misedumacation that the current American establishment obtained). We're number 2 and falling. Oye Vey!!.

[Elaine Meinel Supkis]

You see, Obama looks and sounds smart so he is an elitist even as he is from a very despised minority. Al Gore was a braniac techie freak which is perfect for China but here, was a huge minus. A drunk frat rat: that is what we want. A spoiled rotten elitist slob.

[Paul S]

If it wouldn't be too much to ask, could everyone refrain from using the "F" word and other similar words? My ears aren't sensitive, but too much swearing lowers the level of discussion. One can make their point without using foul language.

[Sands]

This reminds me of one strain of macro economic thought that claim demographics limits the type of economic growth a country can achieve. In a graying population more and more end up as frugal pensioners and this puts the brakes on consumer driven growth. In such countries growth must be achieved through exports. This would explain (partially at least) the economic situation in Germany and Japan. Both are major exporters but in the home market consumer demand is weak.

China's GDP per capita is for now too low to rely on consumers as a driver of growth. As more and more Chinese earn enough to afford discretionary spending the result should be that consumption will pick up and for a while complement or even replace exports as an engine of Chinese growth. But only for a while, because the effects of the one child policy will ensure a return to reliance on exports. A troublesome long-term prospect for other exporting economies and a situation that probably persists until around 2050 (presuming dwindling older generations and a change in the one child policy by 2020).

The US has in recent times relied on a credit driven expansion. But during the same time industry was run so hard into the ground that it created a huge trading deficit. Closing the gap will take a long time to accomplish but on the upside industrial investment could fuel the next economic expansion in the US, even as banks and consumers slowly digest their debts. Unfortunately continued fierce competition from China could mean the deficit is never completely overcome. So we can only hope China will be reluctant to scotch their biggest export markets and not do something funny with all the dollars and euros piling up.

[Paul S]

My biggest concern on the subject? When is "Dubaya" going to start bombing Iran and play the Patriotism card? It probably won't be until close to the Prsidential election this Fall. It has worked before, but I hope people will smarten up. I think the only thing holding Bush back is "his" military--no matter what the neo cons say publicly--is stretched dangerously thin already.

[Elaine Meinel Supkis]

Now that it is certain to be Obama, expect a terrorist attack/assassination.

Bin Laden and those people backing him always move right before elections.

[Gary W]

Don't forget the home-grown loonies and spooks.