Money Matters: Treasury Secretary Now Says US Dollar Will Be Stronger

Elaine Meinel Supkis

Paulson has to rush off to assure everyone that the US wants a strong, not weak dollar. But this is a lie. And so the world's monetary system continues to slide off the cliff as we continue to follow the path set by Greenspan and Bernanke. The US economy continues to contract even as China bouys up the US stock market. It seems the Dragon is no longer going to keep the dollar strong by putting excess cash away in FOREX reserves. Time for the US to change course. Japan just might change course. They must!

From Xinhua:

U.S. Treasury Secretary Henry Paulson on Monday backed a strong dollar policy, indicating no intention to intervene the currency market.

In an interview with CNBC TV channel, Paulson said that he felt very strongly that "a strong dollar's in our nation's interest."

"The dollar's value should be determined in a competitive marketplace based upon underlying economic fundamentals," he said, adding the United States has very strong underlying economic fundamentals.

OK: the US government and all the economic minions from Financal Hell Hole, Bumbfuck USA, have been boasting about how a weak dollar is a good dollar and how making our currency worthless will make us all rich and other goofy things. Now this was all for home consumption but the stupid things these guys say at home end up, via the magic of the internet, read abroad. And the Chinese dragon reads EVERYTHING. So of course, the US Treasury official who works for Goldman Sachs, had to step forwards and contridict everything everyone said this last 7 days.

The Europeans were outraged by all the happy talk about the weak dollar. The Japanese were worried they would have to destroy even more Japanese voters on the Altar of Depression. Everyone wants the dollar to be stronger so they can continue this crazy trade going on that is destroying the US industrial base. The weak dollar was supposed to be this nifty monetarist trick to save us from ourselves. It is, of course, destabilizing the world financial system and will lead to a gigantic depression!

The notion that maybe we should have some barriers and tariffs to protect our domestic markets is taboo, of course. We were assured after the Plaza Accords in the mid 1980's that this would do the trick. We just make everyone unilaterally rejigger their relative values with the dollar and voila! Everything if fixed and no one is the worse for the wear.

This is proven to be sheer nonsense, for course. But monetarism hasn't died at all, it continues its merry way even as the effects and the paradoxes of free trade show us clearly this system is going to collapse due to the fact that the US and Japan are both struggling to MAKE a depression even in the teeth of CHINA making inflation! The effects of the Chinese economy heating up even as our own collapses is the dynamic force at work here. Prices across the planet are now rising due to Chinese inflation. They were the US and Japan's inflation sink during the years the price of oil shot up due to the Gulf wars started by the US itself.

So, how is the US going to strengthen the dollar? HAHAHA. Simple: raise interest rates! And what will this do to our economy at home? Oppsie! Down the toilet.

From Risk Center:

The nation many people are saying will rule the international finance arena within the next half century isn't as risky an investment forum as some may have initially thought. According to a study commissioned by Fullerton Fund Management, a great deal of Greater China hedge funds are fairly similar to funds operating within the United States in terms of market exposures and for the most part, are able to deliver significant positive alpha or risk-adjusted returns.

China rules the world's economic system. The US is a recepticle for Chinese industry. The dollar is dying, the Chinese goods are going up in price and everyone is happy, no? Isn't this what we yelled for all this time? China will be the bank of the world and they are now aggressively going out shopping for world banks, world investment houses, world hedge funds. The Japanese are struggling as hard as possible to keep out these same elements. They want to float along in their pretty little depression alongside the raging waterfall of Chinese expansion.

From Market Watch:

Blackstone Group finds itself at the center of another blockbuster deal, but in this case it's neither buying nor selling. The newly public private-equity firm is advising China Development Bank in its deal to buy an up to 19% stake in Barclays PLC (BCS :60.43, +1.80, +3.1% ) . The deal is likely to raise eyebrows on Wall Street, given the Chinese government's $3 billion investment in Blackstone (BX :26.39, +0.44, +1.7% ) earlier this year.

China Development Bank will invest 2.2 billion euros -- equivalent to around 3.1% of Barclays -- in new Barclays shares at 720 pence each. If Barclays' bid for ABN Amro (ABN :50.95, +0.11, +0.2% ) bid succeeds, it will invest up to another 7.6 billion euros at 740 pence a share.
*snip*
Blackstone's ambitions in China took a big leap forward in January when the firm opened a private-equity office in Hong Kong. At about the same time, Blackstone hired former Hong Kong's former financial secretary, Antony Leung, as a senior managing director.

The hedge fund hell hounds are like any dogs: they lick the hand that feeds them. I have taken over the affections of more than one dog I wanted to control simply using pieces of steak while giving them verbal instructions. More than one man has screamed at Fido to 'kill that bitch!' only to suddenly have his own dog turn and attack him at my own counter command. One guy ended up on top of his car, screaming at his own German Shepard. Retraining dogs is very easy. And if anyone imagines our hedge fund hounds will help us and not obey their new masters who are feeding them billions of dollars, think again!

From Market Watch:

Jitters over the back-to-school selling season hemmed retail stocks in Monday, as the sector sat out a rally in the broader market.

Shares of Circuit City Stores (CC :13.20, -0.43, -3.2% ) and a slew of department-store retailers were under pressure, while the S&P Retail Index ($RLX :512.15, -3.40, -0.7% ) , the sector's key tracking measure, struggled to stay positive at 516.39.

Ahead of the bell, Wal-Mart Stores Inc. (WMT :48.04, -0.02, 0.0% ) set an early tone for the industry's second most-important selling season by saying it would drop prices on 16,000 back-to-school items. See full story.

Price cutting=>depressions. We have energy and food inflation rushing alongside manufactured goods price cutting. Are imports cheaper? No? Heh. What is being cut is the huge profit margin enjoyed by our dear capitalists who put us in this fix. They wanted huge profits and moving factories to China meant huge profits but this works ONLY if they can then resell this stuff to Americans at huge profits! When this element disappears, the profits go poof, too!

From Finance Week:

A review commissioned by private equity groups concludes that fuller financial disclosure, especially of debt, may be the best way to attract mainstream capital, repair the industry’s image and calm fears of an approaching credit crunch.

The British Venture Capital Association’s Walker Working Group, convened has accepted that “private equity needs to become more open” and published draft proposals on how to achieve this.
While seeing no need for present law or regulations to change, it proposes subjecting private equity-acquired companies that were in the FTSE250, were bought for more than £300m or are capitalised at over £500m to higher reporting standards than required under the 2006 Companies Act. Predictably, in the light of current concerns about highly leveraged private equity acquisition, the main additional financial requirement would be to detail “the level, structure and conditionality of debt” as part of a balance sheet statement to be posted within four months of the financial year-end. Funds would also have to specify their procedures for letting creditors take over assets if they ran into severe financial difficulties.

Proposals are also made to widen funds’ openness beyond the purely financial picture – detailing who owns them, explaining to stakeholders what they aim to do, and paying attention to corporate social responsibility as well as fund performance. The industry is also urged to collect and disseminate more aggregate information about its capitalisation, portfolio composition, level and structure of debt, investment record, fund performance and fee structures.

Hark, I hear some howls coming from the Gates to Hell. The dogs don't like this. They will flee England and live far away! They hate these rules. They want no taxes, no rules, no prying, not light, they absolutely hate the light. They love vampires.

Speaking of which, here is a little revealing tidbit from today's news, buried deep within a story:

From Market Watch:

Blackstone's ambitions in China took a big leap forward in January when the firm opened a private-equity office in Hong Kong. At about the same time, Blackstone hired former Hong Kong's former financial secretary, Antony Leung, as a senior managing director.

The people running government systems are all floating into the dark realm of 'let's make money off of our situation even if this destroys our own nation.' I don't know if the former finance official from China is going to shaft China or is part of the 'let's merge ourselves deep into the American financial system so we can control it for China's benefit' thinking process. We can't tell until we see the results! But all the leaders elected into office these days or appointed to important positions in the West, they all retire after a short while and rush off to join the international financial cartels. They want to live in palaces and cease being citizens of this or that. They want to be free as pirates.

From the Washington Post:

FEMA provided about 120,000 travel trailers to victims of 2005 hurricanes Katrina and Rita. More than 56,000 of them are still occupied in Mississippi and Louisiana, and others are being held in reserve for future disasters, Walker said.

I include this tidbit because years later, 1/2 of all the Katrina poor are still stuck in cheap trailers. This shows how strong America is.

From Bloomberg:

American Express Co., the third- largest U.S. credit-card network, said second-quarter profit climbed 12 percent as customer spending and merchant fees increased.

Net income rose to $1.06 billion, or 88 cents a share, from $945 million, or 76 cents, a year earlier, the New York-based company said today in a statement. The average estimate in a survey of 17 analysts by Bloomberg was 86 cents. Revenue advanced 9 percent to $7.13 billion, matching analysts' estimates.

Putting everyone deep in debt makes certain individuals very, very rich. The more people have to use credit to buy thanks to inflation, the more money the big lenders make...until everyone begins to go bankrupt. The early days of this sort of thing are great for these lenders for they get lots and lots and lots of LATE FEES. Then the bankruptcies erupt. This is why, before the Fed lowered interest rates, all these clowns got Congress to suddenly change the bankruptcy laws so people can't escape their debts so easily.

The downside of all this is of course, the Great Depression.

From Bloomberg:

Shares of U.S. homebuilders tumbled, led by Hovnanian Enterprises Inc. and Meritage Homes Corp., after a Deutsche Bank report said new home demand deteriorated further.

A Standard & Poor's index of home construction companies fell 3.4 percent after Deutsche Bank analysts Nishu Sood, Lou Taylor and Rob Hansen wrote in a report released today that demand is falling as potential buyers have trouble obtaining mortgages.

People going bankrupt means fewer home buyers. And higher interest rates means fewer home buyers. And inflation means fewer home buyers. DUH. We went through this four times before in my own lifespan. How could anyone not learn from the first three times? This is a very stupid thing. Whips should teach and no whip is nastier than losing all your money! Well, maybe being blown up, of course.

From the Big Picture:

Haverty: It is like a mystery play. In Act I of the play, it is very clear the U.S. consumer is in what I would call a 21st-century recession, and that's a recession without the negative economic statistics that you would normally get in a '60s or '70s style recession.

How then do you know there is a recession?

Haverty: We have weak end demand virtually everywhere -- in restaurants, autos, durables and at the low end of the consumer area, with pricing pressure on everything from oil to milk. We are not getting a classic recession, probably due to the fact that inventory management has been so much better than it was 30 years ago, largely due to computers. There aren't the massive cancellations of orders that existed in the classic recessions in the '60s and '70s. I can't tell you the last time I have seen a retailer with seriously excessive inventory. The message from this part of the play is that while the consumer is weak, it has basically put the Fed on hold for the last year and for the foreseeable future, because if the Fed raises interest rates it is going to make the sectors that are weak much weaker, and that is not going to accomplish anything.

But the Fed MUST raise interest rates. This is why Paulson had to rush out and contridict the propaganda that the weak dollar is a wonderful thing! We cannot join #2 Japan and have a depression because this will put the whole world into a depression. This is the nature of being an empire. We can retreat from Iraq, cut off Israel's fountain of funds, remove all our excess military bases in Europe and Asia and go home and fix our own industrial base! Let China have our headaches.

Here are the Japanese worried about the Asian Currency Crisis and wondering if the US and Japan will cause a repeat of this thing they caused last time:

From the Japan Times:

It is 10 years since the Asian currency crisis. Currency crises are like earthquakes. I hesitate to use this analogy when lives have been lost and people continue to suffer as a result of the quake last week in the Chuetsu area of Niigata Prefecture. Yet the parallel is a valid one.

A sudden and violent realignment of currency values destroys people's assets. What was seemingly a mound of gold turns into ashes in a flash. The erstwhile wealthy become poverty-stricken overnight. Aftershocks are liable to strike when they are least expected. It takes time to recover from the destruction that the shock waves cause. Normal life does not resume that easily in the wake of currency turmoil.

The Japanese, to this day, refuse to understand how their depression and their collapsing currency causes such huge waves. They seriously think that if they keep the yen out of world currency markets, they can do as they please! This, from the world's #2 economy and, next to the USA and China, the world's biggest manufactured goods exporter! Impossible! And of course, if they and the US together, cause all trade to be warped by their joint efforts at depresssing the yen and dollar simultaneously, well! Fan, meet cow dung!

Fault lines that are not immediately visible may be doing a lot of seismic mischief unbeknown to the locals. The landscape may have changed but there is one significant aspect of the whole picture that is very conspicuous for its unchanging presence. This is the Japan money factor. Now as then, yen-carry trades are all the fashion.

Now as then, funds can be raised for next to nothing in Japan. Now as then, that cheap Japan money is finding its way into all sorts of high interest rate places. Now as then, the flow can be reversed at any time. In this respect the fault lines are startlingly similar to those of a decade ago. Indeed, the situation is arguably more vulnerable today, since the number of people indulging in carry trades has grown considerably larger between then and now. They are also a more diverse group. Then it was mostly professionals who were doing the carrying. Now more and more ordinary people seem to be trying a hand at the yen-transportation exercise. This is with good reason since their savings gain them more or less nothing so long as they stay stuck in Japan. Japan money can only become profitable once it is carried out of Japan. To the extent that these mechanics remain intact, the situation is fraught with tension.

So the answer is quite simply yes, it can happen again. It is actually difficult to see how it can be avoided given the persistence of carry trades.

And this analysis is correct. I enjoy reading good analysis. Clap hands. Hooray. The Japanese are not stupid. It is just in the interests of political powers and the industrialists to follow a course that is, in the long run, very bad for Japan. And there are Japanese who see the dangers and I suspect the country might try, at this late date, to change its course somehow.

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