Pictures From a Currency War, With Narrative

I have noticed lately that the spinmeisters are now latching on to the term 'currency war,' but are trying to deflect it merely to an intensification of the beggar thy neighbor strategy of devaluing your currency to subsidize exports and penalize imports.

This has been going on for a long time, most notably by the Asian Tigers, led by Japan and then perfected by China.  But make no mistake, the real heart of this process is in an Anglo-American banking/industrial cartel that intends to beggar everybody.

The multinational corporations went along with it.  They were its great lobbyists, and their wealthy scions the founders of think tanks to provide it a rationale and respectability. 

 

Walmart wrote a chapter in the new gospel of greed as a means of undermining wages and the American working class by insisting, as far back as the 1990's and the Clinton era, that suppliers start offshoring to China. And servile politicians opened the doors wide, and turned a blind eye to abuses that are still coming home to roost.

Part of the arrangement was a quid pro quo. The multinationals, who successfully staged a financial coup d'état in the States and Western Europe, were to extend the reach of their strong dollar policy and europression via foreign direct investments in resources rich overseas nations and foreign markets in order to consolidate their power into the non-democratic world.

But China and Russia balked at their end of the presumed bargain. They realized that opening their own doors to dollar exploitation, and allowing the economic hitmen to come in and pick up assets on the cheap, would lead to eventual political unrest, encirclement, and their own loss of power.

'Color revolutions' were becoming popular, as one country after another was falling into chaos, the kind that produces fire sales in productive assets and the elimination of inconvenient local rivals to power.  And in Europe, the powers that be created a Eurozone structure that any decent economist would know was unsustainable, and destined to create an unstable situation of few winners and many big losers.

And so a consortium of nations began to resist.  Some called them the BRICS.   They became alarmed, and then convinced, that allowing a single nation or group of multinationals to control the world's reserve currency was like a Ponzi scheme that could only continue on until its acquired the whip hand of power everywhere.

They started to speak up in international monetary organizations, long dominated by the Anglo-American banking and industrial cartels. They demanded the establishment of a new monetary standard for international trade that was broadly based, to replace the failed Bretton Woods Agreement that had continuing on as the ad hoc dollar hegemony known as Bretton Woods II after Nixon arbitrarily broke the formal agreement with the closing of the gold window in 1971.

And so we see a new phenomenon today, in which the long term selling of gold to control its price, resulting in the post-Bretton Woods bear market that lasted over twenty years, has given way to net gold buying by the world's central banks, and in increasing size.  And the creation of a paper gold market in parallel, through which the West seeks to control the price and supply of gold, to maintain their financial operation while they more aggressively pursue nation recycling and repurposing, draconian trade deals that supplant domestic governance, and when that fails, through internal insurgencies and at times, overt military action.

Simultaneously, there are a proliferation of bilateral trade deals in which currency arrangements are being made between countries, and even among small regional groups of nations, to conduct their business outside of the US Dollar system.  They are even building up their own financial networks and infrastructure in response to increasingly aggressive use of sanctions and other forms of economic pressure.

The US and UK, like China and Russia, are not immune to concerns about domestic unrest. A strong dollar policy and the support for a policy of offshoring to increase corporate profits are wreaking havoc on one of the world's greatest popular economic achievements: the US middle class.

 

Increasingly concerned, the governments are cracking down on any sparks of domestic dissent, targeting leaders, vilifying and suppressing minorities, and increasing the surveillance of its own people.  They are weaponizing the domestic police forces, and establishing the 'legal means' by which control can be maintained in the face of increasing misery and discontent at home.

It is not a pretty picture. It is an old story of greed and deceit, of empire and world conquest, of the desolating sacrilege of betraying those who have fought for freedom and civil rights to cash in for their own selfish gains. 

 

Will this end in a new gold standard, as this article A New Gold Standard in the Making, which is the source of these graphs suggests?  I surely do not know, and still do not think so.  

 

If you have been following the thought process here, going back before even the establishment of this blog to 2000, I have felt that the most likely course will be the establishment of a new unit of international currency, similar to but not the same as the SDR, with a far broader composition of currencies and commodities included, so that no single group would be able to control it for their own purposes.

 

Stagflation is no natural phenomenon.  It is the act of man in a policy intervention or policy error par excellence.  Until OPEC was able to trigger a stagflation through their use of an oil embargo and price cartel in the 1970's in the favorable conditions created by economic rot introduced by years of discretionary, aggressive war in Southeast Asia and the ensuing debts, most economists thought it to be impossible, and certainly not a 'natural' outcome.

 

I think that domestic reform will be coming, and this is necessary because no new monetary standard is going to repair a system that has failed from within due to corruption and systemic injustice.  

 

Old systems, even when they finally turn to visible abuse as they decline, can fail for a very long time, seemingly unbeatable, until they finally collapse from within.  This is how it was for the fall of the old Soviet Union, and this is how it may be for the Anglo-American cartel and their attendant nations like Germany and Japan.

 

It is still possible that Russia and China could make a deal with the Anglo-Americans and establish a tri-partite world government, with their own spheres of control and interest.  As you may recall this was the way George Orwell saw it in 1984.  I have been watching for that possible development based on my own research on the growth of international capital markets and flows since 1990 at least. 

 

People bring this up and so I wish to address it now, once and for all.  I am aware of the possible deeper significance of these developments from an eschatological perspective.  But recall that even the great apostle, who was 'lifted up to the third heaven,' was mistaken in his estimation of it, thinking it a phenomenon of his own time.  It is a mistake of vanity to go too far in such arcane and difficult subjects, in pursuit of sick thrills that only serve to distract us from our call to the work of the day, and the practical task of finding sanctity and salvation in the world. 

 

How we will react to this individually is critical for our own long term survival as spiritual beings regardless, since we all face our own ends individually.  Of this we can be sure.   We are told that most will give in, despairing at the increase in wickedness, and seek for power and riches of their own beyond all reason and grace.   And it requires no end time to see this happening through all ages. 

 

Change is coming.  It may be a new arrangement that brings with it the blessing of reform, transparency and justice through peaceful evolution.  It may be delayed and more difficult.  What cannot be sustained will not continue. 

 

This will end.  But perhaps not very well.  To a great extent that is up to us, unless we stand by and do nothing.  "The only thing necessary for the triumph of evil is for good men to do nothing."  But what shall I to do?   Begin with yourself, despising only the fear and the evil in you.  Do as you have been instructed by the two great commandments, which have been implanted as a seed in your heart. 

 

You are called.  You choose the answer.

 

 

GM IPO Timed to Complete Just Before the November Elections

It will be a wonder if the stock market remains favorable to an IPO of this size by October.

ABC News
GM IPO Filing Delayed Until Early Next Week
By Soyoung Kim
August 13, 2010

NEW YORK (Reuters) - General Motors Co has delayed its IPO filing until early next week as it updates its prospectus with the recent CEO change and a management risk factor, a source familiar with the situation said on Friday.

The filing with the U.S. Securities and Exchange Commission was originally scheduled for Friday, sources said previously.

GM Chief Executive Ed Whitacre said on Thursday he would step down and Dan Akerson would take over, effective in September.

The source who said the filing had been delayed declined to be named because preparations for the IPO are not public.

GM's several-hundred-page prospectus will not provide the number of shares to be sold or the pricing range. It will cite the company's bankruptcy, steps completed in restructuring, financial projections, details of ownership, and a large set of risk factors, sources have said.

GM is now adding a new risk factor regarding the departure of Whitacre and increased uncertainty about the automaker's long-term leadership and the change is expected to take more than a day, the source said.

By filing initial paperwork with the SEC next week, GM is aiming to complete its IPO between late October and the U.S. Thanksgiving holiday, another source familiar with the matter said.

A successful GM IPO, which could be the largest ever for the U.S. market, would hand the Obama administration an important political win against critics of its controversial $50 billion bailout of the top U.S. automaker, analysts have said.

The automaker secured a $5 billion credit facility this week, two sources briefed on the deal told Reuters on Wednesday, clearing the last remaining hurdle toward an initial public offering of stock expected to make the U.S. government a minority shareholder.

Ten major banks have signed on to the $5 billion credit facility, committing up to $500 million each, but the individual commitments would be cut as GM adds more banks in other countries and emerging markets as part of its efforts to attract global investors, sources said...

Why Silver?

Here is a 'thought experiment.'

In order to conduct it you have to accept a few postulates, or more properly, hypotheses, as being true without proof.

1. J. P. Morgan is the 'house bank' for the Fed and the Treasury since their forced merger with Chase Manhattan. Goldman may garner most of the high profile publicity, but when it comes to banking, financial engineering, and US economic policy, Blankfein is playing Dutch Schulz to Jamie Dimon's Lucky Luciano, metaphorically speaking.

2. J. P. Morgan, and some of the other Too Big To Fail institutions, sometimes act as an instruments of US policy. This may be an informal arrangement, a phone call. But it happens, and it involves more than just banks. It has been shown to occur with the big media, big corporations, and so why not big money? There is always a quid pro quo involved. Its simple political reality.

3. The US government has become increasingly involved in the management of the economy, from way in which it reports statistics, to the regulation of the financial sector, to the tax policy, and to what amounts to an industrial policy and of course a labor policy. While every government does this as part of their role of being a government, even if by omission, the US began to take a more planned and organized role with the creation of the President's Working Group on Markets in the aftermath of the Crash of 1987. The Exchange Stabilization Fund, established in 1934, was transformed into an opaque 'slush fund' to hand financial crises, most famously in Robert Rubin's extra-congressional actions during the Clinton Administration. What had been informal started to have a core, centralized discussion that exists without oversight. And two key money elements of this group, the Fed and the ESF, resist all attempts at outside audits.

4. From the SP futures to the outsized positions in some of the commodity markets, regulators have been consciously turning a blind eye to some very obvious market manipulation, apparent to anyone involved in the business. While this can be attributed to simple regulatory corruption and capture, in fact these things are often used for other purposes by powerful insiders and politicians. The role of the ratings agencies in support the banks and hedge funds in their various market frauda is interesting. And there is no better way to oblige yourself to the will of the authorities than to be discovered in some breach of the rules.

5. Robert Rubin introduced the policy rule that it is cheaper to head off a market dislocation by buying the futures to head off declines than it is to clean it up in the aftermath. Although this principle is now commonly attributed to a journalist and often dismissed as 'tinfoil hat' speculation I remember vividly when it was first articulated and it was by Robert Rubin. This rule or market intervention has been integrated and expanded, and is now a routine part of US economic policy decisions, again centered around the President's Working Group on Markets. It is a not always used, but it is considered a policy instrument, which is a change. Things like this are intitially proposed to be used in extremis, but like many stimulative drugs, they develop an addictive profile over time. This selective intervention had been performed by private banking pools in the past, most notably J. P. Morgan himself. But it is now firmly embedded in the hands of government.

6. Since at least 1970 the US dollar and financial system have become instruments of its foreign policy in the same way that the US military is an instrument of official policy. There are military conflicts as a means of supporting foreign and domestic policy, and there are also 'currency wars' and what can be loosely described as financial conflicts, for remarkably similar purposes. Sometimes these are overt in the form of sanctions, tariffs, and subsidies, but more often they are subtle, a means of extending political control and influence through debt and currencies, banks and ratings agencies, and supporting one's own corporations and industries.

Now that we have accepted the above for the purpose of this exercise, there comes the question, why silver? Is the United States interested in manipulating the price of silver, and therein the supply of silver in the world, and its uses?

J. P. Morgan has a strategically huge short position in silver, and is using it to 'manage' the price of the market at will. I did not bother to put that into the six postulates because it is a well documented fact, although rendered a bit hazy by official secrecy, bordering on an IQ test. If you fail to see it, try not to use too many sharp or pointed objects.

It is easier to do this with smaller markets like silver when one is using derivatives, as opposed to currencies or something as strategic as oil. I understand the gold market, because gold is a rival currency to fiat money and to the US dollar as the reserve currency. Gold is also the 'canary in the coal mine' and if you were of mindset to control things, you must control gold. Gold has a relationship with interest rates as Larry Summers attempt to prove in his paper, Gibson's Paradox.

But why silver? What strategic or monetary importance does silver have that would warrant so much attention and effort from the US government? Is there some as yet less known application for silver that makes it important? Or is silver just a convenient market to turn over to your cronies as their private sandbox, because it does not matter to you.

The most likely scenario I can imagine is that although silver lives in the shadow of gold from a monetary perspective, it has long been thought of as the 'poor man's gold,' and as monetary instrument for developing regions.

Silver has a long history as a form of currency in Latin America and in China. And although most Americans do not realize it, the US Constitution defines lawful money as both silver and gold.

The US maintains an enormous store of gold, although priced somewhat quixotically at a mythical price of around $42 per ounce, one of the largest in the world. But it has long since depleted its stores of silver bullion, and remains vulnerable to any move to include silver as a nascent currency promoted by the developing nations.

Just as a point of information, I have all of the six premises above as active 'strawmen' in my thinking. I believe there is enough evidence, quite a bit of it circumstantial and unconfirmed, that they are more probable than just possible. So I am content to keep them as data points while new information and data is processed, for and against.

I don't particularly care if anyone believes the premises or not. But they are interesting to consider for the purposes of this experiment in thought. Because the key word here is 'belief.' One cannot disprove any of it, just as one cannot prove it, yet. It takes an enormous leap of faith to believe that the government just lets things happen, and the markets are all happy hunting grounds of pristine humanitarian honesty, and the powerful and the rich do not use their influence to bend the markets to their will. And if the US is not watching out for its own interests in the world, and those of its people, well, it is just not doing its job, and it is incredibly naive to think otherwise. The efficient markets hypothesis is a load of romantically wishful delusion, and more likely propaganda for the masses.

One of the advantages of being your own person and adhering to what hard analysis has led to you conclude is that you can say what you think as long as you state why, and not care overmuch whether people wish to accept it or not, or condemn it as a conspiracy or not. The truth will out.

So, given the above premises, and assuming that few things really happen incidentally and by accident on a large scale when the government is involved, the question has to be asked.

Gold and Oil have an obvious strategic importance. But why Silver?

Early comments:

Mostly the obvious and therefore most highly probable. Its a small market and amenable to manipulation. Since the metal is necessary to industry it has its attractions even if the price rises. It is relatively neutral to government.

Quite a few think that it is a trade gone out of hand, where the shorts are effectively trapped, and cannot manage their way out of it gracefully.

One thing that has not occurred to anyone yet, which is a little bit disappointing, but perhaps too far off the subject, is this. Is it the government at the apex of the policy, the power, or is the government itself just one of the support mechanisms, a powerful member of the demimonde, for the real heart of darkness? Something to think about, but admittedly out of the purview of the thought experiment.

"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president."

Franklin Delano Roosevelt

China Invests in Production and Commodities While the US Feeds the Sharks

China is securing long term supplies of oil, aluminum, iron and other hard commodities at 'favorable prices for years to come.'

The United States is investing in increasingly worthless paper, insolvent banks, crony capitalist ponzi schemes, non-productive consumption, and enormous bonuses for Wall Street financiers.

After a visit to China a few years ago, touring their factories with workers quietly hunched over their worktables in fear, working whatever hours were offered in difficult conditions, Bill Gates observed that this was 'his kind of capitalism.'

The choices you make, what you choose to do or not to do, will pay significant returns, either good or ill, for your children and your children's children.

Plus ça change, plus c'est la même chose.


NY Times
With Cash to Spend, China Starts Investing Globally
By David Barboza
February 21, 2009

SHANGHAI — With the world suffering through a tight credit market, China has suddenly gone shopping.

Beijing said on Friday that one of its big state-owned banks, the China Development Bank, agreed to lend the Brazilian oil giant Petrobras $10 billion in exchange for sending China a long-term supply of oil.

That investment came after similar deals were signed this week with Russia and Venezuela, bringing China’s total oil investments this month to $41 billion.

China’s biggest aluminum producer also agreed earlier this month to invest $19.5 billion in Australia’s Rio Tinto, one of the world’s biggest mining companies. And last Monday, the China Minmetals Corporation bid $1.7 billion to acquire Australia’s OZ Minerals, a huge zinc mining company...

China wants reliable supplies of crude oil, to fuel its growing transport sector; it needs iron ore for steel production, and copper and aluminum to build homes and consumer goods...

Analysts say China could continue to make deals for a variety of small oil and gas companies, mineral producers and mining firms.

This week, for instance, shares of the Australian miner Fortescue Metals Group rose after reports the company was in talks with China over a big investment to help the company expand.

In many cases, China has struck deals in countries that have access to large supplies of oil and minerals but where American and European countries are not well-positioned, like parts of Africa and the Middle East.

In one deal this week, China made an alliance with the government of Hugo Chávez, the president of Venezuela, who has denounced American leadership.

While the oil deals announced vary in terms, analysts say they ensure China a steady supply of oil for decades to come, sometimes at favorable prices....