Currency Wars: Move to Make Treasury's Geithner a Permanent Member of US National Security Council

"To put it crudely, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create.

What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world."

Martin Wolf, Financial Times, 12 Oct 2010


"...the Treasury secretary, who has primary authority on economic and financial issues in the cabinet, should be at every meeting to advise on how economic and security issues intersect, and to ensure that the United States is using its economic and financial strength in the most effective way."

Robert Kimmitt, NY Times, 23 July 2012

Looks like the US is getting ready to flex its financial muscle.  I don't think the Anglo-American banking cartel will relinquish the dollar reserve currency supremacy easily.  This is currency war.

I somehow missed this editorial when it first came out. But over the weekend and today I heard echoes of the same sentiment from various places in what looks like a loosely organized public relations campaign.

The National Security Council, formed in 1947 and comprised of the President, Vice-President, Secretary of State, Secretary of Defense, Director of the CIA, and the Joint Chiefs of Staff.

The National Security Council has an unmistakable military flavor.

The move to add the Treasury Secretary as a permanent member is just another sign of the currency wars heating up. At least from the US perspective, there is an unmistakable convergence between military and economic action.

As I have noted before, the language used often suggests that the US considers its TBTF's to be a modern form of financial battleship, able to move key markets at will to support official policy. And the credit rating agencies are like agile destroyers.

I think this will become very interesting.

NY Times
Give Treasury Its Proper Role on the National Security Council
By Robert M. Kimmitt
July 23, 2012

THE National Security Act of 1947, which created the National Security Council, the Defense Department, the Joint Chiefs of Staff and the Central Intelligence Agency, turns 65 on Thursday. But it’s not ready for retirement; it needs, instead, to be rejuvenated by making the Treasury secretary a statutory member of the National Security Council, rather than an invited attendee.

The act and the organizations it created performed well during the cold war, the post-cold-war decade and the period after 9/11. But they need to be updated to recognize the close connection between security and economic issues as we look forward from the global financial crisis of the last few years. The concept of national security has broadened considerably since the N.S.C.’s early decades, elevating economic and financial issues to crucial elements to our nation’s security, alongside the traditional diplomatic and military issues. Diplomatic and military issues are still important, of course. Iran, Syria and North Korea make that clear. But the growth areas in national security policy are economic and financial.

During the cold war, the German chancellor, Helmut Kohl, knew with precision the throw-weights of American nuclear weapons based in Germany; today, Chancellor Angela Merkel has to know with equal precision the spreads on Spanish and Italian sovereign debt.

It may seem odd that the Treasury secretary would have been left off the list of statutory members of the National Security Council by the generation of American leaders who helped lay the groundwork for Western Europe’s postwar revival with the Bretton Woods conference and the Marshall Plan. But at the time, military, diplomatic and economic policies were seen as largely separate tracks. And as the cold war deepened, the military challenge from the Soviet Union assumed overwhelming importance.

This is where the National Security Act has not kept pace. The statutory members of the National Security Council are still the president, vice president, secretary of state and secretary of defense, with the chairman of the Joint Chiefs of Staff and the director of national intelligence as statutory advisers. This is a good, but incomplete, team. Even though the Obama White House says that Treasury Secretary Timothy F. Geithner is a regular attendee, along with the statutory members, it is now time to add the secretary of the Treasury to the list of statutory members. That would ensure that the economic and financial dimensions of national security challenges are given equal weight in council deliberations, now and into the future...

There are, of course, other officials integral to international economic and financial success, like the secretary of commerce and the United States trade representative. They should still be invited to N.S.C. meetings. But the Treasury secretary, who has primary authority on economic and financial issues in the cabinet, should be at every meeting to advise on how economic and security issues intersect, and to ensure that the United States is using its economic and financial strength in the most effective way.

Read the entire editorial here.

Gold Daily and Silver Weekly Charts - More Confusion and Concerns at the Comex

Light trading today despite all the overnight excitement.

Last night The Financial Times ran an online story that was their front page lead today suggesting that the CFTC was going to simply drop their four year investigation of manipulation in the silver market.

It is of course possible they would do this, but it seemed rather heavy-handed and clumsy to just drop a four year study one month before its expected release, especially since it is judged to be somewhat controversial. And it involves a futures market that has been rocked by scandal after scandal over the past two years.

Today we find out that the FT may have gotten their information wrong which is certainly a faux pas for a major news media outlet that generally would not run something like that without a dual confirmation of the facts, especially when it involves key market information.

At the end of the day, in the longer term, I am not sure that any of this matters. I think the market is heading towards a default in silver unless there is some sort of action or settlement imposed by the government and the exchange.

The metals manipulation has been as bad or even worse than LIBOR, and at some point rude reality is going to intrude given the stubbornly physical nature of bullion. At least that is what history suggests will happen after a long period of price manipulation.

But let's see what happens.

Still, this sort of nonsensical uncertainty and lack of transparency suggests that something is very wrong behind the scenes, and The Major Players and Very Serious People are trying to figure out what to do about it.

And of course, there is the impediment of the credibility trap for the government and the regulators to consider. Especially if He-Who-Must-Not-Be-Allowed-To-Fail has his tit irretrievably caught in the wringer, as they used to say, on the short side of a rising market where covering might not be 'practical.'

I hear the Brits are fit to be tied about the hypocrisy, especially after the public brow-beating they have taken over Barclays and LIBOR. And now the Yanks have the temerity to interfere with the attempts to clean their own house because of the potential collateral damage to Wall Street.

Read what Glenn Greenwald has to say about the modern rule of law with liberty and justice for some, and you will get the picture:

"You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...

The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."

And for any who think that the problems are insurmountable, and that nothing can be done, here is a fine example of how wrong they can be. Each generation must take up its struggle with the principalities and powers, and dark forces in high places, especially those in their own hardened hearts.

SP 500 and NDX Futures Daily Charts - Technical Trade on Light Volume

Today's US equity markets were trading on light volumes largerly driven by professionals.

I think the late sell off in the SP futures was a fairly clear sign that momentum traders dumped their positions into the close, preferring not to hold them overnight.

It is really all about Europe at this point, and what the central banks may do in order to provide additional liquidity to the financial system via official debt channels.

Risky market.  Unless you are willing to swim with the sharks it is best to stay out of the water.