Selling snake oil and issuing unbacked paper currency are not so different. They’re both wildly successful ploys for the guys pulling the strings. And they’re both complete scams that depend solely on the confidence of a willing, ignorant public.
But once the confidence begins to erode, the fraud unravels very, very quickly, and the perpetrators resort to desperate measures in order to keep the party going.
In the case of fiat currency, governments in terminal decline resort to a very limited, highly predictable playbook in which they try to control… everything… imposing capital controls, exchange controls, wage controls, price controls, trade controls, border controls, and sometimes even people controls.
These tactics have been used since the ancient Sumerians. This time is not different.
Today, Argentina presents the most clear-cut example. Here the ‘mafiocracy’ unites organized crime, big business, and politicians to plunder wealth from Argentine citizens. Just since 2010, President Cristina Fernandez has–
* Nationalized private pensions, plundering the retirement savings of her people.
* Increased tax rates across the board– income, VAT, import duties, etc. as well as imposed a new wealth tax.
* Inflated Argentina’s money supply, printing currency with wanton abandon; M2 money supply has increased 215% in the past three years.
* Driven the value and purchasing power of the currency down by 50%. Street-level inflation is now 30%+ per year.
* Made a mockery of official statistics, comically understating the level of Argentine inflation and unemployment. She even began punishing economists for publishing private estimates of inflation that didn’t jive with the government figures.
* Taken over control of one industry after another, most notably the nationalization of Spanish oil firm YPF’s Argentine assets.
* Imposed export controls of agriculture products from beef to grains, forcing growers to sell at artificially lower domestic prices.
* Imposed capital controls, reducing her citizens’ capability to dump their poorly performing currency and hold gold, dollars, euros, or anything else.
For years, policymakers thought it was not worth trying to get Beijing to stop manipulating the renminbi, yet that view was mistaken. They ignored the fact that the Chinese were undermining the consensus that the market should determine currency values.
Now it seems it is too late to rescue the system of free-floating currencies. Abe’s plan to cheapen the yen, otherwise inexcusable, is a defense against the fixed yuan and the falling greenback. Ben Bernanke’s dollar-weakening moves, which hurt America, are in retaliation against Beijing. Beijing will not relax its grip on the renminbi even though it claims the currency is “pretty much close to the equilibrium level.” Of course the yuan is not, because the Chinese central bank is continuing to determine exchange rates.
We are, in fact, seeing the beginning of a currency war, which will not be confined to Asia. Governments see short-term advantage in intervening in the market, but in the end everyone will be hurt.
Billionaire investor George Soros and French President François Hollande, a Socialist, are in agreement: The world is on the verge of a currency war, and it threatens to destroy Europe.
The Europeans should finally enter the fray and do battle with all their might, says Soros, who made some of his fortune by betting against the British pound. “Europe is an outsider,” the 82-year-old recently said at the Davos World Economic Forum. He blamed the European Central Bank (ECB), which he called the last representative of an outdated central bank policy.
The problem is obvious – it is impossible for all currencies to go down at once and if the dollar falls something else has to rise
The G7/EU warns Japan about a currency war. Japan denies doing so. Japan’s lying.
These factors are having an impact of course, but what is being ignored is the most important explanation because people aren’t paying attention. There is no shortage of crude oil. Rather, there are just too many dollars, euros, pounds and other fiat currencies being printed by central banks.
an explosion in prices will be the hyperinflationary result. Thousands of years of history have taught us unequivocally that the best way to protect investors and savers from the coming carnage is to own physical gold and silver.”
Venezuela devalued their currency the Bolivar by nearly 50% on Friday and it now looks like Egypt will be next. The Venezuelan devaluation is merely a small chapter in the current global currency war.
The story in the Financial Times is headlined “Venezuelan devaluation sparks panic“. I read the article and was surprised at the content because when I read the headline I was fooled. OF COURSE the Venezuelans are in a panic, they just lost nearly 50% of their purchasing power over one evening!! The “panic” that I thought would have been written about was “who’s next?”.
By: Sorcha Faal, and as reported to her Western Subscribers
A grim Ministry of Finance (MOF) report circulating in the Kremlin today warns that Venezuela’s “nuclear option” crashing of its currency yesterday is a“clear signal” that the Western banking systems “house of cards”, erected in the aftermath of the 2007-2008 Global Economic Crisis, is in “total collapse” with the expected final outcome to be an “apocalyptic” crash of the US economy no later than April.
According to this MOF report, and what US financial experts described as “what lobbing a nuclear bomb into a currency war knife fight looks like”, Venezuela devalued its currency by an astounding 46% in the latest round of what is being described as the worst currency war our world has seen since the 1930’s, and which plunged the globe into total warfare.
Currency war, (World War C) also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls so too does the real price of exports from the country.
Imports become more expensive. So domestic industry, and thus employment, receives a boost in demand from both domestic and foreign markets.
However, the price increase for imports can harm citizens’ purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.
Brazilian Finance Minister Guido Mantega, widely credited with coining the term “currency war”, further warned yesterday that the global situation could get even worse if Europe joins the fray, and which this MOF report warns the will have to do in the “very near future.”
Chris Richey, a top American financial analyst, further stated that as we have yet to enter a full-fledged war because the European Central Bank (ECB) and Bank of England (BOE) are not (yet) engaged in purposeful currency devaluation. Rather, since 2009, each has been pre-occupied with either saving their currency (the ECB) or saving their banking system (the BoE). The relative value of their respective currencies has not featured high on their list of priorities over the past four years.
Not so, however, Richey says, for the US Federal Reserve, the Swiss National Bank, the Bank of Japan, the Central Bank of Brazil, and the People’s Bank of China, all of whom have been very interested in the relative valuation of their currencies. And this is a list that matters because three of the top five global currencies are represented on that list and all of them have been engaged in competitive devaluations of their currency in order to promote their own exports.
This form of international contest, he continues, should strike those with a sense of history as similar to the trade and tariff wars of the Depression Era 1930′s:“beggaring thy neighbor” in order to extract one’s own country from economic straits. In the 1930′s, the “beggaring” took the form of either abandoning the gold standard, literally blocking the importation of foreign goods, or imposing tariffs so high that imports were effectively blocked.
This time around, he warns, there are no gold standards to abandon and international trade rules have become too ingrained, both economically and legally, for onerous tariffs or outright bans to be practical or legal. Thus, the only economic weapon left is that of currency devaluation….