While the overnight session has been relatively quiet, the overarching theme has been a simple one: currency warfare, as more of the world wakes up to what the BOJ is doing and doesn’t like it. The latest entrants in global warfare: Taiwan, whose central bank overnight said it would step in the FX market if needed, then Thailand, whose currency was weakened on market adjustment according to Prasarn, and of course South Korea, where the BOK said that global currency war spreads protectionism. Last but not least was China which brought out the big guns after the PBOC deputy governor Yi Gang “warned on currency wars.” To wit: “Quantitative easing for developed economies is generating some uncertainties in financial markets in terms of capital flows,” Yi, who is also head of China’s foreign-exchange regulator, told reporters. “Competitive devaluation is one aspect of it. If everyone is doing super QE, which currency will depreciate?” “A currency war, a series of tit-for-tat competitive devaluations, would trigger trade protection measures that would damage global trade and therefore growth globally,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong, who previously worked for the World Bank. “That would not be good for any country with a stake in the global economy.” Which brings us to the fundamental question – if everyone eases, has anyone eased? And is there such a thing as a free lunch when central banks simply finance global deficits while eating their soaring stock market cake too? The answer, of course, is no, but we will cross that bridge soon enough.
European news overnight was as usual bad. As SocGen reports, Euro area M3 growth slowed sharply in December, with M3 deposits declining by €42bn on the month. This almost certainly reflects a reversal of the flows seen in October when national subscriptions to the paid-in capital of the ESM temporarily boosted overnight deposits. As this capital progressively get re-invested, overnight deposits fell back by €32bn in December. This is an effect that we were expecting to a certain extent, although the timing of the flows was difficult to gauge. As a result annual euro area M3 growth fell back to 3.3% y/y, down from 3.8% in November. Lending growth however remains very muted with loans for house purchase growing by a measly €3bn on the month (up 1.3% y/y) while lending to non-financial corporations dropped by €51bn. That’s the biggest ever one month net repayment of M3 lending and takes the annual growth in lending to non-financial corporations down to -2.3%.
Having solved its urgent problem, the eurozone needs to deal with a new dilemma: that of an appreciating currency. There is a growing number of countries seeking to weaken their own currencies. Indeed, in the last six months, the euro has appreciated by 11 per cent against the US dollar and by 8 per cent in nominal trade weighted terms. It has appreciated by a lot more against the Japanese yen…
Kyle Bass, who knows a thing or two about economics and finance, recently spoke to a senior member of the Obama administration about their planned solutions for fixing the U.S. economy and trade deficit.
The answer shouldn’t surprise you.
When I asked a senior member of the Obama administration last week, ‘How are we going to grow exports if we won’t allow nominal wage deflation?’
He says, ‘we’re just going to kill the dollar.’
That worried me.
So, that the only answer.
It’s a dead answer.
But, that’s where we’re headed.
…Needless to say if the world sees a major currency collapse, which up to this point I think most people would consider an absurd idea, it’s going to spark a panic for protection. Despite stocks entering the euphoria stage of this bull market, stocks are not going to protect one from a currency crisis. Only hard assets will do that, and the two hard assets that are best at protecting one’s wealth are gold and silver.
Wouldn’t it be fitting that at a time when gold and silver are about to be most cherished, they are now completely loathed by the market?
If Congress does not get its financial house in order by the new deadline in mid-May 2013, John Williams of Shadowstats.com predicts, “It will be the end of the road . . . . They are not going to have another opportunity . . . they are pushing the limit as it is now.” Williams says he expects, “. . . a negative reaction in the next 3 or 4 months to the dollar.” Williams adamantly calls for hyperinflation to the U.S. dollar by the end of 2014. Join Greg Hunter of USAWatchdog.com as he goes One-on-One with economist John Williams.
A recent appointment of Rothschild as “financial advisor” by the Board of Directors of gold exploration company Spanish Mountain Gold is yet another unmistakable indication that the ancient family is moving the world’s gold supply to both “emerging markets” and Central Banks worldwide, strengthening the family’s monopoly position when the fiat-based house of cards comes crashing down in the West.
The Board of Directors of the British Columbia based gold exploration companyappointed Rothschild to “review strategic options with the objective of maximizing shareholder value.” In July of 2012, Spanish Mountain Gold’s CEO Brian Groves boasted already that the excavation in British Colombia is a project worth “several million ounces in gold” and is backed by “an enormous network of connections globally”, Groves told Resource Clips.
Indeed, this recent appointment of Rothschild’s financial expertise (from centuries worth of experience) has increased the value of this company somewhat, propelling the gold-producing company into newer heights (or depths), depending on what end of the gold bar you find yourself. It also is a sure sign that the family is tightening its grip on gold, in both the excavation, the producing and the trading phase.
In the beginning of this century there were signs that Rothschild was starting to pull back from gold. With the announcement of Lord Jacob Rothschild that his “investment vehicle” RIT Capital Partners “has ridden the rally in gold prices but will now incrementally sell down” many observers were led to believe the ancient house was abandoning the precious stuff. Jacob Rothschild stated in 2011:
“There is I believe a growing awareness of the dangerous position which confronts many countries, particularly those in the developed world. In spite of these concerns, we continue to take advantage of areas that we believe are attractive, but we will remain cautious in terms of the quantum of capital that we allocate”.