‘Currency Wars’ & ‘Trade Wars’ Are On Going Already: Gold Prices Can Only Go Higher As The Euro And Dollar Will Become Worthless: The US Has Devalued, Russia & China Have Ditched The Dollar And HK Intervenes For 5th Time to Defend Peg In Just Two Weeks!!
“The EU is not helping Ireland from the bottom of their heart but the bottom of their wallet. The golden rule is ‘those who have the gold — rule.’ I had given the Irish more credit than to turn their freedom over to Brussels. The best thing Ireland could do is to get out and regain your independence and culture.”
More ominously, he likens the present global economic turmoil to the Thirties depression and predicts WW3.
“Once the bailout bubble collapses — and it will — you are looking at the next great war. You are already looking at ‘currency wars’ and ‘trade wars’. The US has devalued, Russia and China have ditched the dollar and inflation has begun due to the devaluations. The currencies are all buying less and less — and these things lead to real wars.
“When people have lost everything and have nothing left to lose — they lose it. The young people on the streets have degrees in worthlessness and they can’t get a job. The young people are cyber-savvy, the testosterone is raging, they know they have been screwed and they don’t like it.”
He believes the euro and dollar will become worthless and suggests that Irish people should purchase gold and silver coins as a hedge.
U.S. Federal Reserve Chairman Ben Bernanke said a little currency appreciation in the developing world is not a bad thing.
Speaking at the International Monetary Fund meeting in Tokyo this weekend, Bernanke urged Third World nations to allow their currency to appreciate as a means of actually preventing inflation.
“The perceived benefits of currency management inevitably come with costs, including reduced monetary independence and the consequent susceptibility to imported inflation,” Bernanke said.
In the past few weeks, Bernanke has become ever more vocal in encouraging emerging market countries to allow their currencies to appreciate against the dollar; and Obama and Romney have both been advocating for a weaker dollar versus specifically the Chinese RMB. In the recent presidential debates Romney continued his call for declaring China a currency manipulator, and Obama proudly stated that the RMB had appreciated 11% against the dollar since he took office. It has actually been about 9% according to the data we look at; nevertheless, the point that both were clearly trying to make is that a weaker U.S. dollar is in our economic best interests. Likewise, in an IMF speechBernanke essentially admitted that accommodative monetary policy in the U.S. causes upward pressure on foreign exchange rates between emerging market currencies and the dollar, and suggested that foreign central banks allow that dollar depreciation to take hold, rather than intervene to prevent it.
The Hong Kong Monetary Authority sold its own currency for the fifth time in less than two weeks to preserve a 29-year-old peg to the U.S. dollar.
The central bank added HK$2.71 billion ($350 million) to the banking system in Hong Kong yesterday as the currency reached the upper limit of its trading band, according to a spokeswoman for the HKMA, who declined to be identified because of her organization’s policy. That followed a $603 million intervention on Oct. 19, the first time since 2009, and a combined $1.25 billion on Oct. 23.
Funds are flowing into Hong Kong after the U.S., Europe and Japan introduced policies to stimulate their economies and data signal China’s growth slowdown is abating. Last month, the Federal Reserve unveiled a third round of quantitative easing and Europe announced bond-buying plans, spurring capital inflows into emerging markets. The Bank of Japan (8301) expanded its asset- purchase program for the second time in two months yesterday.
The Hong Kong Monetary Authority sold its own currency for a fifth time in less than two weeks after it touched the upper limit of a 29-year-old peg to the U.S. dollar.
#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade
A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement….
China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.
The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.
Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.
#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other
The BRICS continue to flex their muscles. A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India….
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.
The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.
The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.
#3 The Russia/China Currency Agreement
Russia and China have been using their own national currencies when trading with each other for more than a year now. Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.
#4 The Growing Use Of Chinese Currency In Africa
Who do you think is Africa’s biggest trading partner?
It isn’t the United States.
In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.
A report from Africa’s largest bank, Standard Bank, recently stated the following….
“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
China seems absolutely determined to change the way that international trade is done. At this point, approximately70,000 Chinese companies are using Chinese currency in cross-border transactions.
#5 The China/United Arab Emirates Deal
China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.
The UAE is a fairly small player, but this is definitely a threat to the petrodollar system. What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?
Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade. For example, it has been reported that India will begin to use gold to buy oil from Iran.
Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.
#7 The China/Saudi Arabia Relationship
Who imports the most oil from Saudi Arabia?
It is not the United States.
Rather, it is China.
As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.
Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.
So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?
That is a very important question.
#8 The United Nations Has Been Pushing For A New World Reserve Currency
The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world.
In particular, one UN report envisions “a new global reserve system” in which the U.S. no longer has dominance….
“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency.”
#9 The IMF Has Been Pushing For A New World Reserve Currency
The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world.
In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published a while back actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….
“A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”
#10 Most Of The Rest Of The World Hates The United States
Global sentiment toward the United States has dramatically shifted, and this should not be underestimated.