Jens Weidmann warns of currency war risk
Loading central banks with more tasks and pressing them to pursue more aggressive monetary policies could risk a round of competitive devaluations, European Central Bank policymaker Jens Weidmann said on Monday, citing pressure on the Bank of Japan.
Weidmann is the latest in a string of policymakers worldwide to warn of the threat of a “currency war” as central banks pump out cash to support their economies, reducing their value in the process.
He said the pressure that Japan’s new government has put on the BOJ to deliver bolder monetary easing endangered the central bank’s independence, as did the actions of Hungary’s government.
“Already alarming violations can be observed, for example in Hungary or Japan, where the new government is interfering massively in the business of the central bank with pressure for a more aggressive monetary policy and threatening an end to central bank autonomy.”
Inflationary Targets Will Fail – World Stuck In Deflationary Super-Cycle
True Wealth Pie Decreasing
Japan came out with their long awaited 2% inflation target,
and currency devaluation scheme, but it is doomed to fail. It will fail like
all these government and central planning currency devaluation schemes because
the one point that nobody gets right now is that the entire world is in the
middle of a twenty-five year Super-deflationary cycle because there is a
depreciating pile of total wealth in the world. In short everybody is broke!
Mature Governments all in Debt
Most governments are heavily in debt, they are ultimately
going to be forced to cut back spending through austerity programs. Most
governments are going to have to raise taxes for the next 25 years, taking more
money from both businesses and citizens. This all results in less disposable
income to purchase products, and much lower margins for all companies for the
next 25 years as competitive pressures fight over a smaller overall pie of
50 Years of Leveraging Cycle
Most analysts expect a Super Inflationary Cycle due to the
massive amount of currency devaluation and money printing schemes around the
world. But ultimately, the reason everyone is trying to devalue their
currencies is because everyone is broke, and the entire world has lived well
beyond its means for 50 years.
Simply devaluing the currencies is not going to change the
wealth pie in the world which is shrinking because it was built to such an
artificial level for 50 years, the contraction phase of not having anything
backing this inflated wealth will take 25 years of contracting to get back to
Contraction Pressures Stronger than Temporal
Artificial Currency Measures
Central banks can artificially try to create inflation, and
may even have slight upticks in inflation, but ultimately we will still be in a
contraction phase because the contraction pressures are greater than the
central banks can devalue the currencies over the long haul.
And you start to see the lessening effect of each round of
QE Infinity. It ought to be a tell-tale sign when central banks are conducting
all these loose monetary policies globally and this is all the inflation they
When the Fed stops their program at the end of the year
because they basically are running out of competent bullets, the contracting
will start all over again.
Bloomberg Market exposed this danger in an article about bond investor Jeffrey Gundlach, who’s doing a flip-flop as we speak: “Bond guru buying stocks. Sees ‘Kaboom’ Ahead,” something overwhelming that will even dwarf the bizarre fiscal-cliff insanity: Yes, there’s a “financial catastrophe on the horizon.”
Gundlach, the CEO of DoubleLine Capital, who predicted the 2008 Wall Street credit meltdown, says it’s real damage is still to come. Earlier at TCW Group, he had a 7.9% annual average return for the 2000-2009 decade. He warns: “The first phase of the coming debacle consisted of a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008.”
Then all that cheap money “finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth.” America piled on an estimated $29.7 trillion in debt in the shadow markets.
BILLIONAIRES DUMPING STOCKS, ECONOMIST KNOWS WHY!
Despite the 6.5% stock market rally over the last three months, a handful of billionaires are quietly dumping their American stocks . . . and fast.
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.
With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.
Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
So why are these billionaires dumping their shares of U.S. companies?
After all, the stock market is still in the midst of its historic rally. Real estate prices have finally leveled off, and for the first time in five years are actually rising in many locations. And the unemployment rate seems to have stabilized.
It’s very likely that these professional investors are aware of specific research that points toward a massive market correction, as much as 90%.
And this is where Wiedemer explains why Buffett, Paulson, and Soros could be dumping U.S. stocks:
“Companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs.”