Goldman Charts the Currency Wars

[don]

tip of the hat to zerohedge

[gwynedd1]

Re: Goldman Charts the Currency Wars

Currency wars are the tariffs of the 21st century.

[don]

Re: Goldman Charts the Currency Wars

Currency wars are the tariffs of the 21st century.

Currency wars are the tariffs of finance capitalism.

[gwynedd1]

Re: Goldman Charts the Currency Wars

Currency wars are the tariffs of finance capitalism.

Finance capitalism is the oxymoron of the 21st century.

[don]

Re: Goldman Charts the Currency Wars

Finance capitalism is the oxymoron of the 21st century.

It may play out that way.

[GRG55]

Re: Goldman Charts the Currency Wars

I have some Floriday swampland, and a bridge in Brooklyn for sale to anybody who thinks this is a currency "war".

The only organization that is better at manipulating a currency than a Central Bank is a cabal of Central Banks from around the world. This is a carefully coordinated manipulation of major exchange rates. Surely by now anybody who believes Goldman's propaganda about currency "wars" has learned nothing and will probably lose what's left of their money...

[astonas]

Re: Goldman Charts the Currency Wars

I have some Floriday swampland, and a bridge in Brooklyn for sale to anybody who thinks this is a currency "war".

The only organization that is better at manipulating a currency than a Central Bank is a cabal of Central Banks from around the world. This is a carefully coordinated manipulation of major exchange rates. Surely by now anybody who believes Goldman's propaganda about currency "wars" has learned nothing and will probably lose what's left of their money...

Help me understand how this meshes with iTulip's recommendation for gold. Doesn't that rely on the idea that sooner or later, a house of cards will come crashing down, no matter how skilled it is at propping itself up prior to that point?

After all, if a cabal of central banks can manipulate all currencies with arbitrary precision, wouldn't the MMT folks be right? Aren't they the ones asserting that there is no downside to arbitrarily large printings of currency? My understanding is that the iTulip stance to date is that there are limits even for such a cabal. That economic realities will eventually cause unavoidable imbalances to arise, which must somehow be resolved, for example by the loss of the US dollar's reserve currency status.

I could very well be failing at the moment to grasp a very basic point. Anyone willing to help me work out what that is?

[EJ]

Re: Goldman Charts the Currency Wars

Help me understand how this meshes with iTulip's recommendation for gold. Doesn't that rely on the idea that sooner or later, a house of cards will come crashing down, no matter how skilled it is at propping itself up prior to that point?

After all, if a cabal of central banks can manipulate all currencies with arbitrary precision, wouldn't the MMT folks be right? Aren't they the ones asserting that there is no downside to arbitrarily large printings of currency? My understanding is that the iTulip stance to date is that there are limits even for such a cabal. That economic realities will eventually cause unavoidable imbalances to arise, which must somehow be resolved, for example by the loss of the US dollar's reserve currency status.

I could very well be failing at the moment to grasp a very basic point. Anyone willing to help me work out what that is?

There are no currency wars but instead an unspoken policy of cooperative depreciation whereby the right to depreciate rotates from one major power to another as economic need and geopolitical horse trading dictate.

If you look at the number of units of currency in each currency required to purchase an ounce of gold since 2001 you can see the process clearly. In my next article I again debunk the idea of a currency war. We see that Japan was left out of the arrangement for geopolitical reasons and was recently let in as a stop-gap measure. As one country or currency block after another takes its turn, the price of gold in all currencies rises. The policy of cooperative depreciation is one of the reasons we invested in gold.

The money isn't in betting on the final outcome of a "currency war" it's in knowing who's up next. After Japan, Europe or the U.S.?

I have a pretty good idea.

[GRG55]

Re: Goldman Charts the Currency Wars

Help me understand how this meshes with iTulip's recommendation for gold. Doesn't that rely on the idea that sooner or later, a house of cards will come crashing down, no matter how skilled it is at propping itself up prior to that point?

After all, if a cabal of central banks can manipulate all currencies with arbitrary precision, wouldn't the MMT folks be right? Aren't they the ones asserting that there is no downside to arbitrarily large printings of currency? My understanding is that the iTulip stance to date is that there are limits even for such a cabal. That economic realities will eventually cause unavoidable imbalances to arise, which must somehow be resolved, for example by the loss of the US dollar's reserve currency status.

I could very well be failing at the moment to grasp a very basic point. Anyone willing to help me work out what that is?

I'll try to clarify my own views about it:

• Some genuinely think that Central Bankers can manipulate monetary policy indefinitely with impunity - "theory of Central Bankers as omnipotent" (I doubt there's many of those people visiting this site);
• Some think that Central Bankers think they can manipulate monetary policy indefinitely with impunity - "theory of Central Bankers as idiots" (perhaps some visiting this site have that low opinion of Bernanke et al);
• Some think that Central Bankers have to keep telling us they can manipulate monetary policy indefinitely (with implied impunity), but they actually know better - "theory of Central Bankers as intelligent human captives of The System" (that's the cohort I am in);

Going back decades (see "Plaza Accord" for an example) Central Bankers, acting in concert, have been remarkably effective at manipulating the direction and relative level of currency exchange rates when they felt the need. At this moment I believe they are feeling the need more than ever before in their careers...and that the level of global cooperation and coordinated interventions is now arguably unprecedented in scope. Instead of a "currency war", what we have going on is a delicate and continuous management of exchange rates of every important currency around the world, with more players than ever at the table. The Swiss National Bank could not peg the Swissie to the Euro and make it stick without cooperation. There is no way that Draghi would announce "whatever it takes" without the explicit cooperation needed to keep the Euro from a disruptive step function drop. Despite all the sound and fury about "war", the move in the Yen was just what was needed to keep the Japanese economy from imploding, not a moment too soon...and well executed because the move was done almost entirely through official jawboning. Every one of them is in reflation mode, and they all know they cannot afford a "mistake" with the global economic recovery in such a fragile state.

Barack and Boehner can use the phrase "currency manipulator". Bernanke, Zhou Xiaochuan and their Central Banker peers cannot...so I think even the PBoC is in the loop now. There isn't going to be a "collapse" of the US Dollar (against other currencies). Nor will there be a collapse of the Euro, Pound sterling, etc. They have all moved against the "external" reference of gold/oil though, and one might reasonably expect that with continued, unrelenting reflation (for now) that trend is unlikely to have completely run its course...

[phinolerun]

Re: Goldman Charts the Currency Wars

The money isn't in betting on the final outcome of a "currency war" it's in knowing who's up next. After Japan, Europe or the U.S.?

I have a pretty good idea.

Gotta love cliff hangers!

[doom&gloom]

Re: Goldman Charts the Currency Wars

Gotta love cliff hangers!

I'll try for the spoiler and guess China.

I heard somewhere today or yesterday that they hit a new high on the dollar. Can't have that stuff happening to an export driven, mercantilism-based nation holding trillions of reserves of US dollars you know...

[don]

Re: Goldman Charts the Currency Wars

The money isn't in betting on the final outcome of a "currency war" it's in knowing who's up next. After Japan, Europe or the U.S.?

Absolutely. The critical thing at the London Stock Exchange was getting the news on the victor at Waterloo first, not whether it was Napoleon or Wellington.

the right to depreciate rotates from one major power to another as economic need and geopolitical horse trading dictate.

With varying amounts of lubricant, sand or sparks in the gears . . .

the globalization of the world's economy now precludes war between the Great Powers

[Polish_Silver]

OECD learning from OPEC !

There are no currency wars but instead an unspoken policy of cooperative depreciation whereby the right to depreciate rotates from one major power to another as economic need and geopolitical horse trading dictate.
I have a pretty good idea.

The "currency war" idea is that nations are in a race to devalue.

EJ's more complex idea is that
they agree on the degree of devaluation each nation is allowed. Kind of like how OPEC used to work--each nation was only allowed to produce so much oil, so as not to crash the oil price.

Only now, each nation can only print so much currency, to avoid crashing the economies of all the others.

Great system!

[EJ]

Re: OECD learning from OPEC !

The "currency war" idea is that nations are in a race to devalue.

EJ's more complex idea is that
they agree on the degree of devaluation each nation is allowed. Kind of like how OPEC used to work--each nation was only allowed to produce so much oil, so as not to crash the oil price.

Only now, each nation can only print so much currency, to avoid crashing the economies of all the others.

Great system!

The central banks and legislatures of 43 countries coordinated $4 trillion in stimulus between Q4 2008 and Q1 2009.

Currency depreciation via similar measures, primarily monetary expansion and deficit spending, are also coordinated to permit an orderly reflation of over-indebted economies. I will argue that it was agreed subsequent to the emergency reflation measures of Q4 2008 and Q1 2009 that the U.S. was to go first; as the U.S. remains the most important economy in the world, the U.S. economy needs to lead the world out of the crisis, never mind that the crisis originated in the U.S. The USD was to depreciate against all currencies initially to allow the U.S. halt the deflationary impulse of a rising USD and later to boost exports to kick-start economic growth. Subsequently the euro took a turn depreciated against all the others, as seen in the gold price; from 2001 to 2008 gold in USD increased 250% vs 110% in EUR, but since the crisis 110% up in EUR and only 70% in USD.

Recently Japan took a turn with the YEN falling 19% in gold terms since early 2012 while the USD remained flat in gold terms.

If coordinated depreciations fail to produce sustained global growth, or another crisis occurs, coordinated stimulus will again be on the table.

[javaljav]

Re: Goldman Charts the Currency Wars

I'll try for the spoiler and guess China.

....

I was scratching my head over why would China not take a potshot at US stealth-tech positioned nextdoor along with anti-missile missiles. It is highly unusual of China to ignore a chance and every tantrum has been carefully thrown as a tit-for-tat so far.

China's anger at North Korea overcomes worry over U.S. stealth flights
".....The flying of B-2 and F-22 stealth jets in joint exercises with South Korea, bringing U.S. military might virtually to China's doorstep, has barely generated a response from Beijing except for a generic call for calm and restraint...."

Maybe this is their way of saying TIA (Thanks in Advance) for their turn next!