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[sandi66]

10 Reasons to Buy Gold at $1,300.00 an Ounce
by: Marvin Clark October 10, 2010

1. Technical Breakout

From a technical analysis perspective, there has never been a better time to own or purchase gold. Every tradable asset has what is known as support and resistance. Support is the value by which any asset is assumed safe for buying. This is determined by previous price levels.

When prices reach this level more buyers than sellers step into the market. In the latest leg of the gold bull market, $1,000 has been established as the new floor.

Resistance is the price by which assets cannot move beyond because of an overhang of existing supply in the market. After gold reached $850 an oz. in 1980, those unfortunate buyers at that price level waited 30 years, watching the price of gold fall below $300 an oz. before $850 eventually was taken out.

The price of gold traded briefly in 2008 and 2009 in a range between $725 and $1,025 before rising short-term and long-term trend lines confirmed that the path of least resistance of the price of gold was upward.

2. Undervalued on an Inflation-adjusted Basis

If you calculate the cost of gold from it 1980 high of $850 an oz., on an inflation-adjusted basis, the price of gold today would be $2,250 an oz. At today’s price around $1,318 an oz., gold can increase $900 before it would equal its 1980 high. From there, its price can expand from increase demand.

All assets trade in cycles. Before the end of a cycle an asset becomes overvalued. Likewise, at the beginning of a cycle, an asset has been neglected by its market and is undervalued. Gold, having cleared overhead resistance, is now free to seek its 21st century value; including overshooting that fair value before the cycle ends.

3. A Store of Value

The major stock averages 10-year average annual return is virtually zero. Over the last three years, residential real estate has lost 25% to 50% of its value, depending on the market you’re referencing, yet gold has been up nine of the last ten years. This should continue.

The market meltdown of 2008 nearly destroyed the credit market. Real estate is the most credit dependent asset there is. The Mortgage-Backed Securities market, which provided the liquidity for the mortgage industry has not been repaired. Therefore, a structural cap has been placed on the future value of real estate.

U.S. stocks rose in value in the 1980s and 1990s because of deregulation, loose credit, and undervaluation. The inflationary 1970s made stocks poor investments relative to hard assets. By the beginning of the 1982 secular bull market in stocks, the average market multiple for stocks, the number of times over earnings stocks are bought for was between five and ten. Currently, the P/E (price x earnings) ratio for the S & P 500 Index is 17.08.

4. A Rising Asset in a Rising Asset Class

The soft and hard commodity complexes are on a roll. There are various recessionary and depression levels for many assets here in the U.S. towards home ownership, unemployment, commercial real estate vacancy rates, etc. But demand in Asia (the 21st century center of the universe) and South America is strong and getting stronger, monthly.

Foxconn in China, Apple (AAPL) Computer’s primary supplier recently gave its employees a 66% wage increase following 10 work-related suicides. Average U.S. wages have been flat for 10 years. Russia’s heat wave this summer severely reduced its wheat crop. Palladium, silver, coffee, cotton, wheat, pork bellies, and lean hogs are all up significantly for the year. The emerging market countries were not as leveraged as the west; therefore, their economies rebounded faster from the global recession. Their demands for commodities are driving up prices.

5. Upcoming Currency Devaluation

Last week, the Financial Times reported that Brazilian finance minister Guido Mantega said central banks are locked in an “international currency war”. The U.S. Treasury Secretary Tim Geithner is currently pressuring the Chinese to adjust the Yuan against the dollar. Japan is manipulating the Yen to increase exports. Other exporting countries are deliberately attempting to drive their currency lower to expand their respective domestic exports. Unfortunately, this race to the bottom cannot be won by all.

Europeans fled the Euro this spring after Greece debt problems appeared to be growing. Now, the Euro is surging because Ben Bernanke has all but signaled the availability of QE II or QE Lite after the November elections. The U.S. dollar became the least bad currency in the world and a safe haven. That is changing.

The U.S. economic recovery, which is now forecasted to struggle until 2015, will compel currency debasement by the Feds and compel countries and investors to reexamine their dollar holdings. This will add significant downward pressure on the dollar and upward pressure on the price of Gold.

6. Gold as an Upcoming World Reserve Currency Component

This story ran in Reuters at the end of September:

Dollar to remain world's reserve currency—Lockhart

(Reuters) - The U.S. dollar will remain the world's reserve currency, though some diversification over time is inevitable, Atlanta Federal Reserve Bank President Dennis Lockhart said on Tuesday.

"It's very far-fetched ... that the dollar will lose much of its position in the near term as a reserve currency," he said in response to an audience question after a speech at the University of the South.

"I do, however, expect a gradual reduction in the dollar's role as the rest of the world diversifies and some new currencies become qualified to be held as a reserve currency," he said.

It’s rumored that discussions are underway by various countries to prepare for when the U.S. dollar is no longer the world's reserve currency. China, Brazil, Russia, and France are in talks, with the aid of the International Monetary Fund (IMF), when the world loses faith in the dollar.

Central banks from around the world have stopped selling their gold. This is a reversal from your normal practice for much of this decade which implies that the value of gold is on the ascent.

Since no single currency has the ability to replace the dollar, a basket of currencies and gold will be created. Until such time, the informal reserve currency has defaulted to gold.

7. A Shift in Supply/Demand

The World Gold Council reported on second-quarter demand rising 36% compared with the second quarter of 2009, to 1,050 metric tons. Investment demand rose 118%, to 534.4 tons, and of that segment, ETF demand represented 291.3 tons, which was a 414% rise over 2009's second quarter.

Worldwide demand for gold is rising. From gold bar dispensing ATM machines at the Frankfort, Germany airport and the Abu Dhabi Emirates Palace Hotel, to Exchange Traded Funds (ETFs) such as GLD, IAU, PHYS, and SGOL. The U.S. Mint 2009 Ultra High Relief Double Eagle Gold Coin has sold out. However, Thursday evening, the U.S. Mint opened the 2010 American Gold Eagle Proof Coins, Rust was discovered forming on the Bank of Russia’s 2009 "St. George the Conqueror" .999 fine coins.

Domestically, baby boomers will live longer and will need more principal in order to sustain their lifestyle. This will necessitate the need to diversify away from paper assets and into hard assets such as silver and gold as inflation returns.

8. A Momentum Play

The return on gold this year is forcing money managers to throw in the towel and adjust their allocation for the yellow metal. Managers will have the remaining 90 days of 2010 to salvage their portfolio’s return for the year.

The year-to-date return for the S&P 500 Index is 3.8%, the DJIA is 4.9%, the NASDAQ 100 is 8.2%, and the Russell 2000 is 9.6%; while gold is up 22.7%, silver is up 37%, and palladium is up 43.8%. True alpha, and the path of least resistance is precious metals.

9. Betting With the House

For the price of gold to collapse from current levels, congress would need to enact legislation to correct the problems of wasteful spending, high unemployment, an expanding federal debt liability, and sensible tax increases.

The November elections of 2010 are completely irrelevant. Whether it is the Republicans or the Democrats who control Washington DC, the government's inability to correct the problems that persist in today's economy will continue. The price of gold will move higher whether it's gridlock or austerity by the GOP or of fiscal stimulus by the Democrats.

Thomas G. Dolnan’s Barron’s editorial dated October 2 observes:

Even a step in the right direction would face huge opposition. A permanent 10% cut in retirement benefits of all kinds, and the same cut applied to health-care spending, including doctors' and hospital fees, would be worth maybe $150 billion a year. A 10% cut in military spending was worth about $60 billion last year. It could occur automatically if the wars wind down. A 10% cut for everything else the government does except pay interest would be worth about $120 billion.

These would be real cuts from last year's spending, not a reduction from the rate of growth, with allowances for inflation and population growth. But they would take us only a quarter of the way to a balanced budget.

The expiration of the Bush income-tax cuts and restoration of the estate tax would raise about $400 billion a year. The tax hike and the 10% cut together would leave another $700 billion a year to be cut or taxed. Fortunately, that happens to be the advertised cost of the anti-recession programs.

Such spending cuts and tax increases are a reasonable program for national renewal—and for political suicide. So don't ask why candidates aren't proposing spending cuts to balance the budget. Borrowing is so much easier—until no one will lend.

10. The US stock and bond markets are predicting no growth in the future.

The yields on bonds and corporate earnings through cost-cutting informs sober investors that between now and 2015, the U.S. economy will struggle and will be unkind to equities.

Stock rallies are no longer a proxy for economic growth. Stocks can just as easily rise because of a drop in the dollar allows foreign buyers to purchase U.S. stocks at a discount.

Corporate culture, the ego to the stock market’s id, no longer cares about long-term goals and results, when the future is always 90 days away. Therefore, long-term, as we now know it is a contemporaneous creature that is shallow but dangerous. This environment debases paper assets and benefit hard assets.

seekingalpha.com/article/229285-10-reasons-to-buy-gold-at-1-300-00-an-ounce

[sandi66]

U.S. to Step Up Pressure on China

October 11, 2010

WASHINGTON—The U.S. will try to intensify pressure further on China over its exchange-rate policy after a weekend meeting of the International Monetary Fund failed to produce an agreement on international currency movements.

A U.S. official said the Obama administration was pleased that it was able to put China's currency policies at the center of discussions at the IMF's annual meeting, and felt that Beijing was responding to U.S. efforts by lifting the value of the yuan at an accelerated pace over the past month. But the official said continued pressure was needed to prevent China from backsliding.

The U.S., European nations and a number of emerging markets complain that China is deliberately undervaluing its yuan to aid its exporters. To compete, Japan, South Korea, Brazil and others have taken measures to beat down the value of their currencies as well, leading to fears these efforts may presage a trade war.

Chinese officials took a much more visible role at the IMF meetings than they usually do, making their case in press conferences, speeches and public seminars. They sought to ease tensions, but were careful not to go beyond Beijing's policy that a "gradual" ascent in the yuan was to expected—though they didn't define gradual.

On Sunday, China's central bank governor, Zhou Xiaochuan said if China can keep inflation low and the economy stable, "then the currency would become stronger and stronger." But he warned not to expect immediate changes, comparing the policy to a Chinese doctor putting together a package of 10 herbs to cure an illness.

"It solves the problem not overnight, but in a month or two months," he said to laughs at a meeting of the Institute of International Finance, a bankers' trade association.

The U.S will focus its attention on a summit of the leaders of the Group-of-20 industrialized and developing nations in Seoul in November. The Obama administration is betting China will make a further move on its currency before then, as a way to keep its exchange-rate policies from dominating the meeting—and South Korean negotiators are scrambling to convince Beijing to do just that.

Shortly before the last G-20 summit in Toronto in June, Beijing agreed to show "flexibility" in its exchange-rate policy, ending a two-year period of tightly tying the yuan to the dollar.

However, China barely budged its currency upward, producing yet another round of U.S. pressure, including a Sept. 6 visit to Beijing by White House economic adviser Lawrence Summers. Since then, the value of the yuan has gained about 2% against the dollar, a pace the U.S. official said was encouraging, though the U.S. wants further movement.

"It is critical to see more progress by the major emerging economies to more flexible, more market-oriented exchange-rate management," U.S. Treasury Secretary Timothy Geithner said at an IMF session Saturday, in remarks clearly aimed at China.

The U.S. has other levers too, but it is wary of pushing some of them. Most prominent is a semiannual report that Treasury is required to release by Friday examining whether exchange rates—including China's—are being "manipulated." Mr. Geithner has testified in Congress that a manipulation finding on China's yuan could be counterproductive. Such a finding, under a 1988 trade law, simply requires the U.S. to negotiate with Beijing, which it already is doing, and could open U.S. companies to retaliation from Beijing.

In April, Treasury delayed the report, giving China more time to change its policy, and then gave China a passing grade after it said it would allow more flexibility.

Still, giving China a pass in the upcoming report could cause political problems for the administration at a time when China has become a potent political issue in fall campaigns. That argues for Treasury delaying the release of its finding, as it has done in the past under Democratic and Republican administrations. Mr. Geithner has told lawmakers he'll file in a "timely" manner, without a more specific commitment.

Two proposals the U.S. took into the IMF meeting got no traction. In a talk in advance of the meeting, Mr. Geithner suggested that China might be willing to boost its currency if other Asian currencies did the same, in a kind of regional accord. That way, none of the countries would gain a competitive edge. But during a seminar at the IMF, Yi Gang, deputy governor of China's central bank, called such a deal "very unlikely."

Mr. Geithner also said that China's power and role at the IMF should be linked to its willingness to move its currency. That won the backing of IMF Managing Director Dominique Strauss-Kahn, but few others. "Nobody is linking this," said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF's policymaking committee and is overseeing a revamping of the organization's voting structure.

While European nations expressed concern about the yuan's value, they were less confrontational with Beijing. Some argued it's up to the U.S. and China to address the root causes of the dispute over currencies.

"The U.S. would have to reduce the internal and external deficits that they have. From the Chinese side, the most important aspect would be to increase internal consumption, and an appreciation [of their currency rate] would be one of the instruments," Ewald Nowotny, head of Austria's central bank, said in an interview.

Olli Rehn, the European Commission's head of economic and monetary affairs, said he considered the yuan "significantly undervalued" and called on the IMF to take an "enhanced role" in solving the dispute.

Mr. Strauss-Kahn on Friday suggested an initiative in which the IMF would work on a number of fronts to ease currency battles. But by the end of the IMF meeting on Saturday, he described a narrower effort where the IMF would focus its reviews of country policies more heavily on currency issues. The U.S. official said the IMF should continue to play an advisory role to the G-20.

That leaves the U.S. with a combination of unilateral and multilateral levers to pull. Unilateral moves can be difficult because of domestic politics. Mr. Geithner and the White House have tried to use Congressional ire to convince China of the depth of U.S. concern. They point to a bill that passed the House last month that would make easier for domestic industries to win cases against China based on the argument that Beijing's restraint of its currency subsidizes its exports.

But the Treasury also worries that such a bill could backfire by provoking a trade war. So it hasn't endorsed the bill—or given lawmakers advice about what kind of provisions it wants.


Senate leaders say they don't think there is time to pass a similar bill and have it signed into law during a lame-duck session after the November elections. But that could change if anti-Chinese sentiment grows in the Congress. Senior Republican and Democratic Senate aides think a bill would pass by a wide, bipartisan margin.

The Treasury sees the Korea G-20 summit as more promising. Currency is on the agenda as part of what the G-20 calls its "rebalancing" process. Trade-surplus countries—especially China—have agreed to shift away from export-led growth to domestic consumption, which implies an appreciation of the yuan. Trade deficit countries—especially the U.S.—have agreed to boost savings and reduce imports. The overall goal is reduced reliance on U.S. consumer spending for global growth.

South Korean negotiators are talking to Beijing about the importance of striking a political deal with the U.S. over currency issues before the summit, where President Barack Obama is sure to press Chinese President Hu Jintao. Mr. Zhou, the central banker, said China agrees with the G-20 agenda.

Michael Spence, a Nobel Prize-winning economist now at New York University, on Sunday said Chinese and global interests coincide, rather than conflict. "We are into questions of speed. In my judgment [Chinese officials] are going too slowly....many of them don't get it."

online.wsj.com/article/SB10001424052748704127904575543801865057796.html

[sandi66]

Precious Metals The Most Perfect Medium

Commodities / Gold and Silver 2010
Oct 11, 2010 - 03:45 AM

By: Howard_Katz


The precious metals markets moved into high gear last week with silver up 4.5% and new highs in gold and the HUI. Meanwhile the Wall Street Journal explained:

“Driving the recent spate of [currency] flows has been anticipation that the Federal Reserve will restart its efforts to stimulate growth through purchases of government debt that inject more money into the banking system – a practice known as quantitative easing or ‘QE.’”

“Easy Money Churns Emerging Markets,” by Alex Frangos,
WSJ, 10-8-10, p. A-10.

Sad, sad news in the daily paper this week. We live in a world where the leaders of our country, and every country in the world, believe that there is nothing more to the production of wealth than to simply create, out of nothing, the money which symbolizes it. The Journal again:



“Investors who had been betting on the dollar switched their wagers in the past few weeks as they grew convinced the Fed will pump still more money into financial markets to bolster the struggling U.S. economy – essentially diluting the value of the dollar.”

“Dollar’s Fall Roils World,” by Tom Lauricella, WSJ 10-8-10,
p. A-1.

For several years, we have watched as the precious metals markets have told us of a truly amazing advance. Since their lows in the last century, both gold and silver have multiplied by a factor of more than 5. Both metals have traced out powerful up trends with repeated bullish chart patterns. And now we know the answer why. The Government of the United States, in the person of Ben Bernanke (and his fellow officials at the Federal Reserve), is trying to reduce the people of America to medieval serfs, to steal their wealth and to give it to the likes of Goldman Sachs (and a few other institutions which have obtained their great wealth not by producing it but by having the Government steal it for them).

The mechanism of this historic theft is counterfeiting. Indeed, the government has set up the counterfeiting department (the Federal Reserve System). It prints money and gives this new money to its favorites (who respond via bribes disguised as campaign donations and job offers).

But as we gold bugs have been arguing, the printing of money causes the depreciation of the currency, and this must cause all prices (denominated in that currency) to rise. And this is taking the form of a general increase in commodity prices, itself led by the precious metals.

Sadly, America was once governed by wiser men. In 1816, Thomas Jefferson commented:

"We are now taught to believe that legerdemain tricks upon paper can produce as solid wealth as hard labor in the earth. It is vain for common sense to urge that nothing can produce but nothing; that it is an idle dream to believe in a philosopher's stone which is to turn everything into gold, and to redeem man from the original sentence of his Maker, 'in the sweat of his brow shall he eat his bread.'" --Thomas Jefferson to Charles Yancey, 1816. ME 14:381

Jefferson was talking about the Second Bank of the United States. He and James Madison had abolished the First Bank of the United States in 1811, but Madison backed down and allowed a second bank in 1816. This bank was later destroyed by Andrew Jackson and Martin van Buren in 1836 (as a result of Jackson’s overwhelming victory in the 1832 election). It was this battle against the second bank which gave birth to the (real) Democratic Party.

If the Democratic Party was born to destroy the central bank and if the Democrats hold power today, then why is it we have a central bank which keeps on printing more and more money? Indeed, in the easing of 2008 we knew that we were being robbed for the benefit of Goldman Sachs and other Wall Street Houses which had accumulated toxic assets. But here in late 2010 we are not even allowed to know who will receive the wealth which is being taken from us.

Once Jackson had destroyed the Second Bank of the United States, the U.S. began a period of economic growth unprecedented in human history. A cornucopia of wealth flowed such as mankind had never seen. The human lifespan increased. A continent was tamed. One after the other, new machines and devices for the improvement of people’s lives poured out of the factories of the nation.

It should be noted that all this was accomplished without the hint of rising prices. From 1793 to 1933, the prices of basic wholesale goods came out the same. For most of this period, there was no word for unemployment for the simple reason that unemployment was so low that nobody noticed it, and nobody spoke of it.



As Bernanke made clear his intention to counterfeit yet another round of money (at this point no one knows how much), the dollar collapsed on the world markets. It collapsed against gold and silver. It collapsed against the grains. And, as the above chart shows, it even collapsed against the other paper currencies. (All of these paper currencies are going down, but the dollar is going down faster.) Chartists will recognize the pattern which has been formed as a head and shoulders top, and the price objective point is 72.

What Jefferson was saying was that the issue of paper money could not create real wealth. Wealth is (scarce) goods which satisfy a human need. In simple language, wealth is stuff. President Obama’s and President Bush’s economic advisors do not know this. They keep saying that the printing of money will create stuff (“stimulate the economy”). One repeatedly hears the theory that the printing of money will so dramatically stimulate the economy that the extra goods thus created will cause a net decline in prices.

This theory (of a net decline in prices) is repeated throughout the financial world. Every time this forecast is made it proves false. But the people who hear the forecast have short memories. They forget that the last time they heard the same forecast it was also wrong. Ditto, ditto the time before that. They do not look at the facts. They look at the impressive credentials of the con artists who are deceiving them. And so they believe, again and again and again.

The important thing to understand about this confidence game is that it only devours its own. To be protected against it, all you have to do is to see reality as it is. The printing of paper money does not create wealth. Jefferson again.

"Specie is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war." --Thomas Jefferson to John Wayles Eppes, 1813. ME 13:430

If you wish to be protected against the depreciation of our currency by Ben Bernanke, then specie (gold or silver) is the most perfect medium. Any real good will provide protection. However, gold and silver have been chosen as money for certain reasons of convenience. They are the easiest to hold and to exchange with others. They have been used as money for 2500 years, and they are the only legal monies under the United States Constitution. As Ben Bernanke destroys the (Federal Reserve note) dollar, all real goods will rise in price, and gold and silver will lead (are leading) the way. The people who believe the establishment and plan for “deflation” will be destroyed. The people who believe Thomas Jefferson will be protected.

www.marketoracle.co.uk/Article23399.html

[sandi66]

Banks Voice Resistance as Regulators Say Basel Is Just a Start

By Yalman Onaran - Oct 11, 2010 12:10 AM ET

National bank regulators risk undermining a fragile economic recovery if they pursue a new round of capital and liquidity rules beyond those agreed internationally, bankers said at gathering in Washington.

Central bankers told executives at weekend meetings in Washington to expect more financial rules, especially for the largest firms, after international regulators set minimum standards in Basel last month. If countries surpass that accord, they will deny banks a level playing field and impede growth, chief executive officers including Deutsche Bank AG’s Josef Ackermann and Standard Chartered Plc’s Peter Sands warned at the event, hosted by the Institute of International Finance.

“There are growing signs that global coordination is fizzling and unilateral actions are pending,” said Ackermann, chairman of the IIF, which represents more than 400 financial institutions. “Global banks will have to comply with the higher rules in every jurisdiction, regardless of their home base. That will steal from credit to companies and hurt job creation.”

Lobbying groups are shifting attention to national regulators after the industry persuaded some international rule makers that proposed rules may stunt economic growth. The Basel Committee on Banking Supervision softened planned capital and liquidity requirements last month, then gave lenders about a decade to comply. Countries such as Switzerland and the U.K., which had pushed for tougher rules, are moving ahead with additional restrictions to rein in their banks.

Setting a Minimum

Central bankers that addressed the IIF members during the group’s annual gathering said some rules may surpass Basel III, as the new version of the global capital standards are named. Philipp Hildebrand, president of the Swiss National Bank, Mark Carney, Bank of Canada’s governor, and William Dudley, head of the Federal Reserve Bank of New York, said Basel only set a minimum and more should be expected. Bank of England’s deputy governor Paul Tucker echoed that phrase when addressing reporters at another venue yesterday.

Those central bankers were the same ones pushing for tougher rules and faster implementation within the Basel committee, which is made up bank regulators and central banks from 27 countries, as it formulated its new rules. They were countered by France, Germany and Japan, whose politicians were concerned about the economic impacts of the restrictions, amid warnings from Ackermann, 62, and other bankers. Frankfurt-based Deutsche Bank is Germany’s biggest lender.

‘Too Much Divergence’

In June, the IIF published a report predicting that bank regulations would shave off 3.1 percentage points from economic growth in the developed world. Though the Basel committee’s original proposals were softened, the IIF isn’t reducing that estimate, the industry group said yesterday. That’s because benefits of Basel compromises may be offset if national policy makers enact additional measures and international regulators impose surcharges for the largest banks, the IIF said.

“We never expected 100 percent uniform implementation of Basel rules worldwide, but we’re worried about too much divergence,” said Sands, 48, an IIF board member. London-based Standard Chartered gets more than three quarters of its earnings from Asia.

A study done by the Basel committee and the International Monetary Fund found the impact on those nations’ economies to be about one eighth of the IIF estimate.

Bankers from around the world also expressed concern at the IIF meeting that some national regulators, along with investors in bank stocks, will force a faster adoption of the rules than Basel’s timetable requires. Central bankers sought to ease those concerns. Bank of Canada’s Carney said the timetable won’t be accelerated if banks need breathing space. The New York Fed’s Dudley said markets would respect the implementation plan and not push for faster compliance.

Emerging Market Advantage

“We gave the long time frame not because banks advocated it, but because we realize the fragility of the economy,” said Swiss National Bank’s Hildebrand, 47.

Bankers also warned regulators that they were assuming it would be easy for lenders to raise fresh capital to comply with the increased requirements. Banks in emerging markets are better capitalized than their counterparts in the developed world because emerging economies have better growth potential, said Bank of America Corp. CEO Brian Moynihan, 51. The Charlotte, North Carolina-based firm is the biggest U.S. lender by assets.

“If you don’t have growth prospects and you increase capital requirements, which means lower returns on equity going forward, where do you find new capital?” Moynihan asked regulators during a panel discussion during the weekend.

www.bloomberg.com/news/2010-10-11/bankers-voice-resistance-as-national-regulators-say-basel-is-just-a-start.html

[sandi66]

Finance Chiefs Fail to Resolve Currency Spat as G-20 Splits

By Simon Kennedy and Sandrine Rastello -

Oct 11, 2010 4:08 AM ET

Leaders of the world economy failed to narrow differences over currencies as they turned to the International Monetary Fund to calm frictions that are already sparking protectionism.

Exchange rates dominated the IMF’s annual meeting in Washington on concern that officials are relying on cheaper currencies to aid growth, risking retaliatory devaluations and trade barriers. China was accused of undervaluing the yuan, while low interest rates in the U.S. and other rich nations were blamed for flooding emerging markets with capital.

Finance ministers and central bankers pledged to improve cooperation, yet did little to show how they would alter their ways beyond agreeing to let the IMF study the matter. With the dollar down 11 percent against the yen since mid-June, compared with less than 3 percent versus the Chinese yuan, the focus turns to Group of 20 talks in South Korea in coming weeks to prove international policymaking isn’t in tatters.

“Policy makers seemed to be trying to diminish concerns about currency wars,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “There did not seem any commitment to change behavior, however. There is little to suggest that the dollar’s direction is anything but down.”

Mantega’s ‘War’

The dollar rose 0.2 percent against the yen to 82.06 yen as of 8:51 a.m. in London after earlier dropping to 81.39 yen, the lowest since April 1995. The U.S. currency was little changed against the euro and yuan. The Brazilian real strengthened 0.9 percent to 1.6661 against the dollar.

Days after Brazilian Finance Minister Guido Mantega set the tone for the gathering by declaring a “currency war” was underway, officials held their traditional battle lines. U.S. Treasury Secretary Timothy F. Geithner and European Central Bank President Jean-Claude Trichet were among those to signal irritation that China is restraining the yuan to aid exports even as its economy outpaces those of other G-20 members.

“Global rebalancing is not progressing as well as needed to avoid threats to the global economic recovery,” Geithner said. “Our initial achievements are at risk of being undermined by the limited extent of progress toward more domestic demand- led growth in countries running external surpluses and by the extent of foreign-exchange intervention as countries with undervalued currencies lean against appreciation.”

Monetary Expansion

At the same time, officials from emerging economies including China complained that low interest rates in the U.S. and its developed-world counterparts mean investors are pouring capital into their markets, threatening growth by forcing up currencies and inflating asset bubbles. The MSCI Emerging Markets Index of stocks has soared 13 percent since the start of September.

“Near-zero interest rates and rapid monetary expansion are geared at stimulating domestic demand but also tend to produce a weakening of their currencies,” Mantega said Oct. 9. As a result, developing countries will continue to build up reserves in foreign currency to avoid “volatility and appreciation.”

Chinese officials repeated they will allow a gradual advance in the yuan and warned that a hasty revaluation would do the world economy more harm than good.

“We are committed to a more flexible” exchange-rate regime, People’s Bank of China Deputy Governor Yi Gang said. “A more flexible, market-based, managed floating regime is better for China and is better for the rest of the world. But the approach is probably a gradual one.”

While the yuan last week rose to its highest level since 1993, its gain against the dollar since China pledged in June to make it more flexible is little more than 2 percent.

Taking Steps

More and more economies are taking steps to spur growth that end up weakening their currencies. Japan last month sold yen for the first time in six years, and the Federal Reserve is signaling it may revive large-scale asset purchases next month. Switzerland, South Korea and Brazil have also intervened this year. While a lower exchange rate can help bolster exports, it also hurts trading partners, who may look to regain advantage through their own devaluations or by erecting trade barriers.

Leaders are seeking to avoid a repeat of the 1930s, when a trade war begun by the U.S. passage of the Smoot-Hawley Tariff Act deepened the worldwide economic slump.

“We’re in a world in which everyone wants a weaker currency but you cannot have an equilibrium of all currencies being weaker,” Nouriel Roubini, the New York University professor who predicted the credit crisis, told Bloomberg Television. “Currency-intervention wars eventually can lead to trade wars.”

Capital Controls

Some forms of protectionism may already be on the rise. Ukraine’s Deputy Premier Serhiy Tigipko said in an interview in Washington that his country may follow South Korea, Poland, Brazil and other emerging markets in introducing capital controls to prevent short-term investments from fueling currency volatility. India may also intervene to “prevent the disruption of the macroeconomic situation,” Reserve Bank of India Governor Duvvuri Subbarao told reporters.

In the U.S., Democratic Senator Jack Reed of Rhode Island told Bloomberg Television’s “Political Capital with Al Hunt” that the U.S. Senate may consider a lame-duck session to deal with legislation aimed at prodding China on the yuan.

Japan also remains ready to act on the yen when needed, Finance Minister Yoshihiko Noda said, although he signaled last week that his nation doesn’t intend to return to the long-term, large yen selling of the past.

IMF Reports

Unable to find common ground themselves, governments agreed the IMF should serve as currency cop by preparing reports which show how the policies of one economy affect others. The studies will focus on the U.S., China, the U.K. and the euro area.

“The need to have this kind of spillover report has been discussed for months and now it’s part of our toolbox,” IMF Managing Director Dominique Strauss-Kahn said.

The IMF nevertheless has little record of success on pushing global authorities to change their ways. A 2006 effort to oversee the rebalancing of the world economy petered out, and China has repeatedly rejected the fund’s analysis.

“The major economies are each encouraging the IMF to push harder on other countries, but showing no willingness to yield to the IMF any such leverage over their own policies,” said Eswar Prasad, a senior fellow at the Brookings Institution and a former IMF official.

Voting Power

The IMF’s membership also split over how to increase the power of emerging markets in its decision-making. The U.S. rejected as insufficient a proposal by European governments to reduce the number of seats they hold on the 24-strong board, according to two European officials.

Attention now turns to the G-20 meetings, starting next week with finance-minister talks and concluding Nov. 11-12 in Seoul with a leaders’ summit. Suggestions for how to resolve currency differences were vague in Washington, with French Finance Minister Christine Lagarde proposing better coordination and more diversification, while Canada’s Jim Flaherty suggested that new “rules of the road” be outlined. European Central Bank Executive Board member Lorenzo-Bini Smaghi suggested the G- 20 may be too big to find a compromise.

Unless checked in South Korea, the discord may snap the G- 20’s united front formed to fight the financial crisis and recession.

“A once-promising global response has now been replaced by inadequately coordinated national economic policies and growing frictions among countries,” Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., said in a Washington speech.

www.bloomberg.com/news/2010-10-10/global-finance-chiefs-fail-to-resolve-exchange-rate-spat-as-g-20-splinters.html

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China Raises Banks' Deposit-Reserve Ratio by Half a Point, Reuters Reports
By Bloomberg News - Oct 11, 2010 5:18 AM ET

China’s central bank unexpectedly and temporarily raised reserve requirements for six large commercial banks, reining in liquidity as the economy stabilizes and money flows in from abroad, according to a Reuters report.

The ratio will increase 50 basis points and for two months, the news agency said, citing four unidentified people. The current level is 17 percent for the biggest banks and 15 percent for smaller ones. Market News cited unidentified traders to the same effect. The People’s Bank of China declined to comment.

Today’s move may signal policy makers’ confidence that the fastest-growing major economy can maintain momentum even as the government seeks to cool the real-estate market to limit asset bubbles. The central bank will continue to focus on quantitative monetary tools instead of raising interest rates, Bank of America-Merrill Lynch said.

There will be “no interest-rate hike in the short term” said Lu Ting, a Hong Kong-based economist for Merrill. The impact on the yuan could be “slightly positive” he said.

The Shanghai Composite Index closed 2.5 percent higher today, after a 3.1 percent gain on Oct. 8. Stocks climbed as word spread of the measure, milder than an interest-rate increase, said Dorris Chen, a Shanghai-based banking analyst at BNP Paribas.

As the government tries to rein in liquidity after last year’s record expansion in credit, pressure for the yuan to appreciate gives investors another reason to pump money into the Chinese economy.

Capital Inflows

“To combat rising inflation concerns the best option would be to raise interest rates, but apparently the Chinese government cannot do that for fear of more capital inflows,” said Chen. The measure wasn’t applied to smaller lenders because they are “already having difficulty attracting enough deposits.”

Central bank Governor Zhou Xiaochuan said Oct. 8 in Washington that existing monetary policy tools were adequate even after inflation accelerated to a 22-month high of 3.5 percent in August, suggesting China may keep rates at crisis lows. The one-year lending rate is 5.31 percent.

“There is no evidence to show the current quantitative tools, including the reserve requirement and the open market operation to mop up liquidity, are insufficient to control inflation expectations,” Zhou said.

Bank of China

Market News reported that the lenders targeted are Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, China Minsheng Bank and China Merchants Bank, citing information from unidentified traders.

The central bank is yet to release September data for bank lending and the nation’s foreign-exchange reserves. A Bloomberg News survey suggests that the currency holdings may have jumped to $2.5 trillion, boosted by weakness in the dollar and inflows from trade.

Merrill’s Lu said the increase may be “punishment” for banks that lent too much in September as the government seeks to cap new loans at 7.5 trillion yuan this year, 22 percent less than the record set in 2009.

Officials are targeting cities including Shanghai with extra restrictions on home purchases as the government aims to prevent speculative bubbles in real estate.

Economic growth will ease each quarter this year after peaking in the January-to-March period, the median forecasts in a Bloomberg News survey of economists show. China’s expansion was 10.3 percent in the second quarter from a year earlier, down from 11.9 percent in the previous three months.

In a Bloomberg News poll on July 15, only one of five economists expected another increase in reserve requirements this year. Four expected no change. The government withdraws cash from the financial system by raising lenders’ reserve requirements or selling bills.



www.bloomberg.com/news/2010-10-11/china-raises-deposit-reserve-ratio-by-half-point-for-banks-reuters-says.html

[sandi66]

Dollar Trades Near 8-Month Low on Prospects of More Fed Easing



Oct 11, 2010 6:11 AM ET



The dollar traded near an eight- month low against the euro on speculation that Federal Reserve policy makers will this week signal their willingness to buy more government debt to support economic growth.

The dollar touched a 15-year low versus the yen before tomorrow’s release of minutes from the Fed’s Sept. 21 policy meeting. The euro pared earlier gains against the U.S. currency after the weekend’s International Monetary Fund meeting failed to narrow differences over currencies.

“Given there was little suggestion of coordination or cooperation at the IMF meeting, the fact that the euro hasn’t continued to go higher on the back of that suggests caution,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “The euro may be a little overextended and we may see a little bit of a correction set in from these levels.”

The U.S. currency was little changed at $1.3940 per euro as of 11:08 a.m. in London, from $1.3939 in New York on Oct. 8. It fell to $1.4012 earlier today and reached $1.4029 on Oct. 7, the weakest since Jan. 28. The dollar traded at 82.03 yen, from 81.93 yen last week, after earlier reaching 81.39 yen, the lowest level since April 1995. The euro advanced to 114.35 yen, from 114.19 yen.

Australia’s currency fell 0.1 percent to 98.39 U.S. cents. The so-called Aussie strengthened to 99.07 U.S. cents earlier after home-loan approvals climbed for a second-straight month. It reached a record 99.18 cents on Oct. 7, the highest level since it began trading freely in 1983.

U.S. Data, Fed

The Australian dollar erased an earlier advance after China raised the deposit reserve ratio for six banks by 50 basis points. Financial markets in Japan and the U.S. are closed for public holidays today.

The Aussie “dropped from the overnight high with the rate announcement from China depressing demand,” analysts at Lloyds Banking Group Plc, led by Kenneth Broux in London, wrote in an e-mailed report.

U.S. employers cut payrolls by 95,000 workers in September after a revised 57,000 decrease in August, Labor Department figures in Washington showed on Oct. 8. The median forecast of 87 economists surveyed by Bloomberg News called for a 5,000 drop. The unemployment rate unexpectedly held at 9.6 percent.

Fed Chairman Ben S. Bernanke said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing, or QE, is likely to help more. New York Fed President William Dudley, who has voiced support for more government bond purchases, will speak in Washington later today.

DBS Cuts Forecasts

“Since August, the Fed has been leaning towards more quantitative easing measures to underpin the weakened U.S. recovery,” Philip Wee, a senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. “We have downgraded the outlook for the dollar.”

DBS lowered its year-end forecast for the dollar to trade at $1.40 per euro from $1.28 previously, and to be at 83 yen from 88 yen before, according to the note.

“Risk-taking appetite may be positive, given higher equities and commodities,” said Yusuke Tanaka, a senior dealer at Mitsubishi UFJ Trust & Banking Corp. in Singapore. “This is probably a plus for the euro.”

Commodity Futures Trading Commission data show hedge funds and other large speculators are more bearish on the dollar than at any time in history, with bets on a decline exceeding those on a rise by 341,683 contracts as of Oct. 5.

‘Pain Trade’

The last two times sentiment was close to this level, in early 2008 and late 2009, the dollar rallied. The Dollar Index, which tracks the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, surged as much as 24 percent in the second half of 2008 and 19.6 percent between November 2009 and June 2010.

“The pain trade now is any dollar-positive, or very likely U.S. bond-market-negative, news,” Citigroup Inc. strategists led by Steven Englander in New York wrote in an Oct. 7 report. The strategists said they are still calling for dollar weakness.

Europe’s common currency was at 1.3422 Swiss francs, from 1.3419 francs on Oct. 8, when it reached 1.3494 francs, the strongest level since Aug. 13.

Gains in the yen were tempered on speculation that Japan will intervene to stem the appreciation of its currency.

Japanese Finance Minister Yoshihiko Noda said on Oct. 8 Group of Seven officials understand Japan’s position on the yen’s gains and agreed that excessive foreign-exchange movements are undesirable.

‘No Official Criticism’

“There was no official criticism of Japan’s decision to intervene in the foreign-exchange market by selling yen,” said Gareth Berry, a currency strategist at UBS AG in Singapore. “This increases the chance of a further round of intervention should the yen continue to appreciate.”

At the IMF’s annual meeting in Washington, governments tasked the agency with calming the recent outbreak of tensions over currencies amid signs they are already triggering a protectionist backlash. Officials including U.S. Treasury Secretary Timothy F. Geithner and Egyptian Finance Minister Youssef Boutros-Ghali said Oct. 10 the lender should outline how countries can expand their economies without damaging those of other nations.

Australia’s dollar strengthened earlier today versus its U.S. counterpart on prospects the nation’s central bank will raise its benchmark interest rate next month.

‘More Stimulus’

Australian home-loan approvals rose 1 percent in August from a month earlier, the statistics bureau said today, matching the median estimate of economists surveyed by Bloomberg News.

“The market is very keen to take the Aussie higher,” said Khoon Goh, head of market economics at ANZ National Bank Ltd. in Wellington. “The rhetoric is certainly pointing toward providing more stimulus for the U.S. economy and that’s why the market is pricing in a decent probability of QE2, putting the U.S. dollar under downward pressure.”

Benchmark interest rates are 4.5 percent in Australia and 3 percent in New Zealand, compared with as low as zero in Japan and the U.S., attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.



www.bloomberg.com/news/2010-10-11/dollar-trades-near-8-month-low-on-prospects-of-more-federal-reserve-easing.html

[sandi66]

Yuan Forwards Surge to Strongest in Two Years on Demands of Trade Partners
By Bloomberg News - Oct 11, 2010 6:08 AM ET

Yuan forwards surged to the strongest level in more than two years on speculation China’s government will allow appreciation to head off the threat of trade sanctions in the U.S. and Europe.

The central bank set the daily reference rate at a record high for a second day after global finance chiefs at the International Monetary Fund annual meeting last week warned a race to weaker exchange rates in countries from China to Brazil risks hurting the world economy. The U.S. Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, slipped to an eight-month low.

“If China doesn’t let the yuan rise at a time when the dollar is so weak in overseas markets, there will be more pressure,” said Liu Dongliang, a Shenzhen-based analyst at China Merchants Bank Co., the country’s sixth-largest lender by market value.

Twelve-month non-deliverable forwards jumped 0.8 percent to 6.4390 per dollar as of 5:30 p.m. in Hong Kong, reflecting bets the currency will strengthen 3.6 percent from the spot rate, according to data compiled by Bloomberg. The contracts touched 6.4368, the highest level since July 2008.

The yuan’s rate in the spot market was little changed at 6.6678 and touched 6.6610, the highest since the central bank unified official and market exchange rates at the end of 1993.

China’s central bank Governor Zhou Xiaochuan resisted calls from the U.S. and Europe for faster appreciation of the yuan, saying on Oct. 8 his country aims to avoid any “shock therapy” in its currency reform.

“China’s exchange-rate policy is, based on the market supply and demand relationship, to move gradually to the equilibrium point,” said Zhou in Washington during a panel hosted by the British Broadcasting Corp. “We do that in a gradual way, rather than a shock therapy.”

The reference rate for yuan trading was fixed at 6.6732, the strongest level since a dollar peg was scrapped in July 2005



www.bloomberg.com/news/2010-10-11/yuan-forwards-surge-to-strongest-in-two-years-on-demands-of-trade-partners.html

[sandi66]

Dollar Weakness Overstates Fed Printing Press as IMF Sees Best G-3 Growth
By Lukanyo Mnyanda and Bo Nielsen - Oct 11, 2010 4:55 AM ET

The dollar’s biggest quarterly decline in eight years may be setting the stage for a rally, if some of Wall Street’s top strategists are to be believed.

The Dollar Index slid 8.5 percent last quarter, the most since June 2002, and 1.8 percent this month as Federal Reserve Chairman Ben S. Bernanke signaled he may inject more money into the economy to ensure the recovery stays on track. That new supply is reflected in exchange rates, based on how the currency reacted to the last round of so-called quantitative easing, say HSBC Holdings Plc, BNP Paribas SA and Nordea Bank AB.

“The market will find it has been selling the rumor and will rush to buy the fact,” when the Fed begins fresh purchases, said Hans-Guenter Redeker, global head of currency research in London at BNP Paribas. “Everybody sits in the same boat and is heavily negative the dollar. When too many people are sitting in a boat it’s no longer safe.”

U.S. growth will exceed that of the 16-nation euro region by almost 1 percentage point this year and next, the International Monetary Fund in Washington forecast last week. Bank of Tokyo-Mitsubishi UFJ Ltd. says Fed purchases may be as low as $500 billion, less than 30 percent of the $1.725 trillion bought last year.

No ‘Shock and Awe’

“The economic data hasn’t deteriorated to such an extent that they need to implement such an aggressive shock and awe approach,” said Lee Hardman, a currency strategist in London at Bank of Tokyo, who predicts the Fed will buy about $600 billion of bonds. “Positioning and sentiment are certainly suggesting that dollar pessimism is quite extreme.”

Commodity Futures Trading Commission data show hedge funds and other large speculators are more bearish on the dollar than at any time in history, with bets on a decline exceeding those on a rise by 341,683 contracts as of Oct. 5.

The last two times sentiment was close to this level, in early 2008 and late 2009, the dollar rallied. The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, surged as much as 24 percent in the second half of 2008 and 19.6 percent between November 2009 and June 2010.

“The pain trade now is any dollar-positive, or very likely U.S. bond-market-negative, news,” Citigroup Inc. strategists led by Steven Englander in New York wrote in an Oct. 7 report. The strategists said they are still calling for dollar weakness.

Dollar Estimates

Strategists had already capitulated on calls for a stronger dollar. At the start of the year, the median estimate of more than 40 estimates was for the greenback to end 2010 at $1.45. By July, the forecast was $1.18, before ending last week at $1.32 as the euro gained, Bloomberg data show.

Speculation the Fed will buy bonds rose on Oct. 8, as traders drove two- and five-year Treasury yields to record lows and the dollar to its weakest level in 15 years against the yen, after a Labor Department report showed the U.S. lost more jobs last month than forecast.

Since climbing to this year’s high of 88.708 on June 7, IntercontinentalExchange Inc.’s Dollar Index has tumbled 12.8 percent to 77.314 as of 9:26 a.m. in London. It fell 14.6 percent from March 17, 2009, the day before the Fed said it would buy $300 billion of Treasuries and step up mortgage-bond purchases, through Nov. 25 last year.

The greenback traded at $1.4029 to the euro last week, its weakest level since late January, before closing at $1.3939 in New York. Against the yen, it finished the week at 81.93, down from this year’s high of 94.99 in May, and today reached a 15- year low of 81.39.

‘Priced In’

“Quantitative easing seems to be priced in already,” said David Bloom, global head of currency strategy at HSBC in London, who has predicted since the start of June the euro would end the year at $1.35, from about $1.22 at the time. “Three months ago investors were bailing out of the euro, and now they’re all scrambling to buy it back.”

Bernanke has said Fed purchases support growth by lowering borrowing costs as investors use the money they get by selling Treasuries to buy securities including mortgage bonds and corporate notes. Policy makers will probably announce an initial program to buy about $100 billion of Treasuries a month, according to Jens Nordvig, a managing director of currency research at Nomura Holdings Inc. in New York.

“The U.S. is putting a lot more pressure on monetary policy than the other major central banks, and that’s hurting the dollar,” said Thomas Stolper, a London-based economist for Goldman Sachs, who expects the Fed’s bond purchase program to total at least $1 trillion.

The dollar risks further depreciation as long as investors are unsure about the plans, said Dale Thomas, head of currencies in London at Insight Investment Management Ltd., which oversees about $144 billion.

‘Under Pressure’

“The Fed doesn’t know how much it will end up buying and the market doesn’t know, and that’s making people nervous,” said Thomas. “Until the announcement of what we’ll get, the dollar will be under pressure.”

Interest rates favor the euro for international investors looking for an alternative to record low yields in the U.S. Two- year German notes yielded about 0.45 percentage point more than Treasuries last week, the most this year.

Federal Reserve Bank of St. Louis President James Bullard said in an interview with CNBC on Oct. 8 that the chance of a renewed recession has receded and there may not be a strong enough case for additional stimulus. The next Fed meeting on Nov. 2-3 will be a “tough call,” he said.

IMF Outlook

While the Labor Department said Oct. 8 that the economy lost 95,000 jobs in September, consumer spending in the U.S. rose more than forecast in August as incomes climbed, data from the Commerce Department in Washington showed on Oct. 1.

The IMF said Oct. 6 that the U.S. economy will expand 2.6 percent this year and 2.3 percent in 2011, compared with 1.7 percent and 1.5 percent for the euro region, and 2.8 percent and 1.5 percent in Japan.

“The next round of Fed easing is already priced into the dollar,” said Niels Christensen, Copenhagen-based chief currency strategist at Nordea, the top euro-dollar forecaster in the six quarters through June. “The dollar will start to rebound as the U.S. economy improves, while the ECB remains reluctant to pull the trigger on further easing.”

The euro’s strength may start to wane as austerity measures from Greece to Spain weigh on growth. European Central Bank President Jean-Claude Trichet urged governments last week to cut their budget deficits and signaled he won’t slow the exit from emergency stimulus measures. Exports from Germany fell for a second month in August as a rising euro curbed demand, data from the Federal Statistics Office in Wiesbaden showed on Oct. 8.

No ‘Big Bang’

“The euro appears to be too strong today,” Luxembourg Prime Minister Jean-Claude Juncker said in a speech in Washington on Oct. 8 as finance ministers convened for annual meetings with the IMF.

Global finance chiefs tasked the Washington-based institution with calming the recent outbreak of tensions over currencies amid signs they are triggering a protectionist backlash. Japan sold the yen last month for the first time since 2004 to curb its gains. Currency intervention has returned to the fore as countries from China to Brazil try to restrain their exchange rates to protect exports.

Investors who are counting on a “big bang” announcement from the Fed at its next policy meeting may be disappointed, according to Nomura’s Nordvig. When the central bank announced its first program it was trying to calm markets and stem a six- month, 34 percent plunge in the Standard & Poor’s 500 Index, he said. The S&P 500’s 4.5 percent gain this year means there’s less scope for dollar selling.

“It’s not going to be this big-bang announcement like last year,” Nordvig said. “Now it’s really the same as a fully priced rate cut.”



www.bloomberg.com/news/2010-10-11/dollar-weakness-overstates-fed-printing-press-as-imf-sees-best-g-3-growth.html

[sandi66]

Gates Says U.S. Committed to Asian Security Amid China Claims



Oct 11, 2010 1:30 AM ET



Defense Secretary Robert Gates reassured Asian countries that the U.S. remains committed to the region’s security, and pushed for multilateral solutions to disputes amid rising tension over China’s territorial claims.

“We border the Pacific Ocean; we have long-term interests here,” Gates said in a speech to military officials and students at Vietnam National University in Hanoi today. “All Asia can be confident” that the U.S. intends “to be an active participant, not only in economic and political matters, but also in defense and security.”

The comments came hours before a meeting with China’s Defense Minister General Liang Guanglie, his first high-level contact with the country’s military since the government in Beijing cut ties over U.S. arms sales to Taiwan a year ago. Secretary of State Hillary Clinton raised China’s hackles in July when she said settling territorial disputes off China’s southern coast is “a leading diplomatic priority.”

Clinton’s comments were “virtually an attack on China,” Foreign Minister Yang Jiechi said.

China has resisted committing to a code of conduct with the Association of Southeast Asian Nations for disputed regional waters and is expanding its navy to project power beyond its borders, according to an August report by the U.S. Defense Department. It aims to solve all territorial disputes in one-on- one negotiations with claimant states.

Chinese run-ins with Vietnamese and Japanese vessels in disputed waters last month raised tensions in shipping lanes vital to world trade.

‘Not Enough’

“Relying exclusively on bilateral relationships isn’t enough -- we need multilateral institutions in order to confront the most important security challenges in this region,” Gates said. “The U.S. and Vietnam, as well as other nations in the region, also share a common interest in maritime security and freedom of access to the global commons.”

Gates and Liang are meeting in Hanoi a day before Asia- Pacific counterparts gather to tackle regional security issues.

China, Taiwan, Vietnam, Malaysia, the Philippines and Brunei hold claims to islands in the South China Sea. At a Sept. 24 summit, Obama and Asean leaders “reaffirmed the importance of regional peace and stability, maritime security, unimpeded commerce, and freedom of navigation,” according to a statement.

Vietnam, host of tomorrow’s meeting, last week urged China to release a fishing boat and crew detained close to islands claimed by several neighboring countries. Two Chinese patrol boats withdrew on Oct. 5 from disputed seas administered by Japan a month after a maritime collision sparked a diplomatic feud between Asia’s two largest economies.

Vietnam Meeting

Liang met yesterday with Vietnamese Communist Party Secretary General Nong Duc Manh and Defense Minister Phung Quang Thanh to discuss deepening military ties, state-run Xinhua reported.

Gates said U.S. priorities for enhancing military ties with Vietnam include “how we advance maritime security.”

The U.S. and Vietnam have “developed a real bilateral defense partnership,” he said.

Japanese Defense Minister Toshimi Kitazawa met Liang today in Hanoi, where he called for the establishment of a maritime communications system between the two nations to prevent incidents at sea, Kyodo News reported.

The talks with Gates coincide with resumed maritime consultations between the U.S. and China scheduled for this week in Hawaii, Defense Department spokesman Geoff Morrell told reporters Oct. 6. The world’s top defense spenders also plan for broader defense talks in Washington later in the year that may be followed by a Gates trip to China early next year, he said.

‘Resuming Ties’

“This is sort of the resuming of the military-to-military relationship with China,” Morrell said.

The U.S. is concerned about China’s “tremendous investment” in maritime forces and “very aggressive” behavior off its East Coast, Admiral Mike Mullen, chairman of the Joint Chiefs of Staff and President Barack Obama’s top military adviser, told reporters on Sept. 29.

The weaponry Taiwan planned to buy includes Lockheed Martin Corp. Patriot missiles valued at $2.8 billion, United Technologies Corp. UH-60 Blackhawk helicopters worth $3.1 billion, and Boeing Co. Harpoon missiles costing $37 million. China had said it planned to punish the companies involved.

China announced in March it would spend 532.1 billion yuan ($79.6 billion) on defense this year; the Pentagon estimates that actual Chinese military spending is twice that amount. The Pentagon has requested a total of $708 billion for its operations, including money for the wars in Iraq and Afghanistan, for the fiscal year that began Oct. 1.

Chinese Opposition

China has opposed U.S. naval exercises in waters off its shores, and Chinese general Luo Yuan in August said that the government could retaliate through its holdings of $846.7 billion in U.S. Treasury securities. China is the biggest foreign holder of U.S. government debt.

The talks between Asean defense ministers and counterparts from the U.S., China, Australia, New Zealand, India, Japan, South Korea and Russia are the first ever.

Gates said the U.S. was an “enthusiastic participant” in the meeting and called for nations to discuss maritime security and “peacefully resolving issues.”?

Military ties between the U.S. and China have faltered even as Obama seeks better relations on a range of issues including trade, climate change and defense.

Obama is preparing to host Chinese President Hu Jintao for a state visit in Washington, possibly in January.



www.bloomberg.com/news/2010-10-11/gates-rejects-china-demand-for-u-s-to-stay-out-of-asian-maritime-disputes.html

[sandi66]

Gold Gains, Silver Touches 30-Year High on Demand for Currency Alternative
By Claudia Carpenter and Wendy Pugh - Oct 11, 2010 5:39 AM ET

Gold climbed for a second day and silver extended gains to a 30-year high on speculation governments will seek ways to boost their economies by lowering currency values, boosting demand for commodities.

Finance ministers and central bankers meeting over the past few days did little to show how they would alter differences over currencies. The dollar traded near an eight-month low against the euro on speculation Federal Reserve policy makers will signal willingness to buy government debt to boost growth.

“Most countries want a weaker currency and their attempts to get there are good for all kinds of real assets including gold,” said Matthew Turner, an analyst at Mitsubishi Corp. in London. “Just talk of currency wars is going to prompt people to diversify away from paper assets.”

Gold for immediate delivery rose $2.48, or 0.2 percent, to $1,349.21 an ounce at 10:05 a.m. London time compared with the Oct. 7 record of $1,364.77. Silver gained as much as 1.6 percent to $23.6325 an ounce, the highest price since March 1980.

Gold futures for December delivery advanced 0.3 percent to $1,349.70 an ounce on the Comex in New York.

China has been accused by trading rivals of keeping the yuan undervalued to boost exports, while Japan and Brazil are among countries that have acted to try to restrain their exchange rates. Officials from emerging economies including China have complained that low interest rates in the U.S. and other industrial nationals have propelled capital flows into those markets, threatening growth by forcing up currencies and inflating asset bubbles.

ETP Investment

Demand for gold as a haven from weakening currencies has helped boost investment in exchange-traded products. Global holdings gained about 1.1 metric tons to 2,084.76 tons on Oct. 8, according to Bloomberg data from 10 providers, after reaching a record 2,097.01 tons on Sept. 30

Macquarie Bank Ltd. forecast that gold and silver will trade 15 percent higher than previously expected next year. Bullion will average $1,265 an ounce and silver $19.50 an ounce, the bank said in a report e-mailed last week.

Platinum fell 0.4 percent to $1,698.75 and palladium was little changed at $587 an ounce.



www.bloomberg.com/news/2010-10-11/gold-climbs-silver-rallies-to-30-year-high-as-weaker-dollar-boosts-demand.html

[sandi66]

Goldman Sachs, MF Global Among Six New Clearing Members of Green Exchange
By Mathew Carr - Oct 11, 2010 4:36 AM ET

Goldman Sachs Group Inc. and MF Global Holdings Ltd. are among six new clearing members of Green Exchange LLC.

The other four are Credit Suisse Group AG, JPMorgan Chase & Co., Morgan Stanley and Newedge Group, according to an e-mailed statement from Green Exchange. Clearing Members assume “financial and performance responsibility” for all transactions guaranteed by them and executed through them on Green Exchange, the statement said.



www.bloomberg.com/news/2010-10-11/goldman-sachs-mf-global-among-six-new-clearing-members-of-green-exchange.html

[sandi66]

Conscious / International Monetary Fund reached a settlement to avoid (the war of currencies) / economic report

10/10/2010 11:30am 10/10/2010 11:30 am

ÊæÕáÊ ÇáÏæá ÇáÇÚÖÇÁ Ýí ÕäÏæÞ ÇáäÞÏ ÇáÏæáí ÇËÑ ÇÌÊãÇÚåÇ ÇãÓ ÇáÓÈÊ Ýí æÇÔäØä Çáì ÊÓæíÉ ÎÌæáÉ Íæá ÓÚÑ ÕÑÝ ÇáÚãáÇÊ¡ ÊÞÊÖí Çä íÊã Ýí ÇáãÓÊÞÈá ÊÚÒíÒ ÇÌÑÇÁ ãÑÇÞÈÉ ÇáÚãáÇÊ ãä ÞÈá ÕäÏæÞ ÇáäÞÏ ÇáÏæáí. Member states reached in the International Monetary Fund after a meeting Saturday in Washington to settle shy about currency exchange rate, requires that in the future promotion of a Currency Control by the International Monetary Fund.

æÏÚÊ ÇááÌäÉ ÇáäÞÏíÉ æÇáãÇáíÉ ÇáÏæáíÉ æåí ÇáåíÆÉ ÇáãßáÝÉ ÊÍÏíÏ ÇáÊæÌåÇÊ ÇáßÈÑì áÕäÏæÞ ÇáäÞÏ ÇáÏæáí ÈÇÓã ÇáÏæá ÇáÇÚÖÇÁ ÇáÜ 187¡ ÇáãÄÓÓÉ Çáì "ÊÚãíÞ ÚãáåÇ" ÈÔÇä åÐå ÇáãÓÇáÉ ÇáãËíÑÉ ááÌÏá. The Committee invited the International Monetary and Financial, the body charged with identifying the major trends of the IMF on behalf of the 187 member states, the institution to "deepen its work" on this controversial issue.

æáÇÍÙÊ ÇááÌäÉ Çä "ÇáÊæÊÑ æÇáÖÚÝ ãÇ ÒÇáÇ ÞÇÆãíä ÈÓÈÈ ÇÊÓÇÚ äØÇÞ ÇáÎáá ÇáÚÇáãí æÇáÊÞáÈÇÊ ÇáãÓÊãÑÉ áÊÏÝÞ ÇáÑÓÇãíá æÊÛíÑ ÓÚÑ ÕÑÝ ÇáÚãáÇÊ æÇáãÓÇÆá ÇáãÊÚáÞÉ ÈÇáÚÑÖ æÊÑÇßã ÇáÇÍÊíÇØí". The Committee noted that "the tensions and weaknesses continued to exist because of the wide scope of global imbalances and the continued volatility of capital flows and exchange rate change and issues relating to the offer and reserve accumulation."

æÌÇÁ Ýí ÇáÈíÇä ÇáÎÊÇãí ááÌãÚíÉ ÇáÚÇãÉ ÇáÓäæíÉ áÕäÏæÞ ÇáäÞÏ ÇáÏæáí "äÏÚæ ÕäÏæÞ ÇáäÞÏ ÇáÏæáí Çáì ÊÚãíÞ Úãáå Ýí åÐå ÇáãÌÇáÇÊ ÈãÇ íÔãá ÇÌÑÇÁ ÏÑÇÓÇÊ ãÚãÞÉ ááãÓÇåãÉ Ýí ÒíÇÑÏÉ ÝÇÚáíÉ ÓíÇÓÇÊ ÇÏÇÑÉ ÊÏÝÞ ÑÄæÓ ÇáÇãæÇá". The final statement of the General Assembly's annual International Monetary Fund "We call on the IMF to deepen its work in these areas, including an in-depth studies to contribute to the effectiveness of management policies Elaborate the flow of capital."

ÇáÇ Çä ÇáÇÌÑÇÁÇÊ ÇáÊí ÊÞÑÑÊ Ýí ÇáÍíä áÇ ÊÈÏæ ÞÇÏÑÉ Úáì ÊåÏÆÉ ÇáÊæÊÑÇÊ æÝí ãÞÏãÊåÇ ÇáÎáÇÝ ÔÈå Çáíæãí Íæá ãÓÊæì ÓÚÑ ÕÑÝ ÇáÚãáÉ ÇáÕíäíÉ ÇáíæÇä Èíä ÇáÕíä æÇßÈÑ ÔÑßÇÆåÇ ÇáÊÌÇÑííä Çí ÇáæáÇíÇÊ ÇáãÊÍÏÉ æÇæÑæÈÇ æÌíÑÇäåÇ ÇáÇÓíæííä. However, the procedures established at the time did not seem able to calm tensions in the forefront of controversy almost daily about the level of the exchange rate of Chinese currency, the yuan between China and the largest trading partners of any United States and Europe and its Asian neighbors.

æÊÑì ÇáæáÇíÇÊ ÇáãÊÍÏÉ Çä ÇáÕíä ÊÚØá ÊÍÓä ÓÚÑ ÕÑÝ ÇáíæÇä ÚÈÑ ÔÑÇÆåÇ ÚãáÇÊ ÇÌäÈíÉ. The United States believes that China crashes improvement over the yuan's exchange rate buying foreign currencies. ÝÝí ÇáËáÇËíä ãä ÍÒíÑÇä ßÇäÊ Èßíä Êãáß ÇßÈÑ ÇÍÊíÇØí ãä ÇáÚãáÇÊ ÇáÕÚÈÉ Ýí ÇáÚÇáã ãÚ ÞÑÇÈÉ 30% ãä ÇáãÌãæÚ ÇáÚÇáãí¡ Çí 2447 ãáíÇÑ ÏæáÇÑ. In the thirtieth of June, Beijing has the largest reserves of hard currency in the world with nearly 30% of the global total, ie, 2447 billion dollars. æÊÔßá åÐå ÇáäÊíÌÉ ááÌãÚíÉ ÇáÚÇãÉ ÇáÓäæíÉ áÕäÏæÞ ÇáäÞÏ ÇáÏæáí ÖÑÈÉ ááÇãÇá ÈÊåÏÆÉ ÇáÊæÊÑÇÊ ÇáäÇÌãÉ Úä ÊÏÎá ÚÏÉ ÈáÏÇä áÎÝÖ ÓÚÑ ÕÑÝ ÚãáÇÊåÇ. The outcome of the General Assembly's annual International Monetary Fund a blow to the hopes of calming tensions caused by the intervention of several countries to reduce their exchange rate. æÝí äåÇíÉ Çíáæá ÊÍÏËÊ ÇáÈÑÇÒíá Úä "ÍÑÈ ÚãáÇÊ"¡ Ýí ÚÈÇÑÉ ÇäÊÔÑÊ Ýí ÇáÚÇáã ÇÌãÚ. In late September of Brazil spoke of a "war of currencies", in a spread in the whole world.

æÊÝÇÏíÇ áåÐå "ÇáÍÑÈ" ÇÞÊÑÍ Ïæãíäíß ÓÊÑæÓ-ßÇä ãÏíÑ ÕäÏæÞ ÇáäÞÏ ÇáÏæáí ÇáãÔÇÑßÉ ÔÎÕíÇ Ýí ÇÚÏÇÏ ÇáÊÞÇÑíÑ ÇáÊÞáíÏíÉ ÇáÓäæíÉ Íæá ÇÞÊÕÇÏ ÇßÈÑ ÇáÏæá ÇáÇÚÖÇÁ. In order to avoid this "war" suggested Dominique Strauss - The director of the International Monetary Fund to participate personally in the preparation of traditional annual reports on the economy, the biggest member states. æÓÊÔãá Êáß ÇáÊÞÇÑíÑ ÊØæÑÇÊ Íæá ÇäÚßÇÓÇÊ ÓíÇÓÇÊåÇ ÇáÇÞÊÕÇÏíÉ (ÈãÇ ÝíåÇ ÓÚÑ ÇáÕÑÝ) Úáì ÇáÏæá ÇáÇÎÑì. These reports will include developments on the implications of economic policies (including exchange rate) to other countries.

æãä åÐå ÇáÒÇæíÉ íÇãá ÕäÏæÞ ÇáäÞÏ ÇáÏæáí ÇáÑÏ Úáì ÇÓÆáÉ ãËá ãÚÑÝÉ Çáì Çí ÍÏ íÒÚÒÚ ÖÎ ÇáÇÝ ÇáãáíÇÑÇÊ ãä ÇáÏæáÇÑÇÊ Ýí ÇáäÙÇã ÇáãÇáí ÇáÇãíÑßí¡ ÈÚÖ ÇáÏæá Çæ Çáì Çí ÍÏ íÊÓÈÈ ÇÈÞÇÁ ÓÚÑ ãäÎÝÖ áÕÑÝ ÇáíæÇä Ýí ÇáÇÖÑÇÑ ÈÕäÇÚÇÊ Ïæá ÛíÑ ÞÇÏÑÉ Úáì ãäÇÝÓÉ ÇáÇÓÚÇÑ ÇáÕíäíÉ. From this angle the International Monetary Fund is hoping to answer questions such as knowing to what extent the destabilizing pumping thousands of billions of dollars in the U.S. financial system, some states or to what extent the cause to keep the price low for the yuan in damage to industries countries unable to compete with Chinese prices.

translate.google.com/translate?hl=en&sl=ar&u=http://al-iraqnews.net/new/economic-news/29088.html&prev=/search%3Fq%3Dnahrain%26

ty David

[sandi66]

TiaC Rumor 10/10/10

October 10th, 2010 10:45 am · Posted in RUMORS
[TiaC] Well…I have the proud honor to announce to everyone in the room… at 3:00 AM Phoenix time…the Gov’t of Iraq was announced and his Emmence the official Prime Minister Maliki announced and declared the REVALUATION of the Iraqi Dinar…the gov’t is officially seated and the world has the RV.



theiraqidinar.com/2010/10/10/tiac-rumor-g-e-t-101010/

[sandi66]

* Phoenix Update 10/10/10
October 10th, 2010 12:40 pm · Posted in CHATS / POSTS
Phoenix Update, 10-10-10

Seven years.

Seven years ago on Wednesday October the 15th 2003 the new Iraqi Dinar
was introduced to the world.

Seven years ago speculation on the future of the new Iraqi Dinar and
the future of it’s exchange rate was launched.

Seven years ago marked the beginning of the awakening of the mighty giant…mighty Babylon sleeping like a giant by the Euphrates River.

And now…the Giant stirs.

Speculation…..rumor….whispers an innuendo ….flow like wine into the cup of thirsty, parched speculators….cups which seem to never fill but remain always wanting, receptive and open for more…… always thirsting for just one more drop of information…be it fact or fiction…rumor or rant….all is accepted and some rejected but the unending thirst for information remains unquenchable.

7 years.

How much longer? Years? Months? Weeks?

How about…days?

Situation: We are now at the point where all of the political posturing is complete and this past week saw many very important meetings take place world wide.

And the interesting thing on all of these meetings is the lack of information being released and the vague if not blatant elusiveness being presented to the public on the final outcome and decisions which will very soon impact us all.

We saw the Arab League meeting in Syria:
articlesofint…ound-world.html

We also saw the IMF and World Bank meeting:
articlesofint…to-resolve.html

And the G7:
articlesofint…es-finance.html

The activity of all global economic institutions is unprecedented….and the world is sure to see the results of this intense labor soon enough and the fruits of the seeds planted by the world leaders in the meetings and agreements that have lead up to the Global Realignment Of Currencies:
articlesofint…alignments.html

So…the question of the day after 7 long years remains….
“Are we there yet”?

Answer: YES!

I speculate that we may see the final formation of the new Government of Iraq led by Prime Minister Maliki to be announced and seated as soon as this Wednesday the 13th with a high degree of probability of the actual seating of the Iraqi Parliament on Thursday the 14th. and an outside default date of the seating of government on Sunday the 17th.

But again this is just my speculation based upon all current events.

Next question….so how soon after the seating of the Government of Iraq will we see the announcement from the CBI about the Iraqi Dinar changes?

Answer: Very soon after. Time is running out for the CBI to have the change completed by the end of 2010…so time is an issue and an issue that bodes well for all investors of the Iraqi Dinar….for the ever ticking clock runs out on the Central Bank of Iraq as the the end of the year draws nearer by the day.

Again….”Are we there yet?”

After 7 years….the answer is finally….YES!

Please be advised…..the “Novel Event”…..is pending and will be launched at any time after the seating of the Government of Iraq.

“Novel Event” coming up!~

Stand by!

The best of luck to all.

Phoenix

theiraqidinar.com/2010/10/10/phoenix-update-101010/

[sandi66]

Obama to Meet With Governors, Mayors on Infrastructure


October 11, 2010, 6:00 AM ET



WASHINGTON—President Barack Obama will meet today with several governors and mayors to highlight a new report on the potential impact of infrastructure spending, in hopes of putting momentum behind his $50 billion infrastructure-investment proposal.

Obama has proposed the initiative as a way to create more jobs, but Republicans have opposed further infrastructure spending at a time of tight state and federal budgets. There isn’t a bill on the measure so far, and Congress is unlikely to act on the issue when it convenes in November in a lame-duck session.

The report, which was prepared by the Treasury Department and the Council of Economic Advisers, notes that infrastructure spending as a percentage of gross domestic product has fallen by 50% in the U.S. since 1960, and now accounts for 2% of the country’s GDP. In contrast, China spends about 9% of its GDP on infrastructure, and Europe, about 5%, according to the report.

“It is clear that persistent neglect of our infrastructure will impact America’s competitive position vis-a-vis the rest of the world,” the report says. The report, a copy of which was seen by wsj.com Sunday, is due to be released officially today.

Republicans have opposed the administration’s infrastructure plan, especially its effort to expand high-speed rail. House Minority Leader John Boehner criticized Obama’s infrastructure plan in September, saying “we can’t spend our way to prosperity.”

In California, Republican gubernatorial candidate Meg Whitman has criticized the cost of the state’s high-speed rail program, currently under development. Other GOP gubernatorial hopefuls in Wisconsin, Ohio, and Floria have all campaigned on opposition to new rail projects; those states were recipients of federal stimulus money to develop the projects.

Obama’s billion infrastructure plan, unveiled on Labor Day, would help refurbish 150,000 miles of roads, build or maintain 4,000 miles of rail, and refurbish 150 miles of airport runways. It would also upgrade the country’s air traffic control system. The proposal also floats the idea of an infrastructure bank that could make cheap loans to state and local governments.

The proposal would be the first part of a multi-year infrastructure bill that Congress has yet to draft.

According to the new report, spending more on projects like road construction and maintenance could help reduce unemployment, by drawing on workers in the construction industry who lost their jobs when the housing bubble burst. The report predicted that 61% of jobs under a surface-transportation infrastructure-investment plan would be in the construction sector, with another 12% in the manufacturing sector.

Other administration officials expected to attend Monday’s meeting include Treasury Secretary Tim Geithner and Transportation Secretary Ray LaHood. Former Transportation Secretary Norman Mineta will also attend. He recently released his own report on the U.S. infrastructure situation estimating that $134 billion to $194 billion is needed each year just to maintain the country’s existing transportation system.



blogs.wsj.com/washwire/2010/10/11/obama-to-meet-with-governors-mayors-on-infrastructure/

[sandi66]

Parker, Spitzer aim for ideological center on TV



Monday, October 11, 2010 9:38 am



NEW YORK (AP) — Former New York Gov. Eliot Spitzer promised a TV show with ideas in his prime-time CNN debut with partner Kathleen Parker on Monday, and they delivered lots of them.



The Oct. 4 premiere of “Parker/Spitzer” featured former Spitzer prosecution target Henry Blodget, “The Social Network” writer Aaron Sorkin, conservative blogger Andrew Breitbart and White House consumer protection adviser Elizabeth Warren.



The ex-governor, who resigned in a prostitution scandal, teamed with a Pulitzer Prize-winning newspaper columnist for an evening program that CNN is counting on to bring some sizzle to a prime-time lineup that plays third fiddle in the ratings to Fox News Channel and MSNBC. On a colorful New York set, they sat at a table with a coffee cup and the day’s newspapers arrayed in front of them.



“This is a show about ideas, the ideas that drive American politics,” Spitzer said at the show’s opening.



Parker, from South Carolina, noted how the two hosts arrive with different perspectives.

“I’m a journalist, you’re a po-li-ti-cian,” she said, drawing the word out for effect.

“Yeah, but I’m in recovery,” Spitzer said. “This is Step 1, I promise.”



Each opened with editorials: Spitzer said U.S. Department of the Treasury Secretary Timothy Geithner should resign because he did not understand the problems of Wall Street, and Parker urged former Alaska Gov. Sarah Palin to end her “tease” and say that she’s not running for president in 2012. They brought in Breitbart and Harper magazine writer Thomas Frank to discuss them.



Spitzer got in a cursory question about Breitbart’s claim to fame, his role in this summer’s ouster of Obama administration agriculture official Shirley Sherrod, before the guest was hustled off. It illustrated the premiere’s chief weakness: The impressive bookings were undermined because “Parker/Spitzer” tried to show too much, making quick edits visible. Half the guests would likely be twice as enlightening and wouldn’t seem to need as much caffeine.



Blodget’s booking was a coup for Spitzer. As New York attorney general, he prosecuted the former Merrill Lynch analyst for misleading customers, forcing him out of the business. Blodget rebounded to publish a popular business blog.



Despite what happened to him, Blodget said he appreciated that Spitzer was trying to clean up Wall Street and revealed he had voted for him for governor.



“That’s the best endorsement I’ve ever gotten,” Spitzer said. “I’m never going to be able to use it, but I appreciate it.”



Sorkin went on to promote “The Social Network,” but much of the talk was about his television show “The West Wing” and on politics in general. Sorkin sharply criticized Palin, later noting his promotional appearance probably lost ticket-buyers instead of gaining them.



Perhaps to make amends, the hosts opened their last segment — a roundtable designed to approximate a lively dinner party — by asking each of their four guests to say something nice about Palin.



“Parker/Spitzer” was dropped into the toughest time slot in cable television, opposite Fox’s Bill O’Reilly and MSNBC’s Keith Olbermann. Rather than take viewers away from those shows, Spitzer said in an interview last week, “Parker/Spitzer” hoped to find new ones who are more in the mainstream politically and often found their voices unheard on cable TV.

CNN also wants viewers, particularly women, to look beyond Spitzer’s political fall from grace, when he resigned shortly after it become clear he patronized prostitutes while governor.



Some won’t be able to, said Marcy McGinnis, a former CBS News executive now teaching journalism at Stony Brook University. But others will be more forgiving and willing to listen to what he has to say, she said.



“You deal with it like you deal with anything else,” Spitzer said. “You try to be forthright, say I understand it. You will react as it’s appropriate. ... And I’ll try to persuade you that this is a show worth listening to.”



thedailynewsonline.com/entertainment/article_ea5fc87c-d53c-11df-ac3b-001cc4c002e0.html

[sandi66]

Sam Skinner returns to the White House for bi-partisan pitch on infrastructure
By
Lynn Sweet
on October 11, 2010 7:53 AM | Permalink | Comments (0)
WASHINGTON--Chicago's Sam Skinner--former Transportation Secretary and Chief of Staff for President George H.W. Bush--returns to the White House on Monday as part of a bi-partisan group of honchos joining President Obama to pitch infrastructure investment.


Below, from the White House...

"Joining the President at the meeting will be Treasury Secretary Tim Geithner, Secretary of Transportation Ray LaHood, former Secretaries of Transportation Norman Mineta and Samuel Skinner, Governors Ed Rendell and Jack Markell, and Mayors Antonio Villaraigosa, Mick Cornett, Julian Castro, Michael Coleman, Michael Nutter, Stephanie Rawlings-Blake, Kasim Reed and Joe Riley. The group will discuss the current state of our transportation infrastructure in cities and states across the country, the challenges they face to improving their infrastructure, and the short- and long-term economic impact of new infrastructure investment."


Building off his Labor Day announcement of a bold new plan for modernizing and rebuilding America's roads, railways, and runways (fact sheet here), President Obama will hold a meeting on the economic impact of infrastructure investment on our states and local communities at the White House on Monday. The meeting will take place in the State Dining Room beginning at 9:30 am ET on Monday and is closed press. President Obama will deliver a statement after the meeting in the Grand Foyer at 10:50 am ET; the statement is open press.


Joining the President at the meeting will be Treasury Secretary Tim Geithner, Secretary of Transportation Ray LaHood, former Secretaries of Transportation Norman Mineta and Samuel Skinner, Governors Ed Rendell and Jack Markell, and Mayors Antonio Villaraigosa, Mick Cornett, Julian Castro, Michael Coleman, Michael Nutter, Stephanie Rawlings-Blake, Kasim Reed and Joe Riley. The group will discuss the current state of our transportation infrastructure in cities and states across the country, the challenges they face to improving their infrastructure, and the short- and long-term economic impact of new infrastructure investment.


The group will also discuss a new report on infrastructure investment from the Department of the Treasury with the Council of Economic Advisers. The report discusses the positive economic impact infrastructure investment achieves by raising our nation's economic output, enhancing America's global economic competitiveness and creating good jobs for the middle class. Specifically, the report finds that 80 percent of the jobs directly created by investing in transportation infrastructure would be in the construction, manufacturing and retail trade sectors. The report also finds that infrastructure investments have high bang for the buck because construction costs are low due to underutilized resources, and these investments would create jobs in sectors of the economy suffering from some of the highest levels of unemployment.



blogs.suntimes.com/sweet/2010/10/sam_skinner_returns_to_the_whi.html

[sandi66]

As of tomorrow displays the file "to delete the zeros of the Iraqi currency

(ÕæÊ ÇáÚÑÇÞ) - 11-10-2010 (Voice of Iraq) - 10/11/2010




(Voice of Iraq) - - October 11, 2010 - The Central Bank launched in early 2007, to develop a strategic project located under the title of the reform of management system of the Iraqi currency on the recommendation of the Supreme Economic Committee of the Council of Ministers with the support of the Iraqi Ministry of Finance. íÊÍÏË ÇáãÔÑæÚ Úä ÇÓÊÈÏÇá ÊÏÑíÌí ááÚãáÉ ÇáÚÑÇÞíÉ ÈÃÎÑì ÇÞá ãäåÇ Ýí ÇáÞíãÉ ÇáÇÓãíÉ. The project speaks for gradual substitution of the Iraqi currency with another is lower than in the nominal value. ÇäØáÇÞÇð ãä åäÇ¡ íØÑÍ ÈÑäÇãÌ "ÈÊÇÑíÎ ÇáÛÏ" Úáì ÞäÇÉ ÇáÓæãÑíÉ¡ ãÓÇÁ ÇáÌãÚÉ 15 ÃßÊæÈÑ 2010 ÇáÓÇÚÉ ÇáÚÇÔÑÉ ãÓÇÁð ÈÊæÞíÊ ÈÛÏÇÏ åÐÇ ÇáãæÖæÚ áãÚÑÝÉ ÊÏÇÚíÇÊå Úáì ÇáÇÞÊÕÇÏ ÇáÚÑÇÞí. From here, presents the program "as of tomorrow" on Alsumaria afternoon, Friday, October 15, 2010 at ten pm Baghdad time this topic to see its repercussions on the Iraqi economy.

ÓíäÇÞÔ ãÚÏ æãÞÏã ÇáÈÑäÇãÌ ÃÍãÏ ÍÓä ãÚ ÖíæÝå ãÍÇæÑ ÚÏíÏÉ Ýí ÓíÇÞ ÇáÍáÞÉ. Contagious and will discuss the program with guests Ahmed Hassan several themes in the context of the loop. Ýåá ÇáÇÌæÇÁ ÇáÇÞÊÕÇÏíÉ ãåíÆÉ áÊÑÊíÈ åÐå ÇáÊÛíÑÇÊ Úáì ÇáÚãáÉ¿ Does the economic climate well suited to the order of these changes on the currency? æãÇ ÇËÇÑ ÍÐÝ ÇáÇÕÝÇÑ ãäåÇ æåá åÐÇ íÓÈÈ ÇÖØÑÇÈÇÊ Ýí ÇáÓæÞ ÇáÚÑÇÞíÉ¿ The effects of deletion of zeros, including whether this is causing unrest in the Iraqi market?

ãä ÌåÉ ÇÎÑì¡ íäÇÞÔ ÇáÖíæÝ ÇãßÇäíÉ ÈÊ åÐÇ ÇáãÔÑæÚ áÇÕáÇÍ äÙÇã ÇáãÏÝæÚÇÊ ÇáÚÑÇÞí æãÏì ÊÇËíÑ ÍÐÝ ÇáÇÕÝÇÑ Úáì ÓæÞ ÇáÇæÑÇÞ ÇáãÇáíÉ ÈÇáÇÖÇÝÉ Çáì ÇáäÓÈ ÇáãäÌÒÉ áÚãáíÉ ÍÐÝ ÇáÇÕÝÇÑ. Meanwhile, the guests discuss the possibility of bit of this project to reform the Iraqi system of payments and the impact of deletion of zeros on the stock market as well as to the descent completed the process of deletion of zeros.

Ýåá ÓÊÖíÝ ÚãáíÉ ÍÐÝ ÇáÇÕÝÇÑ Çáì ÇáÞíãÉ ÇáÔÑÇÆíÉ ÔíÆÇ æãÇ ÇáãßÇÓÈ ÇáÇÞÊÕÇÏíÉ ÇáÊí ÓíÎÑÌ ÈåÇ åÐÇ ÇáãÔÑæÚ¿ Is a delete operation will add zeros to the value of purchasing something and economic gains that will come out in this project? ÈÇáÇÖÇÝÉ Çáì ÊÝÇÕíá ÃÎÑì ÃßËÑ ÏÞøÉ ãÊÚáÞÉ ÈÊæÞíÊ ÇáÚãá ÈÇáãÔÑæÚ. In addition to details of other more accurate timing of the work related to the project.

æíÓÊÖíÝ "ÈÊÇÑíÎ ÇáÛÏ" Ýí ÇáÍáÞÉ ÇáãÞÈáÉ ãÓÊÔÇÑ ÇáÈäß ÇáãÑßÒí ÇáÚÑÇÞí ãÙåÑ ãÍãÏ æÇáÎÈíÑíä ÇáÇÞÊÕÇÏííä ÈÇÓã ÇäØæÇä æãÇÌÏ ÇáÕæÑí ÈÇáÇÖÇÝÉ Çáì ÇáÎÈíÑ ÇáÇÞÊÕÇÏí ËÇÆÑ ÇáÝíáí ÇáãÊÍÏË ÈÇÓã åíÆÉ ÇÓÊËãÇÑ ÈÛÏÇÏ ÝÖáÇð Úä ÑÆíÓ ÇÊÍÇÏ ÑÌÇá ÇáÃÚãÇá ÇáÚÑÇÞí ÑÇÛÈ ÑÖÇ æÇáãÓÊËãÑ ÇáÕäÇÚí ËÇÈÊ ÇáÈáÏÇæí. Hosts "on tomorrow" in the next episode adviser to the CBI the appearance of Mohammed and two economists as Antoine Majid picture in addition to the economic expert Faili spokesman Thaer Investment Authority, Baghdad, as well as the President of the Federation of Iraqi businessmen and investors willing Reza industrial fixed Baldawi.

íÊÝÑÛ ÝÑíÞ Úãá "ÈÊÇÑíÎ ÇáÛÏ" åÐÇ ÇáÇÓÈæÚ áØÑÍ ÍáÞÉ ÈÚäæÇä "ÍÐÝ ÇáÇÕÝÇÑ" ãä ÇáÚãáÉ ÇáÚÑÇÞíÉ ãÓÇÁ ÇáÌãÚÉ 15 ÃßÊæÈÑ 2010 ÇáÓÇÚÉ ÇáÚÇÔÑÉ ãÓÇÁð ÈÊæÞíÊ ÈÛÏÇÏ¡ æÇáÇÚÇÏÉ ÕÈÇÍ ÇáÃÍÏ ÇáÓÇÚÉ ÇáÍÇÏíÉ ÚÔÑ Úáì ÞäÇÉ ÇáÓæãÑíÉ¡ ÇáÔÈßÉ ÇáÝÖÇÆíÉ ÇáÚÑÇÞíÉ. Full-time working group "on tomorrow" this week to put the episode titled "Delete zeros" of the Iraqi currency pm Friday, October 15, 2010 at ten pm Baghdad time, and run-off on Sunday morning at ten o'clock on Alsumaria, Iraqi Satellite TV Network.

-ÇäÊåì- - END -

áãÒíÏ ãä ÇáãÚáæãÇÊ ÇáÑÌÇÁ ÚÏã ÇáÊÑÏÏ Ýí ÇáÇÊÕÇá: For more information, please do not hesitate to contact:

- ÇáÚáÇÞÇÊ ÇáÇÚáÇãíÉ - Media Relations

00961 4 533344 00961 4 533344

[e-mail] [e-mail]



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ty ksp

[sandi66]

Conference Examines The Role of Central Banks
Today

Today, current and former Central Bank officials are meeting to discuss monetary policy and the state of the global economy. Speakers at the conference include Christine Romer, who recently resigned as the Chairman of the Council of Economic Advisers and former Federal Reserve Chairman Paul Volcker.

Other participants include five current and former central bankers from the United States, European Union, England, China, and Japan as well as several leading economists. This discussion is sponsored by the University of Virginia’s Miller Center of Public Affairs .

Last week, the International Monetary Fund (IMF) and World Bank held meetings in Washington. One of the main issues discussed is the value of national currencies. In the U.S., the President and members of Congress have said China’s currency is undervalued, which makes U.S. goods more expensive in that country.

www.c-span.org/

Conference Live on 12pm ET on C-SPAN

[sandi66]

Monday, October 11, 2010 - 11:40

US,EU Regulators See No Harm To Banks From New Capital Rules

WASHINGTON (MNI) - The introduction of stricter capitals standards through the updated Basel accord has many worried about the ability of banks to implement the new requirements, but New York Federal Reserve Bank President William Dudley Monday said the task "will be easier than a lot of people think."

Bank of England Deputy Governor Paul Tucker agrees, and to those worried regulators are putting the banking sector at undue risk, he argued that authorities around the world are not "willfully jeopardizing the macroeconomic recovery."

In opening remarks during a panel discussion hosted by the Institute of International Bankers, Dudley supported his argument by pointing out that, first of all, banks are going to change their business models.

"So those areas where capital requirements are going up a lot ... banks are going to modify how they do their business," Dudley said.

Secondly, risk-weighted assets will probably come down as the economy recovers. These include a lot of legacy assets such as subprime mortgages, which Dudley said will run off as the assets mature.

Third, banks will be able to go a long way towards meeting the new standards by retaining their earnings Dudley said.

Also on the panel with Dudley and Tucker were the General Manager of the Bank of International Settlements Jaime Caruana, and the U.S. Treasury's Under Secretary for International Affairs Lael Brainard.

Caruana, responding to a question from the audience, argued that 'a good part" of financial institutions already have the capital buffer mandated under Basel III.

Dudley acknowledged that there will be some impact on lending margins from the new capital standards, but the adjustment will be "quite modest."

There will not be a significant impact on the return on equity that financial markets will demand from banks, Dudley continued, arguing that if banks have a higher capital cushion, their earnings will be less volatile. This makes the banks less risky prospects and so the financial markets will demand a lower return on equity going forward.

The same reasoning applies to funding costs, he said.

Dudley said Basel III, will change the landscape "in a pretty significant way," not only requiring banks to hold more capital, but also that they do a better job of capturing risk from their activities.

Not only are the more stringent capital requirements appropriate, Dudley said, "I think it's absolutely necessary to ensure that we don't have a repeat of what we saw in 2007, 2008."

The 2.5% capital conservation buffer required by Basel III is there to allow banks to absorb losses, he said, and still have sufficient equity so that they can maintain their access to the markets.

"You really want to be have a capital standard in place that is high enough to protect the financial system, but not so high that we push a lot of activity into the unregulated sector," Dudley said.

The gradual phase-in period of the Basel III accords is in recognition of the fact that financial systems around the world were impacted differently by the financial crisis, as well as the fact that the economic environment "is not really robust right now," Dudley said.

The BIS's Caruana said the crisis taught regulators significant lessons in terms of level of capital banks must have, with Basel III being the first set of rules that help address systemic risk and the interconnection between the financial sector and the macroeconomy.

He stressed the need for consistent and harmonized solutions. Having a level playing field is "high on the agenda," Caruana said.

He noted that the regulatory framework being crafted extends beyond Basel III, highlighting the need to create cross-border resolution regimes for struggling international financial institutions one of the more difficult elements of reform. Any framework created must be consistent, Caruana repeated.

He stressed that the implement of new financial regulations are just as important as the standards. "We have to make sure that there is consistency and harmonization."

Regulation will only be part of the solution, Caruana continued, adding to have a stable financial system will require action in macroeconomic areas beyond the scope of regulators.

The BoE's Paul Tucker told the gathering that he does not believe energy behind the drive to reform financial regulatory oversight is flagging. He predicted that regulators and policymakers won't cease their efforts until unemployment starts to come down. He called the high levels of unemployment being seen around the world "an appalling price to pay" for the financial crisis.

Tucker argued that every country should have a basic resolution regime for commercial banks along the lines of those in place by U.S. bank regulator the Federal Deposit Insurance Corporation. He said if the UK had put in place such an apparatus prior to the crisis, the fate of failed mortgage giant Northern Rock would have been "eminently resolvable."

On the issue of creating resolution regimes for large, interconnected banks, Tucker warned it is unlikely there will be multilateral treaty that will give primacy in cross-border resolution to one country.

The Treasury's Lael Brainard agreed, calling the matter of resolution one of the most "complicated" issues.

It is important that regulators plan ahead for the fallout from resolution/wind down of a large financial institution, Tucker said, as it"will be quite a shock."

Dudley, responding to a question from the audience, said it will be hard to say exactly what consequences of new regulatory rule changes will be, but if regulators can monitor systemic risk effectively, they will be able to preempt potential flare-ups.

Tucker added that U.S. government-sponsored agencies such as Fannie Mae and Freddie Mac must also be designated as systemically important. Their actions, he said, affect markets all around the world.

Caruana also called on global accounting standard setters to address the inconsistencies in their rules, calling it "a matter of concern to us," and important to financial stability.

Tucker also voiced his preference for tough standards on the solvency of clearing houses in their capacity as managers of risk.

He also warned that information coming into the Bank of England indicates that standards are being relaxed again in the leveraged loan market. "That is a bit of a concern," Tucker said.

imarketnews.com/?q=node/20596

[sandi66]

Old article, but explains much

Death and Resurrection of the US Dollar
A Review Article


by Adrian Salbuchi

Global Research, October 15, 2006

Analysts the world over are starting to recognize the early warning signs of a gathering storm regarding the strength of the international financial system in general, and the stability of the United States Dollar, in particular.

This essay provides an alternative view on this impending crisis, written from the viewpoint of an Argentine analyst whose country has undergone recurrent monetary and financial crises over the past forty years, albeit on a domestic rather than an international scale.

Argentina experienced banking system collapses, inflation, hyperinflation, public debt defaults, stock market crashes and just about anything else you may care to imagine in terms of financial and monetary crises. Chronic inflation was so bad that since 1970 the Argentine currency – the Peso – was revamped four times and had a total of 13 zeroes knocked off in order to cope with inflation, the result being that One Peso which today will just barely buy you a bus ride in Buenos Aires City, is equivalent to 10.000.000.000.000 pesos from 1970, which at that time would have allowed you to purchase the entire country and left some change in your pocket.

In this country, we therefore have a lot of practical first-hand experience on these matters and we believe that we have much added value to contribute if we apply our practical knowledge and experience to what seems to be a cross-roads situation afflicting the global financial and monetary systems.

Today’s financial turmoil rings a lot of familiar bells to us and the sickly US Dollar is certainly looking a whole lot like the old Argentine Pesos and “Australes” of yore. Perhaps too, some lessons can still be learned and the damage from these enormous risks can be somewhat mitigated.

Adrian Salbuchi, June 2005[1]




--------------------------------------------------------------------------------

Getting the Job Done

Last January, US President George W. Bush began his second term in office by declaring foreign policy objectives with clear imperial overtones that seem to promise increasing violence and disruption on a worldwide scale. Aside from the on-going illegal military occupations of Iraq and Afghanistan, we can most certainly expect other major crises and convulsions of a military, political, economic and financial character. One of these has specifically to do with the use and abuse of the US Dollar as an instrument of Imperial World Power by the Bush Administration.

In today’s “globalized” and “interdependent” world, hi-tech applied to geopolitics, economy and finance have transformed all of us into potential victims of a vast number of virtual tsunamis which do not involve oceanic waves but rather waves of technology-driven social catastrophes, financial collapse and artificial crises resulting in civil wars, external invasions, genocides and collective disruption on a scale never seen before. And even though these may be virtual tsunami, the harm and suffering they cause are very real.

The world is on the verge of experiencing the controlled destabilization and collapse of the US Dollar, which will be replaced by a “New Dollar” backed by Official “Good Gold.” The primary driving forces behind this global process are the Bush Administration allied to major private financial-industrial interests in the United States and elsewhere, focused on private Overworld geopolitical planning emanating from a network of think tanks, primarily the New York-based Council on Foreign Relations.

The Controlled Destabilizing and Collapse of the US Dollar.

“The King is dead! Long Live the King!” Such has been since Medieval times, the cry announcing the demise of an English Monarch and the immediate enthroning of the chosen Royal Successor. If the US Dollar is the “king of world currencies” and governs today’s usury-based international financial system, it is no doubt an old, decrepit, tired and sickly sovereign. Since the Empire will never allow his throne to remain empty and subject to unpredictable forces, we can be sure that old and sickly King Dollar already has an appointed blue-blooded royal successor, with rosy cheeks, golden locks and solid health.

In a short while, the world shall hear loud and clear an announcement declaring that “The Dollar is dead! Long live the New Dollar!” Then, the Throne of Usury in the temple of the god in whom the multitudes seem to trust, shall usher in a new sovereign who will enforce that centuries old creed, “business as usual...”.

In recent years, the United States has driven and presently maintains a gigantic and massive printing of Dollar bank notes. No one seems to know for sure just how excessive such currency printing really is, but estimates put it somewhere between four to eight times the monetary circulation that tallies with the size of the US Economy (with a 2004 Gross Domestic Product of almost u$s 13.000 billion).

The reader may ask how come we do not know what the amount of Dollars in circulation really is? Well, this is highly confidential information almost impossible to discover mainly because, contrary to what most people believe, the US Federal Reserve Bank (Fed) is a private entity, even though the US Government may exert some influence over it.2 --i.e., the public institutions of Government cannot require the Fed to render this information, especially when you consider that the Chairman of the Federal Reserve Board, Alan Greenspan need only inform Congress on a quarterly basis what his monetary policy shall look like. We would emphasize that he need only inform what his policies will be, not seek instructions or consensus or agreement from Congress or the Executive branch.

If we add to this the gigantic aggregates of Dollar-denominated banking instruments and stocks & shares which are spread throughout all world markets, then this amount becomes almost incalculable. However, it is quite clear that the sum total of Dollar bills, Treasury bonds and bills, financial instruments of all types, stocks and shares, and all kinds of public and private financial instruments must equal a sum several times more than the total sum of physical assets and services available in the entire planet.3

In 2004, the US Budget Deficit was more than u$s 450.billion, while the Current Account Deficit (foreign trade) was of around u$s 670.billion (i.e., more than twice and thrice, respectively, the size of Argentina’s foreign public debt). Additionally, the Bush Administration announced that both Deficits will increase in 2005 and there are no indications that this situation will improve in 2006, 2007 or 2008. Quite the contrary, in November 2004 president Bush asked Congress for authorization to increase the limit of the US Public Debt from u$s 7.600.billion to almost u$s 8.300.billion, which will be achieved by issuing US Treasury Bills and Bonds, and printing more and more Dollar bills by the US Mint.

The invasion and occupation in Iraq is estimated to cost more than u$s 120.billion annually, to which must be added the occupation cost of Afghanistan, the direct financing by the US of the State of Israel’s war machine, and the costs of preparing other future war theatres, notably in Iran, Syria, North Korea, Venezuela and other “axis of evil” countries. And we better not even start thinking about the US’s “greatest enemy” for the long term, i.e., China… Only a few months back, president Bush got Congress to support him with a further u$s 80.billion to cover military costs in Afghanistan and Iraq and all indications are that these military contingencies will necessarily increase in both of these war theatres.

The sheer enormity of these figures can help us understand why the US Federal Budget for 2004 of u$s 2.400.billion, suffered a shortfall of more than u$s 400 billion. There is, however, no indication whatsoever that this shortfall will force the United States to limit its war efforts in Iraq or Afghanistan, or curb domestic social policies, or freeze other war expenditures. Quite the contrary, these are increasing them more and more. So, the obvious question then is:

Where does the United States get the financial resources it lacks to pay for all of this?

The answer to this question is quite simple: it raises this money by printing US Dollar Notes and US Treasury Bills and Bonds (5 and 30 year maturities, respectively), taking advantage of the high “export” factor the Dollar enjoys, which enables the US Government to issue money and immediately push it out of its domestic economy and primary industrialized country financial circuits, thus avoiding what would otherwise be severe inflation of the Dollar. If we look at the gigantic figures involved, we can quite properly see this whole phenomenon as covert (hyper)inflation which remains hidden from public view….for now.

Fed Chairman Alan Greenspan recently warned that the increase in the Budget Deficit could lead to an economic crisis. He also pointed out that the Deficit is unsustainable and warned that “this could lead to a stagnant economy or worse”. Only in February 2005 the Deficit reached a record monthly figure of u$s 113.940 millions.4

The US Dollar: that un-backed currency…

“Who needs Dollars?” – Juan Perón

In 1971, President Richard Nixon withdrew the legal foundations of the US Dollar’s convertibility into metallic gold or silver, or anything else for that matter. Since then, the Dollar is no longer convertible into anything having any intrinsic value whatsoever. Today, the cornerstone of the Dollar is US economic and industrial strength which, in turn, is based on the military might the US, consolidated after the Second World War which left Europe and Japan conveniently devastated. Additionally, military victory brought with it the looting of hundreds of thousands of German, Japanese and other national patents and inventions, and highly sensitive technological and military secrets were stolen outright. All of this enabled the US to consolidate its superpower status and global prestige5

Thanks to the fact that the Dollar has virtually become the world’s key currency – albeit, imposed by the combined actions of the Federal Reserve Bank (Fed), the International Monetary Fund (IMF), the World Bank (WB), the Bank of International Settlements (BIS) and, in our own region, the Inter-American Development Bank (IDB) – the United States has been able to finance its Budget Deficits by exporting US Dollars to the entire planet through various complex mechanisms and channels that guarantee that those Dollars and Dollar-denominated financial instruments will flow in an orderly and balanced manner, all in favour of US National Interests and that of its key allies. This process could be kept more or less in place until 2001 when the European Union launched its own currency bringing the Euro on the scene. The Euro is a far more solid and stable currency than the US Dollar and represents a major challenge to the Dollar which could very well unseat it as the preferred global currency.

Over the past two years, the US Treasury Dept. and the IMF have succeeded in suggesting/imposing on around thirty national central banks in different countries – Argentina’s Central Bank included – that they must “soak up” US dollars from their domestic economies and hoard these in their vaults as “reserves” for their own local currencies and for foreign debt payment. In other words, these countries invest in US Dollars which implicitly means that they are financing for free a chunk of (uncontrolled) US public spending which is done by printing Dollar bills. This process is headed by Japan which today has Dollar denominated instruments in its central bank reserves to the tune of over u$s 670.000.000.000; strangely, followed by the “Marxist” Peoples Republic of China with u$s 470 billion, then by South Korea with u$s 220 billion plus a long list of other countries which suddenly awoke to the “need” to “soak up” US Dollars and hoard them silently in their central banks whilst they issue, as a counterpart, their own local currencies to fuel their respective domestic economies (something, by the way, which China has been doing fiercely, maintaining an undervalued Yuan much to the displeasure of the Bush Administration).

In the case of Argentina, this phenomenon helps shed some light as to the true origins of our false “economic recovery” which is basically due to the fact that the Argentine Central Bank has issued important amounts of local currency based on its Dollar Reserves, which has suitably fueled economic growth. This will work nicely until such time as Argentine monetary authorities receive the suggestion / counter-order from the US Federal Reserve Bank or the Treasury Dept. to stop doing this. At present the Central Bank has reserves for over u$s 22.billion and rising fast, which is Argentine President Nestor Kirchner’s pride, because with those dollars he can pay our country’s basically fraudulent public debt to…..the IMF, WB, IDB and other international creditors, thus helping to keep the global usury ball rolling!

You want money? OK….just print all you need!

Let me give a simple example of how the system actually works. The Federal Reserve Bank issues a 100 Dollar bill which is given to the Bush Administration so that the Dept. of Defense can give it to the US Army who buy some ammunition for their soldiers’ rifles, who can then use it to kill iraquis in their invaded land. Now, the last thing that the Bush Administration wants is for that 100 Dollar bill to flow back into the US financial system as that would be potentially inflationary. Because the process we described is repeated over and over again, millions upon millions of times and allows the Bush Administration to purchase not just ammunition, but, more importantly, barrels of oil, tanks, F16 fighter-bombers, Apache helicopters, guided missiles of all sorts, sizes and shapes, napalm, aircraft carriers, cluster bombs and all those other much needed instruments to promote “freedom and democracy” throughout the world, the secret is to ensure that these zillions of Dollar bills do not flow back into the US economy uncontrollably. Otherwise, that would have an inflationary – even a hyper-inflationary – effect.

What the US Government needs and gets is that, once each 100 Dollar bill the US Mint prints has been used to buy war material (or whatever), that it then gradually flows out of US domestic and primary financial circuits and that it stays out for as long as possible. I.e., that those Dollar bills eventually get “soaked up” by somebody somewhere far away: in Japan, Malaysia, China, India, Brunei, Saudi Arabia, Brazil, Indonesia or Argentina. Anything, as long as they make sure that those Dollars do not come back (at least not anytime soon), into US financial circuits and those of the primary supranational banking system.

From this point-of-view, we can well understand the huge pressure exerted by the United States on foreign central banks – especially those of subordinated countries – so that they permanently “soak up” US Dollars, which is equivalent to saying that they take them out of circulation. That gives the US some urgently needed respite and breathing space. Why does the US need to do this, you may ask? Simple: so that they can continue issuing as many 100 Dollar bills they need, in order to give them to the Dept of Defense who give it to the Army to buy some ammunition….well, you know the story…. And the cycle goes on and on and on….

By now you might be thinking that if you can get others to pay for your expenses and costs like this, then anybody can play at being a superpower. Well, that’s precisely how the system works. If George W. Bush needs money to finance his imperial appetite (which has grown voraciously in recent years, generating pathological and potentially catastrophic Deficits), then, no problem: he need only ask Alan Greenspan to issue all the Dollar bills he can spend; in this way he gets literally “all the money in the world”.

The key factor is to make sure that the spiraling wheel keeps turning and churning and turning and churning; printing, circulating, and then “soaking up” those dollars through the channels and at the speed which fit the Imperial need of ensuring they are dispatched far, far away. The real danger is if the wheel were to suddenly stop turning and churning because then all this vast and complex global financial engineering would simply collapse under a huge load of worthless paper with the ensuing dire consequences for our 21st Century Wizards of Oz.

For the United States to maintain global superpower status, there must always be somebody somewhere as far away as possible, on whom to dump vast quantities of unbacked US Dollars, continually and uncontrollably printed by the Fed so that once the US War machine has consumed that money, it can be silently and discretely removed from further circulation (i.e., “soaked up” and hoarded in foreign central banks, private savings, etc.). They need to make sure that these Dollars “disappear” after they have been consumed; at least for a while. And it really doesn’t matter whether they “disappear” into central bank vaults abroad or into individual investors’ safes and mattresses in Mexico, Indonesia, Argentina, Nigeria or Brazil. That’s not really the issue.

In short, every time one of us “foreigners” (or “Aliens” as the US government sweetly calls us), buys Dollars as savings, or our national central bank “soaks them up” from domestic markets in order to maintain whatever rate of exchange the IMF requires in order to maintain a “sustainable economy” (Anne Kruger, dixit) - i.e., so as to ensure that we can pay back foreign debt loans - what we are really doing is helping finance the US Budget Deficit. In the worst case scenario, we are helping to pay for the cost of killing iraquis and afghanis, preparing invasions against Iran, Syria, North Korea or Venezuela, or torturing POW’s in Guantanamo and Abu Ghraib.

This will enable us to better understand why in countries like Argentina, successive caretaker governments presided by the likes of former presidents Carlos Menem, Fernando de la Rúa, Eduardo Duhalde and Néstor Kirchner always bow down to help the US in this way, through successive Argentine Central Bank governors, notably in recent years, Messrs. Mario Blejer, Alfonso Prat-Gay and, today, Hernán Martin Péres Redrado6. Over the past three years, these gentlemen have all implemented policies of “soaking up” US dollars from the market in order to maintain the rate of exchange of the Peso to the Dollar.

As a counterpart, these market-economy puppet central bankers have had no problem in issuing Argentine Pesos to buy Dollars in the local market and the IMF and US Treasury Dept suitably applaud them for doing so. However, if the Central Bank were to issue Argentine Pesos to finance the building of our much needed national social and strategic infrastructure, then all “experts” and “media analysts” would go haywire to the scream of “Inflation!” Why is it that these “experts” insist that a 600 km four-lane highway is not proper “collateral” for issuing local currency, whilst neat piles of Dollars sleeping in the Central Bank is. Ah, the mysteries of global finance…

May we once again stress that the real backing which the US Dollar has nowadays is US economic strength, US prestige and, above all, the immensely powerful and apparently invincible armada of US military might which, since 11th September 2001 is permanently perched ready to attack, bomb and invade anybody anywhere for any reason. Not bad as a “convertibility” scheme: today, the US Dollar is convertible into bullets, bombs and tanks, not to mention covert CIA actions which could even include highly complex and costly domestic terrorist attacks like 911 which served as a casus belli for pro-israeli neocons in the Bush Administration to declare war on the entire world. Maybe someday we may know what really happened on that clear morning of September 11th, though that wont happen anytime soon…

In short and as a crude example of what we are saying, every time the Argentine people need to buy a barrel of oil, we must, as a community, work and toil to earn u$s 57 to buy it. However, every time the US government needs to buy a barrel of oil, it just has to ask the Fed to print u$s 57. Clearly, there is a great difference…

Again: like that, it’s easy be a global superpower.

Mafia + Usury = “Market Economy”
But, as the old adagio goes, “all good things must come to an end”. And it would seem that with George W. Bush the era of printing all the money you want is fast coming to an end. In Argentina, we know only too well what happens when you print “all the money in the world” to pay for uncontrolled government spending. Former president Raúl Alfonsín did just that and collapsed the economy into 5000% hyperinflation in 1989 with the ensuing hunger, street riots, violence, unemployment and suffering among the population.

Long before George W. made it to the White House, the perverse process had begun whereby Finance and Money which should always be subordinated to the Real Economy of Work and Production went out of control and – like a virtual tsunami – grew and grew into the monster which is today. Swamping and drowning out the Real Economy, destroying the forces of Labour, deconstructing Production and generating mass poverty and unemployment on a worldwide scale.

Indications of the geometrical swelling of this tsunami are everywhere to be seen, even though local and international so-called “analysts”, academics and the specialized media do not seem to notice it. An indicator of what we say can be found in the Dow Jones Industrial Average (DJIA) Index. Right after the collapse of the former Soviet Union, when George “It’s the economy, stupid!” Bush Sr. lost the 1992 elections to the young and upcoming Bill Clinton7, the Dow sat placidly at 3.700 points. Eight years later, however, when Clinton ended his second term in office in 2000 the Dow was at 10.900 points and had a short time earlier peaked at 11.700 points; that’s 300% growth over eight years!

The obvious question is: did the US economy also grow 300% between 1992 and 2000 as the DJIA did? The answer is clearly, no. Economic growth in the nineties in the US was very good but only averaged 3 to 4 percent per annum, so that during the entire Clinton era aggregate economic growth was not more than 40%.

Now, if the Real Economy only grew by 40% in eight years, how is it that the “Virtual Economy” of Finance and Speculation grew by 300%? Something is clearly rotten and not exactly in the State of Denmark. The key to all of this can be found in factors like Usury, printing of Fiat money, and rampant speculation which are embedded into the very fabric out of which today’s global financial system is made of. Money is created out of thin air by the Federal Reserve Bank and by the private mega-banking system by the billions of Dollars.

This all clearly carries with it a deep moral and ethical problem as the real force behind the “miraculous growth” of the US economy is “unlimited greed” (Greenspan, dixit), soulless egotism and homicidal profit-grabbing. In recent years, the stench could no longer be contained nor checked. The criminal frauds and inhumanities perpetrated by “world-class” Fortune 500 Corporations and Banks hit the headlines daily: Enron, WorldCom, Tyco, Nike, Marsh & McLennan, American International Group, Wal-Mart, K-Mart, Arthur Andersen, Halliburton (Dick Cheney), Harken Energy (George W Bush), Pacific Gas & Electricity, Adelphi, Qwest Communications, Global Crossing, amongst so many others. Huge fines for money-laundering and corporate misbehaviour were paid by top banks as CitiGroup (money-launderers’ favourite bank), JPMorganChase, Franklin National Bank of NY, Credit Suisse First Boston, Morgan Stanley, Merrill Lynch, Goldman Sachs, BCCI Bank of Commerce & Credit International (closed down – linked to CIA), Brown Brothers Harriman (Bush), HSBC (originally born out of the British imperial Opium Wars fought against China in the mid-nineteenth century which gives this bank great drug money-laundering expertise)…

The list goes on and on, and this spirit of Usury and Immorality spans the entire world: A-Hold in Holland, Parmalat in Italy, The Maxwell Group in the UK, Yukos in Russia, Vivendi in France… Their top corporate bosses are investigated and even jailed: Kenneth Lay (Enron), Bernhard Ebbers (WorldCom), Jeffrey Greenberg (Marsh & McLennan), Maurice Greenberg (AIG)…

Again, we Argentines know what this is all about!! We’ve had our share of corporate crooks in such scandals as Yabrán, Beraja/Banco Mayo, Yoma, IBM, CitiBank, Moneta, ENTEL, YPF, Southern Winds, not to mention one billion dollars plus in Public Funds belonging to Santa Cruz Province in southern Argentina which mysteriously “disappeared” since 1993 when president Nestor Kirchner was governor of that province…

The problem is that this whole process seems to have been taken several steps too far, so now the whole edifice is on the brink of collapse. The international financial system resembles a planetary Las Vegas managed by the Shylocks and Al Capones of this age, who sit in corporate boardrooms in Wall Street, the City of London, Paris and Zurich. They are starting to realize, however, that their luck is definitely about to run out. For decades they have danced themselves to a dizzy frenzy around the Golden Calf, stuffing their pockets whilst generating hunger, war, social turmoil, sickness and suffering for untold millions around the world. However, the “Game Over” sign is about to go on.

When Fed governor Alan Greenspan was asked in 1996 how he explained the fact that the DJIA had reached the unheard of level of 11.700 points, whilst the NASDAQ index had peaked at 6.000 points (today it has slumped to 1.600 points), his most eloquent reply was that this whole complex phenomenon was caused by “irrational exuberance”... You got it?

Just do it…
The truth of the matter is that the United States will stay in Iraq and Afghanistan all the time it wants, and will continue financing Israel limitlessly so that it can continue repressing and persecuting the Palestinian people in their own land, and new attacks will be made against today’s expanded “Axis of Evil” which - Condoleeza Rice, dixit8 - now includes North Korea, Syria, Myanmar, Zimbabwe, Venezuela….

President Bush recently declared that he will continue promoting “freedom and democracy” throughout the world, thus honoring a shrewd recommendation contained in an old book which is a true blueprint for world domination, which recommends that Imperial Sovereigns impose their will by exerting “Force and Hypocrisy” Brute force we have plenty of just about everywhere. Hypocrisy is constantly voiced by our presidents, prime ministers, ministers, secretaries, government spokesmen, media and corporate leaders. This gigantic planetary machine needs oil to operate properly; lot’s of oil. And not just the Iraqui, Venezuelan and Saudi hydrocarbon variety, but also virtual “oil” which today is the US Dollar which allows this infernal machine to run, grow and spin out of control.

But, alas! The US cannot continue printing Dollar bills indefinitely. Today’s global financial system is bursting at the seams, and growing concern is marked on the brow and voice of the Alan Greenspans of this world. How much longer until there is a final crash? One year? Two years? Nobody knows for sure. We do, however, know that the US Dollar can collapse virtually at any moment if an unforeseen / unmanageable crisis were to arise.

This was one of the reasons why the plan to oust Saddam Hussein had to be speeded up in 2003. Since 2001, Saddam had been selling oil in Euros to the European Union under the Oil for Food Program, implicitly inviting other OPEC (Organization of Oil Exporting Countries) to do the same. Had this led to the world oil market quickly switching over from trading in US Dollars to trading in Euros as its base currency, this would have had the effect of generating an enormous, sudden and uncontrolled influx of US Dollars from the whole world back into the United States economy with immediate inflationary effects which would have probably evolved into a hyperinflationary catastrophe for the US. The invasion of Iraq in March 2003 quickly dealt with that and stopped Saddam dead in his tracks, at the same time sending a clear message to all other oil producing countries who may have been playing with the idea of abandoning the “Dollar Area” in their oil tradings for the Euro. “If you do that, you’ll end up like Iraq…”, was the message, and nobody else did do that.

But the US also naively thought that invading Iraq would be like a joyride, that the proud Iraqui people would welcome the US invaders as liberators, and that a quickly subdued Iraq would speed up massive cheap oil flows from their oil fields to US gas stations at a cost of not more than u$s 15 per barrel, which would have certainly eased the pressure on the US economy. But things did not quite turn out that way and the “cheap oil” objective was never reached. Today, Iraq is looking more and more like Vietnam whilst world oil prices have reached u$s 57.60 a barrel and rising. This forced the Bush Administration to take such emergency actions as, for example, opening up vast virgin natural reserves in Alaska to the contaminating oil industry. The US economy’s voracious addiction to oil is very much out of control.

Today, excessive printing of US dollars has passed the point of no return. Monetary collapse can no longer be avoided. At best, it needs to be managed. Naturally, the US elite power Establishment and its key allies in the United Kingdom and the State of Israel are not stupid and they will not allow a hyperinflationary crisis to collapse their economies. There are various, creative and innovative ways of re-directing and detouring monetary catastrophes so that they hit somebody else somewhere else, and there are ways of ensuring that damage control at home and at our friends’ homes is kept at acceptable levels. It is precisely this “Plan B” which is presently on the drawing boards in the key think tanks headed by the New York-based Council on Foreign Relations, the London-based Royal Institute of International Affairs, and the Trilateral Commission.

It even appears as though “Plan B” consists of letting the present mass of US Dollars continue growing for a bit longer, all the way up to the brink of collapse, taking advantage as much as possible of the fact that this serves to ensure that the rest of the world finances the US Budget and Trading Deficits. The first part of Plan B, then, consists of making sure that the party lasts as long as possible, fueling all on-going military adventures.

We would even say that just a George W. Bush’s main purpose during his first term was to serve as a suitable figurehead for the “War on Terrorism”, his primary purpose during his second term in office will be to lead a highly professional team which is taking advantage, promoting and managing the very complex monetary and financial engineering necessary for the demise of the Dollar, then ensuring its orderly replacement by a New Gold-backed Dollar.

Let us consider a possible scenario of this sort.

The “New Dollar” is coming!
“Plan B” has a second part. Sometime during the next 12 to 24 months, our TV screens will tune in to CNN, CBS, BBC, CNBC, Fox and other world media as they announce urgent “Breaking News” involving important financial developments amid growing panic and dark rumours. Such news will come on a Friday afternoon, after 4 or 5 PM when the New York Stock Exchange and banks in New York City have closed. We will learn that Alan Greenspan – probably accompanied by Treasury Secretary John Show – have a very important announcement to make to the people of the United States and the world. His speech will be short, terse and filled with carefully selected banking jargon.

Greenspan will state something along the lines that “in an effort to uphold and reinforce the US economy and that of its key allies; to protect consumer interests and those of major corporations; to preserve the international financial system and to thwart a potential financial meltdown; to balance the Budget and avoid a stock market collapse, the United States will effective immediately implement a far-reaching Economic Reform and Financial overhaul, declaring an extended banking and exchange holiday”. In Argentina, we have lot’s of experience on this!.

He will then inform that President George W. Bush, with the full support of Congress, will sign a series of emergency executive orders whereby the US Dollar will be placed on a Gold Standard. Correspondingly, this will necessitate introducing a New Dollar convertible into metallic gold and this new currency shall replace all the “old dollars” in circulation which, as we have seen, are only backed by worthless paper, i.e., Fiat money. What’s going to happen with those “old” dollars? They will have to exchanged for New Dollars, of course.

All persons holding US Dollar Notes and Treasury instruments who are citizens of the US or are domiciled in the US, together with US corporations, and persons, corporations and organizations domiciled in countries allied to the US (most notably, the United Kingdom and State of Israel) shall have their “old” Dollars exchanged for New Dollars on a 1-to-1 parity.

In the rest of the world – i.e., Asia-Pacific, Central and South America, Africa, Russia, the Muslim World – changing “old” Dollars for New ones will depend on the local “exchange markets” which will fix the “proper” rate of exchange between the extremely plentiful “old” Dollars and the extremely scarce New Dollars. And what will that rate of exchange be? One-to-one? I doubt it, because supply and demand will set in almost as fast as panic. Two “old” Dollars for One New Dollar, then? Or, maybe, 3-to-1? Or 5-to-1? Or 10-to-1? Who knows? “Let the laws of the free-market economy – supply and demand – do their bidding”. And whatever happens elsewhere will certainly not be the concern of the US.

We will then see millions upon millions of desperate and panicky people, companies, banks, operators, players of all sorts throughout the planet running amok all at the same time trying to unload their “old” Dollars and exchange them for New Dollars. Again, in Argentina we have a huge amount of experience on this…

Alan Greenspan is definitely the man to micromanage this whole process, with the political support and backing of president George W, Bush, because he has always been a Gold Standard buff, since a long, long time ago. One of his first key academic articles dating back to 1967 proposed just that: placing the US Dollar on a Gold Standard.

And then along came the Euro…

Another key factor which helped trigger and speed up this impending crisis was the launching in 2001 of the greatest challenge to the Dollar so far: the Euro. As the monetary unit of the European Union (EU), the Euro carries the economic might of an entire continent with a combined GDP which is almost the same as that of the United States. Powerful stuff, indeed.

If we project future growth of both economies over the next twenty years, we find that the EU economy has greater potential than the US economy simply because the countries surrounding the UE are anxiously asking to be allowed into this vast and sophisticated economic and monetary system which in the long run will probably end up including even Russia itself. Each of the countries still outside the UE – Ukraine, Belorussia, Lithuania, Estonia, Latvia, Hungary and others – have great added value to contribute to the UE economy, both in terms of the economy, as well as geopolitically.

By comparison, the US can only expand its regional economy into Central and South America, where the countries in that region resist aggressive US penetration and, for more than a century, resent arbitrary US military interventions, invasions and repeated humiliations.

Quite a difference! Whilst the countries still to join the UE wish to do so voluntarily and anxiously await their turn, the US has no choice but to impose AFTA (American Free Trade Agreement) on unwilling neighbours that will permanently resist the regional hegemon. More importantly in the short term, there are a series of symmetries and asymmetries between the present Dollar and the Euro worth pointing out:

Comparison between the US Dollar and the Euro

Structural Strength (Technical Factor) Low
The Dollar is over-issued by a factor of 4 to 8 times (there being no trustworthy information available), because over the past years successive US administrations have abused the Dollar’s high prestige and printing has gone out of control;
Growing evidence of this structural weakness generates inflationary - even hyper-inflationary - risks which can be triggered by some internal or external political or financial crisis
High
The Euro has only been just launched (2001). The European Central Bank in Frankfurt Germany issues clear public information showing that the amount of currency placed in circulation since 2001 is consistent with the size and productive capacity of the UE economy. No doubt, the Euro runs no inflationary risks at the present moment.

Cultural and Psychological Strength Very High

Intelligently, the US has kept the same format (i.e., the same national leaders, monuments and mottos) on its Dollar bill for more than a century.
This gives the Dollar a feeling of unmovable stability: the effigies of Washington, Lincoln, Hamilton, Jackson, Grant and Franklin appear on 1, 5, 10, 20, 50 and 100 Dollar bills together with symbols of US power: the White House, the Treasury Department, Congress, the Lincoln Memorial, the Great Seal of the US (with its esoteric, Masonic and millenarian symbolism including the pyramid topped by the all-seeing Eye of the Great Architect of the Universe ushering the Illuminati New World Order announced since 1776).
Each Dollar bill bears the credo “In God we Trust”, although people increasingly wonder what “God” the US government is really talking about…
Low (still)
The design chosen by European monetary authorities for the Euro is rather unfortunate. No doubt, finding consensus amongst fifteen countries was not an easy task. The Euro is bland, insipid and uninspiring, bears the sole word “Euro” and shows gates and bridges which rather than depicting real monuments merely reflect abstract architectural styles.
Clearly, the Euro is an oxymoron designed by a committee, which brings to mind what our former president Juan Perón once said to the effect that “a camel is a horse designed by a committee…”. And a camel is what the Europeans got…
The Euro contains no compelling symbols, which is something almost incredible coming from a continent having some of the most beautiful monuments in the world which could easily serve as very powerful symbols: the Roman Coleseum, the splendid cathedrals of Rheims or Cologne, the Parthenon of Athens, the Alcazar in Toledo…





In short, the Dollar is a structurally weak currency with enormous psychological strength and prestige, whilst the Euro is a structurally strong currency with substantial cultural weakness. Today, the US Dollar resembles those high-class families of yore which, having lost all their wealth, nevertheless maintain their noble appearances and pride. So much so, that people continue respecting them as if they still were powerful and rich lords. When reality finally catches up with the Dollar, its collapse could come quickly and violently. Meanwhile, the Euro can continue to mature solidly as long as the monetary, financial and geopolitical structures of the EU move forward. Clearly, in monetary affairs time runs against the US and in favour of the EU.

And then there’s China. In a few years more, the most powerful economy in the world will be the Chinese economy and on top of that they are a nuclear power. With its two-currency and capitalist-socialist system, China has succeeded in implementing some of the fundamental concepts involving the use of Sovereign Currency – by way of the Yuan – to promote enormous internal development and growth. No doubt, in the long run, what really gives the US-UK-Israeli Empire leadership sleepless nights, is China.

One last comment for this section: in the Table above, we describe the great cultural strength of the US Dollar which has hardly been altered over the past century. Significantly, in recent years – and for reasons not yet clearly explained – the Federal Reserve Bank decided to begin slightly altering the physical appearance of the Dollar. The effigies of Franklin, Grant, Jackson, Hamilton and Lincoln were slightly displaced to the left and enlargened, security factors were introduced and, most notably, various color experiments changing the traditional green and black colors were also introduced. It began some years back with a new series of blue-coloured 20 Dollar bills, then came later red-coloured u$s 50 Dollar bills, thus breaking the traditional “green” tradition for which the dollar is known the world over.

Might this be a way to prepare the collective psyche for the “great change” that will take place when the New Dollar is finally and suddenly introduced at the same time that the old dollars are withdrawn from circulation? It is hardly necessary to remind readers that general acceptance of any currency is basically a social convention which thus carries a decisive psychological factor. All Nation-states know that acceptance of its currency – inside and outside of the country – depends on factors which need to be properly linked and tuned to the collective psyche, and which have to do with the Trust and Prestige emanating from the issuing agency. And this Trust and Prestige is not so much geared on a particular government (Administrations come and go), but rather on the strength of the issuing Sovereign Nation-State (which should permanently consolidate and increase its Power). Very possibly, the New Dollar shall have a totally different design than today’s Dollars. It may even be of different colours and sizes.

Bases for a New Dollar.

These are relatively simple and can be described as follows:

A Monetary Unit convertible into Gold at an official and mandatory rate of exchange fixed by the US Federal Reserve Bank, in coordination with the Bank of England and key supranational public and private financial players.
The Gold backing the New Dollar will not be just any gold. Only special “officially approved New Dollar Gold Bullion” will be used and accepted, which will be specially minted and proof. It will no doubt carry an embedded chip or bar code or some other foolproof and failsafe anti-counterfeit element, ensuring total control by the monetary authorities.
“Common” gold – i.e., non-officially approved and treated gold, will be worth maybe three, five or ten times less than the Special Approved Gold Bullion. This “Good Gold” is in all likelihood already being minted and amassed in the vaults of the Federal Reserve Bank in New York, the Bank of England in London and elsewhere.
You may be thinking that this will trigger a gigantic worldwide financial crisis. No doubt, it will. That this will place the better part of the international financial system on its head. Of course it will. That there will be even more hunger, hardship, poverty, sickness, wars, epidemics and catastrophes of all sorts. Certainly… However, those who are “in the know” beforehand – i.e., the Empire’s most trustworthy allies and friends (both in terms of countries as well as financial, economic and industrial groups and even a Mafia here and there) in the US, the UK and Israel – will receive all the necessary foreknowledge enabling them to mitigate the impact of this crisis and make ready. In Argentina we remember only too well own domestic monetary and financial meltdown in December 2001. The private banks and certain key individuals who were “well informed” got their money out of the system in a timely manner and when the crisis came, it was the populace at large that bore the brunt. The banks and major corporations came out surprisingly unscathed and today they are for the most part back to “business as usual”, whilst more than 50% of the population sank below poverty levels.
China, Japan, India with their vast reserves will feel the blow. They will loose vast amounts of money. Japan will see its economic recovery delayed for years to come. China will see it huge growth slowed down, the aggregated effect of the global financial collapse will greatly harm exports from India, Taiwan, South Korea, Brazil…
China herself seems to be making ready for this, as they are already transforming great chunks of their Dollar-denominated reserves of more than u$s 470.000.000.000 – in “old” Dollars, of course– into physical assets (i.e., investments in South East Asia and in South America, and they are shedding dollars and buying Euros). Japan and South Korea cannot budge as swiftly and easily because they are military underdogs and politically subservient to the United States. To a great extent, their lots have been cast unless…. Unless, as Samuel Huntington insinuated in his 1997 classic “The Clash of Civilizations”, Japan and China were to forge an alliance similar to the one which Germany and France were able to reach over half a century ago. Imagine Japanese technology allied to the Chinese powerhouse and its military clout… Then South Korea might even be able to move forward towards reunification with the North under the aegis of China which wields the necessary influence over the North Koreans and can soften up their outmoded authoritarian style. This latter scenario most definitely keeps the US-UK-Israeli imperial leaders wide awake at night…
The “controlled collapse of the international financial and monetary system” is the next “Great Crisis” which the Real Power Structures of the New World Order have entrusted to George W. Bush and his team, knowing that they have the necessary psychological profile to promote this virtual fraud and robbery on an unprecedented planetary scale. The whole world has witnessed speechlessly at the incredible audacity with which George W. Bush and his team look into the TV cameras and blatantly lie without a blink in their eyes.

In this brief essay, we have described a possible future scenario, resulting from a series of technical factors (the extreme over-printing of US Dollar bank notes and Treasury bills and bonds), economic interests (mainly the Empire’s wish and need to have free access to major oil fields around the world), and long term US-UK-Israeli geopolitical objectives (in the Middle East, in the short/medium terms; in South America, in the medium term; and in the Far East, in the long term). If we add to this the Empire’s hunger for conquest, triggered and “justified” by the strange events of September 11, 2001 then we feel that the scenario described herein is not only possible but also probable.

Implications for countries like Argentina are enormous, for this will entail great threats of all sorts, but also unexpected opportunities as well. For example, why does the present Argentine government make such unsustainable and unrealistic efforts to “renegotiate” our huge Dollar-denominated foreign debt, when a collapse of the “old” Dollar could very well carry with it the virtual liquidation or, at least, vast reduction of that public debt?

Clearly, there is much food for thought in all of this, and many lessons to be learned from the past. Whatever may happen, if you have a large part of your assets in US Dollars – whether in bank notes, Treasury Bills, stocks and shares, investment funds, banking accounts or whatever - perhaps you would be wise to reconsider. In the coming collapse of the international monetary system, the safest thing to do will be to invest in the Real Economy and not in the unreal financial economy. In other words, consider buying tangible goods: real estate, companies, machinery, land, equipment, precious metals and stones, and the like. No matter how bad an economic crisis may be, tangible goods will not disappear whilst the balance on your bank account appearing on an ATM screen can quickly vanish into nowhere. Oh, and don’t forget: paper money is just that: paper.

Think about it..


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Notes


1 Adrian Salbuchi is an Argentine writer, researcher and journalist. Member of CREAR, Consejo Regional Estratégico Argentino, the Project for a Second Argentine Republic and the Centro de Estudios Económicos Mariano Fragueiro, Buenos Aires. Author of various books on geopolitics and economics, amongst them, “El Cerebro del Mundo: la cara oculta de la globalización” (Ediciones del Copista, Córdoba, Argentina, 4th Edition, 2003, 470 pages).

2 More than 95% of the Federal Reserve Bank’s share capital is owned by the private member banks, which can, in turn, be traced back to key traditional finance dynasties, both in Europe and in the US: Rothschild, Warburg, Schroeder, Mellon, Bleichroeder, Montefiori, Montagu, Rockefeller, and Harriman, amongst others. Cfr. The Federal Reserve Bank, Purposes & Functions, Washington DC.

3 The sum of all international financial operations (exchange, stocks and shares, investment funds, etc) is of almost u$s 2.000.000.000.000 daily (yes, daily). If this is projected annually, we find that the internacional financial system (i.e, the Virtual Economy) has a turnover of around u$s 700.000.000.000.000 (seven hundred trillion Dollars), however, the aggregate sum of the GDP’s of all countries in the world (i.e., the Real Economy) does not exceed u$s 45.000.000.000.000, i.e., an amount fifteen times smaller. We can thus conclude that Internacional Finance – the world of speculation, usury and fiat money – is fifteen times larger than the Real Economy of Labour and Production. If finance is to be considered as the “oil” which makes the Economic “engine” run, then we can see that that “engine” is overstuffed with a veritable oil glut which will grind it to a halt.

4 See “Clarín” newspaper, Buenos Aires, 15-Mar-05, article “Greenspan encendió una luz de alerta por el déficit de EE.UU”.


5 Regarding the nature of Power, I would refer readers to my essay “El Poder: ¿de dónde viene?, ¿quién lo tiene?, ¿adónde va?” (“Power: where does it come from? Who has it? Whither is it going?” soon to be translated into English), available in www.eltraductorradial.com.ar


6 Before being named president of the Argentine Central Bank under the De la Rúa and Duhalde Administrations, Mario Blejer was for 18 years director of the Institute for Monetary Affaire at the IMF in Washington DC and today he is Director of the Bank of England in London. Alfonso Prat-Gay, president of the Central Bank during the last part of the Duhalde administration and first part of the Kirchner administration was a director at J P Morgan Investments, London and he was “recommended” to the Argentine government by the Bank of England based on Blejer’s suggestion. Hernán Martín Péres Redrado, the present Central Bank president comes from the Fundación Capital, idelogically linked to the extreme liberal policies of former president Carlos Menem.
7 Member of the Council on Foreign Relations and the Trilateral Commission.

8 Secretary of State and member of the Council on Foreign Relations.

Note: This article was translated from the Spanish original.

© Adrian Salbuchi, Buenos Aires, 05 June 2005 Reproduction allowed if the source is clearly named.
www.eltraductorradial.com.ar
[e-mail]

www.globalresearch.ca/index.php?context=va&aid=3490

[sandi66]

This comes at a time when dozens of attorneys general announced their intent to launch foreclosure investigations after a number of banks announced a suspension of foreclosure sales.

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Foreclosure Freeze Hurts Housing Prices: Ex-Ginnie Exec
Published: Monday, 11 Oct 2010 | 10:35 AM ET
Although the foreclosure freeze is stabilizing the housing market for the time being, it will trigger further housing price declines two to four quarters out, Joseph Murin, former president of the Government National Mortgage Association [Ginnie Mae] told CNBC on Monday.
"What it will cause is a more eroding of confidence in the American people," he said. "And when the American people aren't confident, they're not going to respond, which means the housing market is going to remain sluggish."

Foreclosure stalling is necessary for institutions to reassess whether they are processing correctly, Murin went on to say.

"There's no fraud involved in this," he said. "It's process inadequacy that's causing the problem. Behind the scenes, we're dealing with technology and experience that's probably a decade old. It's not kept up with the huge push [in mortgage debt]."

In 2000, the United States had $6 trillion worth of mortgage debt; in 2009, that figure hit $14.4 trillion, he said.

This comes at a time when dozens of attorneys general announced their intent to launch foreclosure investigations after a number of banks announced a suspension of foreclosure sales.

"Everybody wants to jump on the bandwagon," Murin said. "Let the markets do what the markets do, and we'll find a way out of this process a lot sooner than I think the meddling that's going to go on with this foreclosure process.

www.cnbc.com/id/39613951

[sandi66]

Who’s winning the currency wars?
Oct 11, 2010 16:18 EDT Those who are worried about currency wars are too late — the wars are already here. China and the United States are both winning the race to cheapen their currencies for now. But if the rhetoric keeps heating up, everyone will be a loser.



American and Chinese officials traded blows over the weekend, setting the stage for a tense G20 summit next month. The head of China’s central bank rejected the idea of a big revaluation for the yuan, advocating a slow-acting “herbal medicine” instead. Treasury Secretary Tim Geithner took a swipe at countries with “significantly undervalued” currencies, of which China is an obvious example.



The United States claims to be a loser in the currency wars. But in reality it is winning. The dollar has fallen sharply against most of its trading partners’ currencies. On a trade-weighted basis, the dollar is the lowest it has been all year, according to the Federal Reserve major currencies index. The likelihood of an imminent bout of money-printing can keep that trend going for a long time.



China, meanwhile, claims not to be a winner. But that is disingenuous too. While the yuan just hit its highest level versus the dollar since officially abandoning its dollar peg in 2005, it has fallen heavily against most other currencies. The euro, the currency of China’s biggest trading partner, has strengthened 14 percent against the yuan. The Japanese yen is not far behind. Various emerging markets, such as Brazil, have also seen their currencies soar.



The gap between winners and losers is widening. With rates as low as can be in the West, money has poured into assets in the East and South. Many Asian stock markets are at multi-year highs — benchmark indices in Indonesia and the Philippines hit records last week. Emerging market bonds too are rallying, as investors scramble for yields. That adds further upward pressure to currencies already out of relative whack with their trading peers.



There is no easy answer. But that, unfortunately, is a fact of life when the world has been living in such an unbalanced way for years. A rate hike in the United States might squash economic growth and leave the world facing another dip. A rapid China revaluation could price the country’s exporters out of the market and lead to widespread unemployment.



A gradual but sustained revaluation of the yuan versus the dollar — combined with a halt to the dollar’s own depreciation — is the least bad way forward. But getting such a deal, as positions become increasingly entrenched, will be tricky. And if both sides refuse to do anything, a currency war could mutate into a trade war — a genuine lose-lose scenario.



blogs.reuters.com/columns/2010/10/11/whos-winning-the-currency-wars/

[sandi66]

A Primer in Protectionism


Monday, 11 October 2010 16:45



Despite opaque and dissembling arguments that what the world needs now is a world currency to replace the weakening dollar, there are significant obstacles confronting that elitist dream. After the IMF (International Monetary Fund) annual meeting in Washington ended, leaders could only conclude that the IMF needed to keep “a close watch on currencies,” using “candor” and an “evenhanded” approach to such observations.


While departing amidst platitudes, the "leaders'" real issue is rising protectionism being waged by its members through currency manipulation. Simply put, in order to stimulate exports, a country will often resort to reducing the value of its currency in order to make goods offered for sale in foreign countries appear to be cheaper. By stimulating such export demand, local companies providing goods for export enjoy increasing sales and profits, and are then encouraged to expand, hiring more workers and purchasing more capital goods. Thus, in a static environment, and in the very short run, the local economy is stimulated.

The only problem is that most of the G-20 countries (including Argentina, Australia, Brazil, Canada, China, France, Germany, Japan, and others) have been engaging in these “beggar thy neighbor” policies for some time, setting the stage for a potential worldwide trade war. Steve Englander of Citigroup in New York said, "Policy makers seemed to be trying to diminish concerns about currency wars. There did not seem [to be] any commitment to change behavior, however. There is little to suggest that the dollar’s direction is anything but down.” At this writing, the dollar trades at 82 yen, the lowest since April, 1995. Treasury Secretary Timothy Geithner also expressed concern that “global rebalancing is not progressing as well as needed to avoid threats to the global economic recovery. Our initial achievements are at risk of being undermined by the limited extent of progress.” As explained by Simon Kennedy, writing for Bloomberg.com, “More and more economies are taking steps to spur growth that end up weakening their currencies…. While a lower exchange rate can help bolster exports, it also hurts trading partners, who may [then] look to regain advantage through their own [currency] devaluations or by erecting trade barriers.”

This smacks of repeating errors made during the Great Depression when the Smoot-Hawley Tariff Act was passed in 1930, which raised prices on over 20,000 goods in order to “protect” the American economy. Similar protectionist measures by other countries soon reduced total imports and exports by half. Nouriel Roubini, New York University professor, put it succinctly: “We’re in a world in which everyone wants a weaker currency but you cannot have equilibrium of all currencies being weaker. Currency-intervention wars eventually can lead to trade wars.”

Alex Newman explained in his “Waking Up to a World Currency” in The New American that such weakness in the American dollar is “prompting calls for a world currency to stabilize world financial markets.” Newman then reviews the ongoing efforts to replace, perhaps as soon as 2014, the dollar with an IMF currency. The head of the communist-China central bank, Zhou Xiaochuan, explained that “the desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies [like the dollar].”

The intent of the insiders to create a world currency just became even clearer, thanks to an article in the Wall Street Journal and analyzed by the Daily Bell. That article opens:

Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn … the IMF has since become more influential — governing like a global financial authority.

In an interview for that article, Strauss-Kahn was asked, “Does this mean that the IMF became the first post-crisis world government?”

No, no, the government has to consist of elected people, and that’s more like the G-20. But the reality is the G-20 — or any other grouping — doesn’t operate like a government….

In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability.

It just may be that protectionist self-interest expressed by the various members of the G-20, even though short-sighted, may delay the closing of the world currency loop in time for sensible, newly elected limited-government representatives in the United States to begin to put a stop to this push for a world currency and a concurrent world government. For the moment, at least, a world currency is no shoo-in.


www.thenewamerican.com/index.php/economy/commentary-mainmenu-43/4844-a-primer-in-protectionism

[sandi66]

October 11, 2010

A CounterPunch Special Report
"Who Needs an Army When You Can Obtain the Usual Objective (Monetary Wealth and Asset Appropriation) Simply by Financial Means?"


Why the U.S. has Launched a New Financial World War -- And How the the Rest of the World Will Fight Back


By MICHAEL HUDSON

“Coming events cast their shadows forward.”

– Goethe

What is to stop U.S. banks and their customers from creating $1 trillion, $10 trillion or even $50 trillion on their computer keyboards to buy up all the bonds and stocks in the world, along with all the land and other assets for sale in the hope of making capital gains and pocketing the arbitrage spreads by debt leveraging at less than 1 per cent interest cost? This is the game that is being played today.

Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means? All that is required is for central banks to accept dollar credit of depreciating international value in payment for local assets. Victory promises to go to whatever economy’s banking system can create the most credit, using an army of computer keyboards to appropriate the world’s resources. The key is to persuade foreign central banks to accept this electronic credit.

U.S. officials demonize foreign countries as aggressive “currency manipulators” keeping their currencies weak. But they simply are trying to protect their currencies from being pushed up against the dollar by arbitrageurs and speculators flooding their financial markets with dollars. Foreign central banks find them obliged to choose between passively letting dollar inflows push up their exchange rates – thereby pricing their exports out of global markets – or recycling these dollar inflows into U.S. Treasury bills yielding only 1% and whose exchange value is declining. (Longer-term bonds risk a domestic dollar-price decline if U.S interest rates should rise.)

“Quantitative easing” is a euphemism for flooding economies with credit, that is, debt on the other side of the balance sheet. The Fed is pumping liquidity and reserves into the domestic financial system to reduce interest rates, ostensibly to enable banks to “earn their way” out of negative equity resulting from the bad loans made during the real estate bubble. But why would banks lend more under conditions where a third of U.S. homes already are in negative equity and the economy is shrinking as a result of debt deflation?

The problem is that U.S. quantitative easing is driving the dollar downward and other currencies up, much to the applause of currency speculators enjoying a quick and easy free lunch. Yet it is to defend this system that U.S. diplomats are threatening to plunge the world economy into financial anarchy if other countries do not agree to a replay of the 1985 Plaza Accord “as a possible framework for engineering an orderly decline in the dollar and avoiding potentially destabilizing trade fights.” The run-up to this weekend’s IMF meetings saw the United States threaten to derail the international financial system, bringing monetary chaos if it does not get its way. This threat has succeeded for the past few generations.

The world is seeing a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. This financial grab is occurring without an army to seize the land or take over the government. Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling hosts. Indeed, this “currency war” so far has been voluntary among individual buyers and the sellers who receive surplus dollars for their assets. It is foreign economies that lose, as their central banks recycle this tidal wave of dollar “keyboard credit” back into low-yielding U.S. Treasury securities of declining international value.

For thousands of years tribute was extracted by conquering land and looting silver and gold, as in the sacking of Constantinople in 1204, or Incan Peru and Aztec Mexico three centuries later. But who needs a military war when the same objective can be won financially? Today’s preferred mode of warfare is financial. Victory in today’s monetary warfare promises to go to whatever economy’s banking system can create the most credit. Computer keyboards are today’s army appropriating the world’s resources.

The key to victory is to persuade foreign central banks to accept this electronic credit, bringing pressure to bear via the International Monetary Fund, meeting this last weekend. The aim is nothing as blatant as extracting overt tribute by military occupation. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means? All that is required is for central banks to accept dollar credit of depreciating international value in payment for local assets.

But the world has seen the Plaza Accord derail Japan’s economy by obliging its currency to appreciate while lowering interest rates by flooding its economy with enough credit to inflate a real estate bubble. The alternative to a new currency war “getting completely out of control,” the bank lobbyist suggested, is “to try and reach some broad understandings about where currencies should move.” However, IMF managing director Dominique Strauss-Kahn, was more realistic. “I'm not sure the mood is to have a new Plaza or Louvre accord,” he said at a press briefing. “We are in a different time today.” On the eve of the Washington IMF meetings he added: “The idea that there is an absolute need in a globalised world to work together may lose some steam.” (Alan Beattie Chris Giles and Michiyo Nakamoto, “Currency war fears dominate IMF talks,” Financial Times, October 9, 2010, and Alex Frangos, “Easy Money Churns Emerging Markets,” Wall Street Journal, October 8, 2010.)

Quite the contrary, he added: “We can understand that some element of capital controls [need to] be put in place.”

The great question in global finance today is thus how long other nations will continue to succumb as the cumulative costs rise into the financial stratosphere? The world is being forced to choose between financial anarchy and subordination to a new U.S. economic nationalism. This is what is prompting nations to create an alternative financial system altogether.

The global financial system already has seen one long and unsuccessful experiment in quantitative easing in Japan’s carry trade that sprouted in the wake of Japan’s financial bubble bursting after 1990. Bank of Japan liquidity enabled the banks to lend yen credit to arbitrageurs at a low interest rate to buy higher-yielding securities. Iceland, for example, was paying 15 per cent. So Japanese yen were converted into foreign currencies, pushing down its exchange rate.

It was Japan that refined the “carry trade” in its present-day form. After its financial and property bubble burst in 1990, the Bank of Japan sought to enable its banks to “earn their way out of negative equity” by supplying them with low-interest credit for them to lend out. Japan’s recession left little demand at home, so its banks developed the carry trade: lending at a low interest rate to arbitrageurs at home and abroad, to lend to countries offering the highest returns. Yen were borrowed to convert into dollars, euros, Icelandic kroner and Chinese renminbi to buy government bonds, private-sector bonds, stocks, currency options and other financial intermediation. This “carry trade” was capped by foreign arbitrage in bonds of countries such as Iceland, paying 15 per cent. Not much of this funding was used to finance new capital formation. It was purely financial in character – extractive, not productive.

By 2006 the United States and Europe were experiencing a Japan-style financial and real estate bubble. After it burst in 2008, they did what Japan’s banks did after 1990. Seeking to help U.S. banks work their way out of negative equity, the Federal Reserve flooded the economy with credit. The aim was to provide banks with more liquidity, in the hope that they would lend more to domestic borrowers. The economy would “borrow its way out of debt,” re-inflating asset prices real estate, stocks and bonds so as to deter home foreclosures and the ensuing wipeout of the collateral on bank balance sheets.

This is occurring today as U.S. liquidity spills over to foreign economies, increasing their exchange rates. Joseph Stiglitz recently explained that instead of helping the global recovery, the “flood of liquidity” from the Federal Reserve and the European Central Bank is causing “chaos” in foreign exchange markets. “The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy. ... It’s doing nothing for the American economy, but it’s causing chaos over the rest of the world.” (Walter Brandimarte, “Fed, ECB throwing world into chaos: Stiglitz,” Reuters, Oct. 5, 2010, reporting on a talk by Prof. Stiglitz at Colombia University. )

Dirk Bezemer and Geoffrey Gardiner, in their paper “Quantitative Easing is Pushing on a String” , prepared for the Boeckler Conference, Berlin, October 29-30, 2010, make clear that “QE provides bank customers, not banks, with loanable funds. Central Banks can supply commercial banks with liquidity that facilitates interbank payments and payments by customers and banks to the government, but what banks lend is their own debt, not that of the central bank. Whether the funds are lent for useful purposes will depend, not on the adequacy of the supply of fund, but on whether the environment is encouraging to real investment.”

Quantitative easing subsidizes U.S. capital flight, pushing up non-dollar currency exchange rates

Federal Reserve Chairman Ben Bernanke’s quantitative easing may not have set out to disrupt the global trade and financial system or start a round of currency speculation that is forcing other countries to defend their economies by rejecting the dollar as a pariah currency. But that is the result of the Fed’s decision in 2008 to keep unpayably high debts from defaulting by re-inflating U.S. real estate and financial markets. The aim is to pull home ownership out of negative equity, rescuing the banking system’s balance sheets and thus saving the government from having to indulge in a Tarp II, which looks politically impossible given the mood of most Americans.

The announced objective is not materializing. The Fed’s new credit creation is not increasing bank loans to real estate, consumers or businesses. Banks are not lending – at home, that is. They are collecting on past loans. This is why the U.S. savings rate is jumping. The “saving” that is reported (up from zero to 3 per cent of GDP) is taking the form of paying down debt, not building up liquid funds on which to draw. Just as hoarding diverts revenue away from being spent on goods and services, so debt repayment shrinks spendable income.

So Bernanke created $2 trillion in new Federal Reserve credit. And now (October 2010) the Fed is proposing to increase the Fed’s money creation by another $1 trillion over the coming year. This is what has led gold prices to surge and investors to move out of weakening “paper currencies” since early September – and prompted other nations to protect their own economies accordingly.

It is hardly surprising that banks are not lending to an economy being shrunk by debt deflation. The entire quantitative easing has been sent abroad, mainly to the BRIC countries: Brazil, Russia, India and China. “Recent research at the International Monetary Fund has shown conclusively that G4 monetary easing has in the past transferred itself almost completely to the emerging economies … since 1995, the stance of monetary policy in Asia has been almost entirely determined by the monetary stance of the G4 – the US, eurozone, Japan and China – led by the Fed.” According to the IMF, “equity prices in Asia and Latin America generally rise when excess liquidity is transferred from the G4 to the emerging economies.”

Borrowing unprecedented amounts from U.S., Japanese and British banks to buy bonds, stocks and currencies in the BRIC and Third World countries is a self-feeding expansion. Speculative inflows into these countries are pushing up their currencies as well as their asset prices, but. Their central banks settle these transactions in dollars, whose value falls as measured in their own local currencies.

U.S. officials say that this is all part of the free market. “It is not good for the world for the burden of solving this broader problem … to rest on the shoulders of the United States,” insisted Treasury Secretary Tim Geithner on Wednesday.

So other countries are solving the problem on their own. Japan is trying to hold down its exchange rate by selling yen and buying U.S. Treasury bonds in the face of its carry trade being unwound as arbitrageurs are paying back the yen that they earlier borrowed to buy higher-yielding but increasingly risky sovereign debt from countries such as Greece. Paying back these arbitrage loans has pushed up the yen’s exchange rate by 12 per cent against the dollar so far during 2010. On Tuesday, October 5, Bank of Japan governor Masaaki Shirakawa announced that Japan had “no choice” but to “spend 5 trillion yen ($60 billion) to buy government bonds, corporate IOUs, real-estate investment trust funds and exchange-traded funds – the latter two a departure from past practice.”

This “sterilization” of unwanted financial speculation is precisely what the United States has criticized China for doing. China has tried more “normal” ways to recycle its trade surplus, by seeking out U.S. companies to buy. But Congress would not let CNOOC buy into U.S. oil refinery capacity a few years ago, and the Canadian government is now being urged to block China’s attempt to purchase its potash resources. This leaves little option for China and other countries but to hold their currencies stable by purchasing U.S. and European government bonds.

This has become the problem for all countries today. As presently structured, the international financial system rewards speculation and makes it difficult for central banks to maintain stability without forced loans to the U.S. Government that has long enjoyed a near monopoly in providing central bank reserves. As noted earlier, arbitrageurs obtain a twofold gain: the arbitrage margin between Brazil’s nearly 12 per cent yield on its long-term government bonds and the cost of U.S. credit (1 per cent), plus the foreign-exchange gain resulting from the fact that the outflow from dollars into reals has pushed up the real’s exchange rate some 30 per cent – from R$2.50 at the start of 2009 to $1.75 last week. Taking into account the ability to leverage $1 million of one’s own equity investment to buy $100 million of foreign securities, the rate of return is 3000 per cent since January 2009.

Brazil has been more a victim than a beneficiary of what is euphemized as a “capital inflow.” The inflow of foreign money has pushed up the real by 4 per cent in just over a month (from September 1 through early October). The past year’s run-up has eroded the competitiveness of Brazilian exports, prompting the government to impose 4 per cent tax on foreign purchases of its bonds on October 4 to deter the currency’s rise. “It’s not only a currency war,” Finance Minister Guido Mantega said on Monday. “It tends to become a trade war and this is our concern.” And Thailand’s central bank director Wongwatoo Potirat warned that his country was considering similar taxes and currency trade restrictions to stem the baht’s rise, and Subir Gokarn, deputy governor of the Reserve Bank of India announced that his country also was reviewing defenses against the “potential threat” of inward capital flows.”

Such inflows do not provide capital for tangible investment. They are predatory, and cause currency fluctuation that disrupts trade patterns while creating enormous trading profits for large financial institutions and their customers. Yet most discussions of exchange rate treat the balance of payments and exchange rates as if they were determined purely by commodity trade and “purchasing power parity,” not by the financial flows and military spending that actually dominate the balance of payments. The reality is that today’s financial interregnum – anarchic “free” markets prior to countries hurriedly putting up their own monetary defenses – provides the arbitrage opportunity of the century. This is what bank lobbyists have been pressing for. It has little to do with the welfare of workers.

The potentially largest speculative prize of all promises to be an upward revaluation of China’s renminbi. The House Ways and Means Committee is backing this gamble, by demanding that China raise its exchange rate by the 20 per cent that the Treasury and Federal Reserve are suggesting. A revaluation of this magnitude would enable speculators to put down 1 per cent equity – say, $1 million to borrow $99 million and buy Chinese renminbi forward. The revaluation being demanded would produce a 2000 per cent profit of $20 million by turning the $100 million bet (and just $1 million “serious money”) into $120 million. Banks can trade on much larger, nearly infinitely leveraged margins, much like drawing up CDO swaps and other derivative plays.

This kind of money already has been made by speculating on Brazilian, Indian and Chinese securities and those of other countries whose exchange rates have been forced up by credit-flight out of the dollar, which has fallen by 7 per cent against a basket of currencies since early September when the Federal Reserve floated the prospect of quantitative easing. During the week leading up to the IMF meetings in Washington, the Thai baht and Indian rupee soared in anticipation that the United States and Britain would block any attempts by foreign countries to change the financial system and curb disruptive currency gambling.

This capital outflow from the United States has indeed helped domestic banks rebuild their balance sheets, as the Fed intended. But in the process the international financial system has been victimized as collateral damage. This prompted Chinese officials to counter U.S. attempts to blame it for running a trade surplus by retorting that U.S. financial aggression “risked bringing mutual destruction upon the great economic powers.

From the gold-exchange standard to the Treasury-bill standard to “free credit” anarchy

Indeed, the standoff between the United States and other countries at the IMF meetings in Washington this weekend threatens to cause the most serious rupture since the breakdown of the London Monetary Conference in 1933. The global financial system threatens once again to break apart, deranging the world’s trade and investment relationships – or to take a new form that will leave the United States isolated in the face of its structural long-term balance-of-payments deficit.

This crisis provides an opportunity – indeed, a need – to step back and review the longue durée of international financial evolution to see where past trends are leading and what paths need to be re-tracked. For many centuries prior to 1971, nations settled their balance of payments in gold or silver. This “money of the world,” as Sir James Steuart called gold in 1767, formed the basis of domestic currency as well. Until 1971 each U.S. Federal Reserve note was backed 25 per cent by gold, valued at $35 an ounce. Countries had to obtain gold by running trade and payments surpluses in order to increase their money supply to facilitate general economic expansion. And when they ran trade deficits or undertook military campaigns, central banks restricted the supply of domestic credit to raise interest rates and attract foreign financial inflows.

As long as this behavioral condition remained in place, the international financial system operated fairly smoothly under checks and balances, albeit under “stop-go” policies when business expansions led to trade and payments deficits. Countries running such deficits raised their interest rates to attract foreign capital, while slashing government spending, raising taxes on consumers and slowing the domestic economy so as to reduce the purchase of imports.

What destabilized this system was war spending. War-related transactions spanning World Wars I and II enabled the United States to accumulate some 80 per cent of the world’s monetary gold by 1950. This made the dollar a virtual proxy for gold. But after the Korean War broke out, U.S. overseas military spending accounted for the entire payments deficit during the 1950s and ‘60s and early ‘70s. Private-sector trade and investment was exactly in balance.

By August 1971, war spending in Vietnam and other foreign countries forced the United States to suspend gold convertibility of the dollar through sales via the London Gold Pool. But largely by inertia, central banks continued to settle their payments balances in U.S. Treasury securities. After all, there was no other asset in sufficient supply to form the basis for central bank monetary reserves. But replacing gold – a pure asset – with dollar-denominated U.S. Treasury debt transformed the global financial system. It became debt-based, not asset-based. And geopolitically, the Treasury-bill standard made the United States immune from the traditional balance-of-payments and financial constraints, enabling its capital markets to become more highly debt-leveraged and “innovative.” It also enabled the U.S. Government to wage foreign policy and military campaigns without much regard for the balance of payments.

The problem is that the supply of dollar credit has become potentially infinite. The “dollar glut” has grown in proportion to the U.S. payments deficit. Growth in central bank reserves and sovereign-country funds has taken the form of recycling of dollar inflows into new purchases of U.S. Treasury securities – thereby making foreign central banks (and taxpayers) responsible for financing most of the U.S. federal budget deficit. The fact that this deficit is largely military in nature – for purposes that many foreign voters oppose – makes this lock-in particularly galling. So it hardly is surprising that foreign countries are seeking an alternative.

Contrary to most public media posturing, the U.S. payments deficit – and hence, other countries’ payments surpluses – is not primarily a trade deficit. Foreign military spending has accelerated despite the Cold War ending with dissolution of the Soviet Union in 1991. Even more important has been rising capital outflows from the United States. Banks lent to foreign governments from Third World countries, to other deficit countries to cover their national payments deficits, to private borrowers to buy the foreign infrastructure being privatized, foreign stocks and bonds, and to arbitrageurs to borrow at a low interest rate to buy higher-yielding securities abroad.

The corollary is that other countries’ balance-of-payments surpluses do not stem primarily from trade relations, but from financial speculation and a spillover of U.S. global military spending. Under these conditions the maneuvering for quick returns by banks and their arbitrage customers is distorting exchange rates for international trade. U.S. “quantitative easing” is coming to be perceived as a euphemism for a predatory financial attack on the rest of the world. Trade and currency stability are part of the “collateral damage” being caused by the Federal Reserve and Treasury flooding the economy with liquidity in their attempt to re-inflate U.S. asset prices. Faced with U.S. quantitative easing flooding the economy with reserves to “save the banks” from negative equity, all countries are obliged to act as “currency manipulators.” So much money is made by purely financial speculation that “real” economies are being destroyed.

The coming capital controls

The global financial system is being broken up as U.S. monetary officials change the rules they laid down nearly half a century ago. Prior to the United States going off gold in 1971, nobody dreamed that an economy – especially the United States – would create unlimited credit on computer keyboards and not see its currency plunge. But that is what happens under the Treasury-bill standard of international finance. Under this condition, foreign countries can prevent their currencies from rising against the dollar (thereby pricing their labor and exports out of foreign markets) only by (1) recycling dollar inflows into U.S. Treasury securities, (2) by imposing capital controls, or (3) by avoiding use of the dollar or other currencies used by financial speculators in economies promoting “quantitative easing.”

Malaysia successfully used capital controls during the 1997 Asian Crisis to prevent short-sellers from covering their bets. This confronted speculators with a short squeeze that George Soros says made him lose money on the attempted raid. Other countries are now reviewing how to impose capital controls to protect themselves from the tsunami of credit from flowing into their currencies and buying up their assets – along with gold and other commodities that are turning into vehicles for speculation rather than actual use in production. Brazil took a modest step along this path by using tax policy rather than outright capital controls when it taxed foreign buyers of its bonds last week.

If other nations take this route, it will reverse the policy of open and unprotected capital markets adopted after World War II. This trend threatens to lead to the kind of international monetary practice found from the 1930s into the ‘50s: dual exchange rates, one for financial movements and another for trade. It probably would mean replacing the IMF, World Bank and WTO with a new set of institutions, isolating U.S., British and Eurozone representation.

To defend itself, the IMF is proposing to act as a “central bank” creating what was called “paper gold” in the late 1960s – artificial credit in the form of Special Drawing Rights (SDRs). However, other countries already have complained that voting control remains dominated by the major promoters of arbitrage speculation – the United States, Britain and Eurozone. And the IMF’s Articles of Agreement prevent countries from protecting themselves, characterizing this as “interfering” with “open capital markets.” So the impasse reached this weekend appears to be permanent. As one report summarized matters: “‘There is only one obstacle, which is the agreement of the members,’ said a frustrated Kahn .”

Paul Martin, the former Canadian prime minister who helped create the G20 after the 1997-1998 Asian financial crisis, said “said the big powers were largely immune to being named andshamed.” And in a Financial Times interview Mohamed El Erian, a former senior IMF official and now chief executive of Pimco said, “You have a burst pipe behind the wall and the water is coming out. You have to fix the pipe, not just patch the wall.”

The BRIC countries are simply creating their own parallel system. In September, China supported a Russian proposal to start direct trading between the yuan and the ruble. It has brokered a similar deal with Brazil. And on the eve of the IMF meetings in Washington on Friday, October 8, Chinese Premier Wen stopped off in Istanbul to reach agreement with Turkish Prime Minister Erdogan to use their own currencies in tripling Turkish-Chinese trade to $50 billion over the next five years, effectively excluding the U.S. dollar. “We are forming an economic strategic partnership … In all of our relations, we have agreed to use the lira and yuan,” Mr. Erdogan said.

On the deepest economic lane, the present global financial breakdown is part of the price to be paid for the Federal Reserve and U.S. Treasury refusing to accept a prime axiom of banking: Debts that cannot be paid, won’t be. They tried to “save” the banking system from debt write-downs in 2008 by keeping the debt overhead in place. The resulting repayment burden continues to shrink the U.S. economy, while the Fed’s way to help the banks “earn their way out of negative equity” has been to fuel a flood of international financial speculation. Faced with normalizing world trade or providing opportunities for predatory finance, the U.S. and Britain have thrown their weigh behind the latter. Targeted economies understandably seeking alternative arrangements.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, [e-mail]

www.counterpunch.org/hudson10112010.html

[sandi66]

Fed Uncertainty Weighs on Futures
Published: Tuesday, 12 Oct 2010 | 6:09 AM ET Text Size By: CNBC.comDiggBuzz FacebookTwitter More Share
U.S. stocks looked set for a weak open Tuesday as investors braced for minutes from the Federal Reserve's latest policy meeting to gain clues on potential quantitative easing.

European shares were lower across the board with mining companies leading the decline on weaker metal prices. Asian stocks closed mostly in the red, but Chinese stocks saw a boost.

The Federal Open Market Committee will release details of its September meeting at 2 pm New York time. With many market watchers expecting another round of asset buying from the central bank in the coming months, the minutes could provide key details on the Fed's strategy.

Meanwhile, further clues could be gleaned at a speech from Kansas City Fed President Thomas Hoenig at 11:45 am. Hoenig will speak on the economic outlook and monetary policy from a National Association for Business Economics meeting in Denver, Colorado.

There have recently been a growing number of market watchers claiming that further liquidity would do little to boost the real economy. Stephen Roach, non-executive chairman at Morgan Stanley Asia, told CNBC that Americans would rather reduce their debt levels than increase spending and so further liquidity wouldn’t help.

Also taking to the stage is European Central Bank President Jean-Claude Trichet. He is due to speak at the Economic Club of New York at 12:15 pm.

At 1 pm the results of a $32 billion sale of 3-year Treasury notes will be available. And after-the-bell earnings are due from Dow component Intel [TM 70.87 -0.20 (-0.28%) ] and CSX [TM 70.87 -0.20 (-0.28%) ].


www.cnbc.com/id/39570805

[sandi66]

Dinar, IQD, Iraq, Revaluation

* Dollar Collapsing? Reports from London (VIDEOS)

October 12, 2010 07:13 am · Posted in NEWS, RUMORS · 8 Comments

www.youtube.com/watch?v=juPz2bAp_ZQ



www.youtube.com/watch?v=sAS2eLjeG2Y


www.youtube.com/watch?v=sAS2eLjeG2Y

[sandi66]

* Gunner Post: The Get Team 10/11/10
October 11, 2010 07:51 pm · Posted in RUMORS · 19 Comments
[gunner] DINAR FRIENDS: I will remind everyone: 1. The ARABS march to their own drumbeat. 2. I will believe the RV or RI when I see on the CBI or Dinar Trade Website. I am sharing info that my contact has shared. Everyone: The CBI and he Finance Ministry are scheduled to do a TV show in Iraq on the new Small Denominations on Friday to educate their people on what the revaluation and withdrawing the three zero bills means to them and how it will affect them. Also the small denominations will be shown on TV at that time. I cannot say the RV will happen before Friday the 15th or not. But the US treasury has not released our banks to do the revalue yet. So we could see the RV on Wednesday, Thursday or possibly on Friday along with the TV show. My guess is we will see it sooner than the show on Friday as the smart cards issued to all Iraqis including the ones in the US were credited OCT 5th with only 250 dinar instead of the 1250 usual amount so the buying power went up to $5.00US . This kind
[gunner] This kind of illustrates the rate is $5.00+ in my opinion. The cat is out of the bag on the RV so we should see this released to the Forex quickly. Everyone please be excited in a controlled sort of way as it appears to be happening but after all this is Iraq and delays seem to be inevitable. If the Government is formed we might see the reval take place on that announcement also. Anyway, I do not foresee any way to stop it now. We still do not have the rate or the day officially.
[gunner] I like it, don’t you?

theiraqidinar.com/category/rumors/

[sandi66]

Wall Street Plays Dr. Jekyll to Avoid Court: Susan Antilla

By Susan Antilla - Oct 12, 2010 9:00 PM ET

When duped investors set out to make themselves whole after a fleecing by a broker, the American way is to hustle them off to a private court run by Wall Street. It’s a tradition that was set in stone when the Supreme Court in 1987 said that, if an investor signed an agreement to arbitrate, the sorry loser is out of luck if he ever wants a day in court.

Brokers have enjoyed having a say in the management of their own justice system ever since then, even getting to stack every three-person jury with an investment professional. So you’ve got to wonder what’s going on when regulators at the Financial Industry Regulatory Authority, whose paychecks come from Wall Street, are all of a sudden recommending something that would benefit investors in Finra’s courts: the option to have a panel that excludes brokerage employees.

You can think of the role of the so-called industry arbitrator the way you might if you sued me for libel and wound up with four very opinionated columnists on your 12-member jury, or one-third of the panel. When investors come to Finra with a claim that they’ve lost $100,000 or more, it’s mandatory to include a panelist from finance. Why would a clear-thinking person in the brokerage industry contemplate giving that up?

It’s a real head-scratcher when you consider that the status quo turns out to be an even better deal for Wall Street than we’d ever known. For the past two years, Finra has run a pilot program with 14 brokerage firms that agreed to give customers the option to ax the industry guy or gal from an arbitration panel.

Decision Record

At the end of two years, 23 cases had made it all the way through to a decision without first reaching a settlement. And guess what? Investors won half of the six cases where there was a finance person on the panel, but they scored in 12 of the 17 cases, or more than 70 percent, when the panel had nobody from Wall Street.

“The whole character of the proceeding changes when it’s an all-public panel,” said Seth Lipner, a Long Island, New York, lawyer who represented customers in two of the pilot cases where investors won decisions from Wall Street-free panels. Arbitrators “are more aggressive in wanting to know about the terrible stuff that happened,” he said.

Nancy Condon, a Finra spokeswoman, said in an e-mail that there are “too few awards to draw statistical conclusions.” Wall Street arbitrators aren’t involved in cases where investors claim to have lost less than $100,000 because a single public arbitrator decides those cases, she said.

Seeking Change

Finra this month will ask the Securities and Exchange Commission for a rule change to give investors the option of having their cases heard by panels without a financial industry representative, thereby making the pilot program permanent. The request reflects the Dr. Jekyll side of Finra’s dual personality as a self-regulator: it sometimes fulfills its charge to protect investors -- thus, a pro-investor proposal -- but often gets sidelined when the brokers that endow its budget push the agency toward light-touch regulation.

The SEC will seek public comment once it gets Finra’s proposal, and you can expect the usual suspects to weigh in.

Andrew De Souza, a Securities Industry and Financial Markets Association spokesman, said the group would like to see the full Finra proposal before passing judgment, but Sifma in the past has been clear about its soft spot for industry arbitrators.

In 2007, Sifma published a white paper that depicted arbitration as a fair process in which non-Wall Street arbitrators benefited from having a panelist associated with the securities business in part because -- hold the guffaws --“they can serve to educate them” about things such as industry customs.

Fairness Concerns

Any benefits from that educational component seem to be going unnoticed by aggrieved investors. When two law professors sought out the opinions of arbitration participants in 2008, four out of 10 investors said they started out with concerns about arbitration before they even filed their dispute; by the time their arbitrations were done, six out of 10 had fairness concerns.

In spite of the obvious advantage Wall Street gets by having one of its own on dispute panels, there are political reasons that industry types might actually support Finra’s proposal: forces that are threatening mandatory arbitration altogether. The Dodd-Frank Act has the SEC looking into whether arbitration contracts are in the public interest; the Arbitration Fairness Act of 2009 had raised questions on the issue even before Dodd-Frank passed.

‘What’s Driving This’

If this pro-investor proposal goes through, the SEC will be better able to justify the preservation of mandatory arbitration, Wall Street’s prized license to stay out of court.

“That’s what’s driving this,” says Ryan Bakhtiari, a California lawyer who won $1.56 million for clients in two pilot cases where no Wall Streeters were on the panel.

Condon notes that the pilot program began in 2008, “before regulatory reform occurred,” and that the point of Finra’s proposal is to give “choice” to investors.

Another choice would be to let customers decide whether they want arbitration at all, opening the courts to injured investors. Don’t hold your breath to see a proposal like that make it to the SEC from Wall Street’s Finra cops.

www.bloomberg.com/news/2010-10-13/wall-street-plays-dr-jekyll-to-avoid-court-commentary-by-susan-antilla.html