This week brings the Moscow circus to the world stage. The world’s major economies meet in Moscow as the Russians are presently in the leadership position of the G-20’s rotating presidency. It used to be the G-7 nations that crafted an economic blueprint for the World Bank and IMF to somewhat adhere, but as much of the global economic growth is now in the BRICS and the other emerging economies, the world’s former colonial powers have had to make room for the rising economic nations. Most of the time the G-7 and G-20 meetings have been photo-ops for world leaders, but every once in a great while something constructive actually makes its way into global policy. The immediate global consensus after the Lehman debacle helped stem the global credit markets from total collapse. This G-20 meeting will not be one of the constructive outcomes as the G-20 members are nowhere near any type of consensus.
Going into the end-of-week conference, the Europeans cannot even reach any type of agreement. The most important item to be discussed is the “Currency Wars,” or, the perceived battle to devalue the way to prosperity. The Japanese have set currency devaluation as the main topic for discussion for their success in depreciating the YEN from the conclusion of the last G-20 meeting in October. From Asia to Latin America, the world’s top nations are concerned that Japan’s efforts are causing disruption to global trade and finance. The French are complaining that Japan is causing an undeserved rise in the Euro and the U.K. and U.S. are making the situation worse by the continued policies of Quantitative Easing–currency intervention by stealth.
Today, the French and Germans were revealing vast differences of opinion from within the EU. The French maintain the euro is too strong while the Bundesbank President Jens Weidmann maintains the Euro “does not signal a serious overvaluation.” Weidmann also cautioned other countries not to move away from inflation targeting and only concentrate on stimulating the demand side of the equation. The U.S. used its Treasury Undersecretary for International Affairs, Lael Brainard, to caution that “the G-20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation.”
Secretary Brainard: Is the FED‘s continued purchasing of Treasury and mortgage debt in an effort to stimulate demand through ultra-low interest rates considered intervention for the purpose of competitive devaluation? One nation’s constructive efforts to sustain domestic demand may be economically destructive for the global economy. Ms. Brainard then goes on to point the finger at China and reiterates the old refrain: “China needs to further boost household demand and reinvigorate the move to a market-determined exchange rate and interest rates.” She then admonishes Europe, saying that it must come together “around a joint strategy for growth.” Yes, this is going to be one contentious G-20 meeting so I caution to be leery of misleading headlines.
Making the situation even more chaotic is the piece in tomorrow’s Financial Times by the previous head of the Swiss National Bank, Philipp Hildebrand. As the previous president of the SNB, Mr. Hildebrand instituted the 1.20 EUR/CHF floor, which helped paved the way for the recent aggressive monetary action by the Bank of Japan (whose success has given rise to much of the acrimony heading into the G-20 meeting in Moscow). Hildebrand asserts in the FT piece, “No Such Thing As A Global Currency War,” that the world’s central banks are acting within their mandates. “The monetary policy battles that have been fought and continue to be fought in so many economies are domestic ones. They are fights against weak demand, high unemployment and deflationary pressures. A greater danger to the world economy would in fact arise if central banks did not engage in these internal battles.”
Hildebrand defends all current policies and basically tells all the concerned parties complaining about “currency wars” to mind their economies and go about their own policies. This G-20 communique is going to be in need of careful reading to make sense of diplomatic nuance. Hildebrand has fired a shot, waiting for response from the Chinese, Russians and Brazilians.
Tags: BRICS, Bundesbank, currency war, EU, EUR/CHF, Fed, G-20, G-7, IMF, Jens Weidmann, Lael Braindard, Philipp Hildebrand, SNB, Yen
February 12, 2013 at 5:09 am |
Great article Yra.
When I read your quote by Secretary Brainard “China needs to further boost household demand and reinvigorate the move to a market-determined exchange rate and interest rates.” it all became clear again.
We all know that between the Fed’s target rate and the massive purchases down the curve, the market has little to do with determining US interest rates. The hypocracy of the statement is a reminder that when it comes to the dollar, policy makers will never say what they really mean. Remember Paulson’s “Strong Dollar policy”?
In fact when I reflect on the tortuous economic logic of the “portfolio balance channel” compared to the obvious growth enhancements from a weaker dollar, the duplicity of policy makers becomes clearer still.
Only the relative novices in the G20, like Brazil, still appear to say what they mean, and try to do what they say they will.
Thanks for “The Rotten Heart of Europe” arrived in Cape Town yesterday.
February 12, 2013 at 7:09 am |
Kevin–thanks for the nice support and it is amazing that it just go there as It was sent weeks ago I believe—as you read it promote it as we have another 9,000 to sell and beleive it is the most important book to get an in depth understanding of Europe and its currency.I find it hard to believe that every european history course and global finance course has not made it mandatory reading.And I will add that it is not readable on an electronic device
February 12, 2013 at 11:18 pm |
[…] Legendary trader Yra Harris says, “The currency wars are real, and the game is on.” Harris says the global currency war is what helped Volkswagen gain market share in the last few years. So, what is Japan doing? It is cutting the value of its currency so Toyota will gain market share. The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB) can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
February 13, 2013 at 1:51 am |
Yra. One of the reasons the book and its contents are kept out ot the mainstream, especially schools/colleges, is because the Euro Union likes to buy everyone to help/advance their agenda. Read this, it’s shocking – http://www.dailymail.co.uk/news/article-2188453/The-case-Europe-MEP-Daniel-Hannan-reveals-disturbing-contempt-democracy-heart-EU.html
February 13, 2013 at 7:20 am |
Alex–thanks for the post.For those desiring the Rotten Heart of Europe go and oreder thru rottenheartofeurope@gmail.com
February 13, 2013 at 10:39 am |
[…] The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB) can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
February 13, 2013 at 11:18 am |
[…] Legendary trader Yra Harris says, “The currency wars are real, and the game is on.” Harris says the global currency war is what helped Volkswagen gain market share in the last few years. So, what is Japan doing? It is cutting the value of its currency so Toyota will gain market share. The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB) can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
February 13, 2013 at 12:44 pm |
[…] The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB)can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
February 13, 2013 at 7:25 pm |
[…] Yra Harris: Currency Wars are Real ! by Greg Hunter’s USAWatchdog.com Legendary trader Yra Harris says, “The currency wars are real, and the game is on.” Harris says the global currency war is what helped Volkswagen gain market share in the last few years. So, what is Japan doing? It is cutting the value of its currency so Toyota will gain market share. The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB) can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
February 14, 2013 at 1:14 pm |
[…] Legendree trad'r Yra Harris sez, T' currency wars air real, and t'game is on. Harris sez t'global currency war is whut hepped Volkswage gane market share n' t'las few yeers. So, whut is Japun a'doin? It is cuttin t'value o'its currency so Toyota will gane market share. T' currency war is also whuts bee drivin gold har. Harris sez, Is gold n' a bull market? Absolutelee. Is gold a tard bull fer t'moment? Absolutelee. . . . I reckon y'alld be crazy to sell becawz thar air so minny a variables o'uncertuntee. Harris goes on to perdick, Whut do I reckon is t'mos explosif' event fer gold? It is t'day Draghi (Presdint o't' ECB) a'ken no long'r jawbone quantitatif' easyun'. He ackshly has to step up to t'plate. Harris is countin on t'Fd to continue to pump out dollars. He sez, I a'ken go to sleep at nite and knoe one thangt' Fd will nairy alloe deflashun. T' reeson is simple, accerdyun' to Harris, We lif' on debt n' thishere socidey. Debt basd societees cannot abserb a deflatyunree spiral. Join Greg Hunt'r as he goes One-on-One wit analeest and trad'r Yra Harris. […]
February 17, 2013 at 5:13 pm |
[…] Legendary trader Yra Harris says, “The currency wars are real, and the game is on.” Harris says the global currency war is what helped Volkswagen gain market share in the last few years. So, what is Japan doing? It is cutting the value of its currency so Toyota will gain market share. The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB) can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
April 9, 2013 at 10:06 pm |
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already. Cheers!
March 6, 2015 at 7:50 pm |
[…] The currency war is also what’s been driving gold higher. Harris says, “Is gold in a bull market? Absolutely. Is gold a tired bull for the moment? Absolutely. . . . I think you’d be crazy to sell because there are so many variables of uncertainty.” Harris goes on to predict, “What do I think is the most explosive event for gold? It is the day Draghi (President of the ECB)can no longer jawbone quantitative easing. He actually has to step up to the plate.” Harris is counting on the Fed to continue to pump out dollars. He says, “I can go to sleep at night and know one thing–the Fed will not allow deflation.” The reason is simple, according to Harris, “We live on debt in this society. Debt based societies cannot absorb a deflationary spiral.” Join Greg Hunter as he goes One-on-One with analyst and trader Yra Harris. […]
September 19, 2017 at 5:18 pm |
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