Saturday, October 9, 2010

Currency Manipulation: World's largest Pot calls world's largest Kettle "black" as Fed races to devalue dollar faster than China devalues yuan

China has been a popular conversation topic in Washington lately, and an even more popular conversation in the chambers of the House and Senate. Last week, the House passed a bill authorizing tariffs against China in retaliation for China's continued "devaluation" of the yuan. Ironically, Congress also applauded the Federal Reserve's latest sure-to-lead-to-certain-doom plan to do what only the Federal Reserve does best: to accelerate the fantastic devaluation of the US dollar.

Talk about the pot calling the kettle "black."

The Senate has yet to debate the bill, and of course, the Congress has no control over the Federal Reserve, so Mr Bernanke will turn up the press without the input of Congress (which is lovin' it anyway). Neither the House nor the Senate are attempting to do anything whatsoever about China's two master accomplices, the individuals enabling China to accomplish its goal of "yuan devaluation." You know these people, Congress loves them and the president appointed them: they are Ben Bernanke at the Federal Reserve and his FRBNY buddy Timothy Geithner at Treasury.

If Congress genuinely wanted to stop yuan devaluation, it would stop dollar devaluation. The yuan is pegged to the dollar: 100% of the devaluation evident in the yuan is equally occurring in the dollar. Instead, Congress just calls China a currency manipulator without even bothering to lookin the mirror. The United States is the world's largest currency manipulator, and has been since the incipience of Bretton Woods. Yet the story for the past year has been how horrible it is that China (which is evil, but for different reasons) is for intentionally "devaluing" the yuan and thus effectively creating a 20/20 import-export manipulation through which US exports are effectively 20% more expensive to Chinese consumers while Chinese exports are 20% cheaper to US consumers. The poor little United States just cannot do anything about it except blame China, because it is certainly not Mr Bernanke's fault--and former FRBNY president Timothy Geithner, who happens to be fluent in Mandarin, as one could have ever possibly foreseen China doing such a thing, and just because the US is devaluing its currency doesn't mean that China can, too!

Yeah, right. What few in Congress, no one at the Federal Reserve or Treasury, and certainly not the president, are admitting is that the only way China has been able to accomplish yuan devaluation is through its choice to peg the yuan to the US dollar in summer of 2008. This means that 100% of the "devaluation" that has hit the yuan has also hit to the dollar. Are these politicians and "policy makers" complaining about the fact that USDX has lost 36% since 2002?! Do they care that they have contributed to the reducing by over one third the purchasing power of every American through their compliance and embrace of a decade of ridiculously loose monetary policy, insanely low interest rates, and a 36% devaluation of the dollar?! Of course not. Now stop complaining about the deteriorating dollar and the evil Federal Reserve, and be a patriotic American and blame China.

The yuan "devalution" of the past two years is not due to some magical powers that China has: it is due to the magical unicorn fairy dust powers of the Federal Reserve to print up money ex nihilo and carte blanche. Yuan devaluation is due to dollar devaluation, and dollar devaluation is the only possible impact that can occur to currency controlled by a Federal Reserve who has no problem with printing up over $2 Trillion in dollars and who just announced plans to print more, and a Treasury that has no problem auctioning off record amounts of debt every week despite having no increase in revenue to cover interest payments, and two Congresses with their two presidents who have no qualms about either outright authorizing or gleefully endorsing $24.7 Trillion in bailout guarantees in less than 2 years. What currency can survive being shot fifteen times, stabbed fifty-three times, rolled down a hill, run over by a Pete 379, and lit on fire?! According to Mr Bernanke and Congress, the almighty dollar can!

Well it can't, and this is evident manifestly by the fact that the US dollar is worth 4 cents against its original pre-Fed value. But forget about 1913, as we have even more dramatic evidence from just this last decade. See for yourself below. This chart shows USDX from 1985 to 2009 (source):

The steep decline at the left from 1985 to 1987 is the intentional result of the Plaza Accord, an announced conspiracy by the Treasury Department, Federal Reserve, and German and Japanese finance ministers to devalue USD against the yen and the deutchemark. As you can see, it was "success": the Plaza Accord resulting in a resulted in a 52% devaluation of the US dollar in two years, a crash that was only stopped by another international currency manipulation conspiracy, the Lourve Accord. The right-most peak of about 120 occurred in 2002. In the eight years since, USDX has dropped 36%, to a level which is near the lowest part of this chart (all time low from March 2008, which is the lowest dip on the chart, is 71.18. USDX today sits at 77).

So, once again, if anyone knows anything about currency manipulation, it is the United States government and Federal Reserve. If a nation wants to devalue a currency, all they have to do is peg to the dollar. The yuan situation is about to get worse, too, because the chronically irresponsible Fed has announced that a $2 Trillion balance sheet (a balance sheet that includes monetization) is just not enough. Apparently, we know need super Ben to jump on his unicorn, ride it to his helicopter, talc up his hands, and start QE2.

Oh yeah, this is going very well: two years after TARP and the height of the credit crisis, and the Federal Reserve still thinks there are "liquidity" issues. There is again renewed talk of a "second Plaza Accord" to steal yet more spending power from Americans. This appears to some to be the beginning of the first currency wars of the new century. And how do we prevent a currency war? We call in the creation of the world's largest currency manipulator, the IMF, to "stop" it, of course. As Peter Schiff explains in this video, currency wars are won by the nation which is "successful" in devaluing the currency of its own citizens the most, and stealing as much spending power as possible, or, in his words:

"You know, most wars, the object is to kill the enemy. Well, in the currency war, the object is to kill your know troops. Because in a currency war, its a nation's own citizens that suffer, because they're the ones that are being made poorer. Well, of course, you know, unfortunately, America is going to win the the currency war, so our citizens have the most to lose. Because we are going to be the greatest casualities in the currency war--its going to be American retirees, people living on fixed income,because, unfortunately, that's how you win the currency war: whichever country succeeds in making its citizens the poorest is the winner."

We do not want a currency war. As mentioned above, USD has already been shot fifteen times, stabbed fifty-three times, rolled down a hill, run over by a Pete 379, and lit on fire. We don't exactly need to USD to slit its own throat.

Watch commodities, and this vastly expanding foreclosure fraud crisis, along with the massive intervention of various nations in FOREX, because it is almost beginning to look like summer 2008 again.

1 comment:

  1. You know as well as I this whole thing is to give the ones with power even more and us "little people" the equivalent to the dark age peasants of Europe.

    A sad side note, My Grandmother born in 1920 keeps making comments about everything becoming so expensive. I keep trying to tell her that it's not that prices have gone up but rather the dollar has gone down in value. Makes me wonder if I will remember GD2 (Great Depression II) if I'm lucky enough to become 90.