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.

Bankster Report's Eagle mascot gains 30.5% in 6 weeks while Bankster Reporter's savings lose 8% of purchasing power

In case you haven't noticed, silver has been on a tear this past month. Check out the graph below, courtesy of StockCharts (to which we are permanently linked on the left of this page under "Silver (chart)"):

Silver up $5.5/oz over the last 35 trading days: f(x) = 5.5/35X ?

If you cannot see the numbers, please click on the link, because StockCharts does a great job with their graphics and you will be able to see everything you need to in good contrast. Even without clearly seeing the numbers, however, you certainly cannot miss the near linear increase on the right of the image. Looks like y = 5.5/35x to me. This covers a roughly six week period from the last week to August through today. The late August price was about $18.00/oz, and silver moved up a massive $5.50 since, or 30.5% (silver hit $23.50/oz, and closed today at $23.22). It is a huge move, no doubt, and is a 13% larger move than the less-huge-but-still-nice spike in gold. See for yourself the gold chart, also from StockCharts:

As you can see, gold is up $200 over the same period, from $1160/oz to over $1360/oz, and closed today at $1347/oz, thus giving gold a gain of over 17% in since the end of August. Of course, silver is quite prone to runs-up, and runs-down. Between mid-March and mid-April of 2006, silver shot up 43%--and then sunk 45% from May to June. Silver also dropped 31% in the month between mid-September and mid-October 2008 during the tumult of the credit crisis, and did this after having dropped from over $21/oz just six months previously. Silver recorded two 30%-plus rallies in the first half of 2009: one, from mid-January to mid-February registered nearly 35%, and the other, from May 2009 to June 2009, registered 33%. The first rally moved silver out of the $11/oz range, and the metal has not returned to that level since. However, the second price rally of 33% from May to June was promptly following by a 28% crash from June to July 2009. Digging back further than 2006 reveals more examples of silver's notorious volatility, especially 2001 and 2004. As for gold, during the above-mentioned 2006 silver rally-top-crash, gold rallied as well, though less aggressively, and also erased it's gains the following month. Likewise, during the fall 2008 credit crisis peak, gold dropped over 25% and traded briefly below $700/oz after having that summer broken $1048/oz. So, all that said, I know that I am not only one who is just a little concerned with this current move. (More on this later.) We've looked at the charts for gold and silver over the last six weeks, so the next obvious question would, of course, be "What about the USDX?" Well, c'mon--what do you think? Here's the US Dollar Index, from StockCharts:
Ouch. That was predictable, unfortunately. While gold-bugs and silver eagles are jazzed at the rallies in precious metals (I know I am, as well as very apprehensive), we also have to look especially closely at that last chart, the USDX. You might have some investments in commodities, gold, and silver, and are therefore pleased with these moves. You might have already figured out that the US economy is in an utter unsustainable path towards disaster, and you've made yourself mentally prepared to shovel dollar bills into the fireplace in Wiemar America, if need be. You might be totally psychologically ready for whatever comes. But are your financially prepared for it? No one is: a dollar collapse would be completely unprecedented and there is no telling what would happen: violence, wars, totalitarianism, or "benevolent" property seizure, illegalization of gold and silver, account confiscation, bank holidays, devaluations. No one knows. For the record, I don't know if any of these things will ever happen, and I hope they do not, but I personally think that the dollar is not built to last and never was. And that dollar connects us all. Look at that USDX chart again: I'm guessing that you are not paid in commodities, and if you are, please don't tell the IRS. You are paid in dollars, and your checking account is in dollars, and your savings account is in dollars, and your retirement plans in dollar-denominated assets (equities or bonds), and your house which you might one day like to sell is in dollars. The only good thing about it is that your debt is in dollars, too. USDX is a measure of value against six other major currencies, and as the dollar falls against these other currencies, import prices increase. Correspondingly, the relative price of US exports falls, which would perhaps be beneficial if the US actually exported anything! To the contrary--the US economy is, quite literally, based on consumer spending, and consumer spending, and consumer spending. You and I spending money is what makes our "economy" work, and is what dominates almost 65% of the national GDP. That in mind,USDX is down nearly 13% since the recent high in June of over 87. Over the last six weeks, USDX is down almost 8%. That means we are out 13% of our spending power in the last four months: are you thinking that all of the sudden, silver and gold continuing up doesn't seem so nice?

In September 22 article, Bob Chapman had this to say on the issue of the USDX: "The dollar, now at 81.32 on the USDX, will fall to 74, then to 71.18, and eventually to 40 to 45...". Since he wrote that, USDX has moved from 81.32 to 77.26 today. Mr Chapman cites two specific levels--74 and 71.18--because these are the two very important support levels: if USDX breaks these levels, then we could be sliding into the long term scenario that Mr Chapman thinks will take USDX "to 40 to 45." Others disagree greatly with him. Here are USDX data going back to 1986, and if you take a few minutes to view them, you'll see what has happened to the relative value of the dollar over, especially over the last year fews of the Fed's loose/cheap-money policy. Mr Chapman specifically cites the 71.18 level on USDX because it was the 14-day relative average of the USDX during the two weeks which bracketed the all time low in USDX, hit in March 2008.

So let's recollect March 2008, shall we? Pretty uneventful, really, expect for the collapse of Bear Stears! Of course, Bear didn't collapse because of the dollar; it collapsed because it was a reckless investment bank that attempted to play $13 TRILLION in games with $11 Billion in chips. Another relevant event which occurred in March 2008 was silver hitting its previous post-1980 high of over $21/oz. The events of the last week include silver eclipsing even that mark, and the metal now sits a 30-year high. Gold, of course, has hit all-time highs several days in a row, and it up week-over-week since the end of August.

It is a bitter pill: as my headline states, one is up and the other is down. Gold and silver strengthen because the dollar deteriorates. But that is the purpose of fiat money--to destroy wealth and annihilate savings and capital. The tables may be set to turn, however. I have no clue--I'd trust Bob Chapman's opinion over my own any day. However, silver and gold look overbought to me, and dollar looks oversold. This is not uniquely my observation, but some say, including myself, that it appears in the very charts I posted on this page. I could be completely wrong, of course, and totally misinterpreting the data.

Below the main price charts above, you'll see a second, smaller box. These are the MACD charts. MACD stands for "moving average convergence-divergence" data. Here they are again from, from silver, gold and USDX, respectively:

Look at the right-most trend. The MACD is a momentum indicator, and like all technicals, it doesn't matter if you believe if everyone else does--particularly when that "everyone else" includes computers in high-frequency trading (HFT) modules that are programmed to buy/sell when certain statistical or technical events occur. Commodities are less subject to HFT, but gold is not a commodity, and both gold and silver are covered by several ETF's and thus have significant exposure to HFT's. I have no idea how much further the MACD can move in gold, silver, or USDX, but in my very humble opinion, gold looks overbought, silver looks overbought, and USDX looks over sold. And that is NOT investment advice!

Here are someone who happens to agree, as well as someone who doesn't, and Dennis Gartman, who is a long term gold bug who thinks gold is not only currently overbought, but "hyper-overbought," and who says he just doesn't "get" silver at all. If anything, in more of my still humble opinion, a pull-back in silver would be great, as it would give me a chance to move in on a dip! I think it would only be a temporary move, because I think both silver, gold, and all "things" on the planet are set to increase in price as all currencies decrease due to central bank theivery, and I think gold and silver are the long term belt and suspenders. That is not investment advice either, but I'd certainly rather have silver than dollars--no contest. The dollars I do have I ought to convert to Arrowhead jugs full of pre-1982 pennies, as with copper at $3.77/lb, penny arbitrage is the perfect dollar hedge as far as I'm concerned.

And yeah, I'm that crazy: you can imagine me a bunker with Arrowhead jars of pennies all around. I'd rather have copper than paper any time.

Gold Stalls in $ and Soars in €

Something's up with gold and the euro. We know EUR is under major pressure right now, and has been since November. But just to demonstrate what's happening currently, consider this: gold closed Friday at $1126...in USD. In EUR, on the other hand, gold closed at €826--an all-time record high!

This is a very interesting paradox, especially for people like myself who look at gold as much closer to a currency than a commodity. Remember, the all-time high for gold in USD was back on December 03, 2009 at $1226. Today's close in USD terms at $1126, we're a flat -$100 (-8.1%) off the USD high for gold--and yet we have a new high for gold in EUR. That obviously reflects EUR weakness, but I think it reflects more than that.

When gold was at that USD high $1226 in December, it was trading at about €808, which was also at that time an "all-time high" for gold in EUR. So, gold hit highs in both USD and EUR at the same time in December, and now EUR has been hit again. Since the first "high" in EUR, gold gained 2.25% against EUR and lost 8.1% against USD before hitting the second, new all-time high today at €826. But if you look at the USD v EUR, you'll see that USD has moved from 0.66 on Decemeber 3rd to 0.74 today--a 12.2% change. In other words, while USD gained 12.2% against EUR, it only gained 8.1% against gold. Do you see where I'm going with this?

What seems rather bizarre to me about this week's USD-EUR-gold drama is that gold is "supposed to" drop when USD gains strength against other currencies--especially EUR--not record gains against both USD and EUR. I just say "supposed to" because people who deny that gold is a currency are always using it's sensitivity to USD-EUR as "proof" that the market only views gold in terms of other currencies, and thus it is strictly a commodity. Well, their "proof" just vanished, because now we have gold doing things independent of USD or EUR, and the market indeed treating it more like a currency. This is demonstrated by the fact that USD gained 50% more relative to EUR than it did relative to gold (12.2% v EUR; 8.1% v gold). I think this is important because it appears that gold, as money, is in a unique situation. It is currently at a high against EUR and about 8% below the high in USD. If USD strengthens more against EUR, this will only increase the price of gold in EUR, leading to more EUR highs. Conversely, if EUR strengthens against USD, it will only come with a drop in USDX and thus the value of USD, which will likewise lead to an increase in the price of gold in USD. The US Dollar Index v Gold is clear, and can be seen on when you compare charts of USDX v gold (all data from Feb 19 2010):

Here's USDX:

Here's Gold:

And here's my cut-and-paste blend of the two (red is USDX, grey is Gold):

These charts say, "USDX down, gold up." So again, if EUR weakens, it will result in newer, higher highs against gold. If USD weakens, it will drive down the USDX and weaken also against gold. It seems that EUR will be under a lot of pressure at least until this Greece mess gets straightened out, which, of course, has been pushed out another month. And speaking of Greece, they are certainly wishing they had some gold right now--well, actually, they are more than wishing, they are blaming the Germans for the Nazis for having stolen it decades ago. The plot gets thicker.

(Sidenote: this Dubai thing is not over, either. Not by a long shot: its appears right now that the offer from Dubai World to its creditors will be $.60 on the dollar, and no interest payments--a 40% haricut, and no payments! Needless to say, this is a developing story. Time and secret bankster meetings will tell what the Greek mess sorts out to, as well.)