YouTube – The Big Bang Theory – Rock, Paper, Scissors, Lizard, SpockUnderstanding global trade in the Floating Currency system is vital. The vital necessity of this is hyper-important to the US, above all others. The US is entirely and 100% at fault for creating this system which is now destroying us relentlessly. Just like banking gnomes invented the Derivatives Beast, in order to protect their illicit wealth gains, it ended up destroying these, instead. Because the entire planet is dependent upon the US consuming while not competing, no one is ready to stop this Floating Currency game. Least of all, the US itself. We are addicted to easy credit/easy import economic systems.
Aso, Obama Agree To Maintain Dollar As Key Currency
WASHINGTON (Nikkei)–Prime Minister Taro Aso agreed with U.S. President Barack Obama here Tuesday on the importance of maintaining the dollar as the primary global currency.
Japan Posts Record Trade Deficit In Jan
Japan will move heaven and earth to keep the dollar as the ‘key currency’. Anyone looking at economic data of the last century can see that the troika of the US, Germany and Japan have been the main motivator of global trade. Despite epic, destructive wars, two of them, in the case of Germany, both Germany and Japan always bob back to the top of global industrial powers.
Few people in America think very much about all this. Why does this happen? This question is verboten. American exceptionalism beliefs [We are #1!] prevent us from riddling out this bizarre business. Up until the Floating Currency regime, the US used to be #1 in all industrial and trade matters. Now, we are dropping rapidly out of that particular race. Japan and Germany trade places with who is #1 in trade profits and international industrial power [ie: how many factories they own in other countries].
A major tool in this game is to have a weak currency. The European Union enjoyed a strong euro for the last 6 years and this has devastated Germany’s industrial position. The Japanese thought is was immensely funny that the weak yen, weakened against the dollar, also became weak against the euro. They used this aggressively to pull ahead of Germany and sat directly behind the US economy as the world’s #2 economic power even while telling everyone, Japan was suffering from a terrible, long depression!
This faux depression was always on the verge of becoming a real one because Japan ceased consuming and the relentless drop in wages was locking over 50% of the population into perpetual, inescapable poverty. Part time workers are now beginning to outnumber full time workers! But the industrialists saw nothing but wall to wall profits so they kept the ZIRP-based faux depression business going. They could go to G7 meetings and with a straight face, announce that prices were dropping in Japan and therefore, they had to keep their ZIRP lending system going.
Japan cheated on world trade. There was no ‘trade’ going on. It was all one-way aggressive business. Now, for the last 50 years, the only way—and I do mean ONLY—way the US could balance trade is to throw the entire planet into a severe recession or even a depression. During the Japanese ‘depression’, the Japanese people didn’t buy much or any industrial output from non-Japanese companies. They did import Japanese goods made in Japanese-owned factories in South America and Asia. But not foreign-made goods from say, the US.
Since the US had zero hope of changing this dynamic [the Japanese kept us at bay by buying Boeing jets and even there, they insisted that a good hunk of the jets be made in Japan and then assembled in the US as a sop to US job worries!] the US is forced to balance trade with the only tool Libra has: destroy world trade.
Libra is a strange thing. It is a force of nature, it is the obvious outcome of all systems: they must reset at zero or in balance. All systems in nature that run in a lopsided manner are ‘reset’ to zero suddenly and brutally. This is why overpopulation in any ecosystem doesn’t gently slow down, it crashes and has to restart from nearly zero or worse, it dies totally and forever. This is why all regulators of all systems run by humans have to keep a sharp look-out for imbalances.
Let’s go back to the seven fatted cows and seven lean cows: humans have a very hard time, grasping the concept of overgrazing. In the US, ranchers still, to this day, demand the right to overgraze public lands. Farmers who raise animals on lands they own are much more aware of the need to not overgraze. When there are too many cows, they eat all the grass, their hooves chop up all the topsoil and then winds turn all of this into dust storms. So a wise farmer gages how many cows he can graze on his lands. This is true in all economic systems for all systems are ultimately based on the incredibly ancient farming methods of the last 10,000 years.
Japan Exports Plummet 45.7%, Deficit Widens to Record
Japan’s exportsplunged 45.7 percent in January, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics.
The shortfall widened to 952.6 billion yen ($9.9 billion), the most since comparable records started in 1980, the Finance Ministry said today in Tokyo. The January drop in exports eclipsed a record 35 percent decline set the previous month.
Gross domestic product shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, and economists predict the slump will drag into this quarter. Toyota Motor Corp., Sony Corp. and Hitachi Ltd. — all of which forecast losses — are firing thousands of workers, heightening the risk the recession will deepen.
“The drop in exports is unbelievably bad,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo. “The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted.”
The stupid Japanese export powers who run Japan, ran Japan into a long depression. Then, when Japanese export business took off like a rocket in the last 7 years and had the greatest expansion in their history, not one yen of these profits went to the Japanese workers and consumers. Instead, the exporters who run the Liberal Democratic Party of Japan simply crushed domestic spending as brutally as they dared.
This increased profits to the top 1% and is in the process of destroying Japan, itself, as a nation and as an ethnic population. In other words, while the Japanese workers had 7 years of starving cattle, the Japanese elite feasted on fatted trade cattle. Now, they have to go hungry, too! To preserve their own ill-gotten wealth via lopsided trade, the industrialists will use the government of Japan to impose utter starvation on the Japanese people. Firing everyone, closing factories and moving them to other Asian powers, the Japanese warlords will now get rid of the $9 billion trade deficit by ‘thinning the herd’.
This evil and contemptuous political/economic system is now waking up the average Japanese to their peril of perishing as the population crashes. I do hope they imitate the Chinese workers who are loud, strong-willed and easily angered. Now, on the other half of the equation, Germany:
The European Central Bank gave a thinly veiled warning to the German government on Friday not to violate the European Union’s “no bail-out” clause, which prevents members of the eurozone from supporting other members that are facing rising public debt.
Jürgen Stark, ECB executive board member, told Spiegel magazine in an interview released on Friday that the clause was an “important basis for the functioning of the monetary union”.
The warning follows reports that Germany was considering ways to help members of the eurozone that are facing fast-rising refinancing costs as investor fears rise about deteriorating public finances. Peer Steinbrück, finance minister, said this week that Germany would not remain inactive if the eurozone was in danger of breaking up.
Asked about the issue on Friday, Frank-Walter Steinmeier, foreign minister, said; “A process is now starting to consider to what extent support via the eurozone and the economically strong countries of the eurozone can happen.”
The “no bail-out” clause of the EU treaties prohibits countries from becoming “liable for” or assuming “the commitments” of other governments and is regarded by the ECB as an important weapon for ensuring fiscal discipline.
Imagine if Japan were in a monetary/political union with all of Asia! The Germans wanted political and economic stability so they joined France in forming the European Union and then, the euro currency system. This was quite unpopular in Germany, itself. The Germans were quite proud of learning lessons from the harsh past. They supported a strong currency.
But the temptations to sell to the US are great and in the past, Germany always gaged exactly how far to go in this matter. When the US began to throw tantrums, the Germans would renegotiate the value of the DM. This was done in the Bretton Woods II Accords [our surrender to Germany and Japan, post-WWII] and the Plaza Accords. Both German and Japanese exporters had to deal with the stresses of these sudden, arbitrary revaluations of their currencies with the dollar. One of the provisos of the Plaza Accords was, the US was not to do this again.
Instead, the US was supposed to balance trade via balancing the budget of the government and trading industries with the winners of the 20th century struggle for economic power over global trade [ahem, we did not win that 100 year struggle!]. The Japanese swiftly figured out, running a huge government deficit inside Japan with almost all the loans owed to the Japanese system, they could couple this with an immense FOREX reserve of dollars [and then, euros] to weaken the yen for good and thus, win trade advantages.
All of Europe together, held nearly the same amount of FOREX reserves [I actually sat down and added it all up] but had no central control over these reserves so they couldn’t be used to strengthen the US dollar, easily. So, while Japan and China happily grew their reserves and bought US government debt so one-way trade [minus Boeing jets] so they could grow their industrial power while destroying US industrial power, Germany found itself harnessed to the European system which was no protecting European export markets!
The recession which is turning into a depression began, like it did in Japan and then, the US, in the form of factory re-locations to ever-cheaper labor pools and the slow collapse in the real buying power of the working masses inside Europe. All of this was disguised by the strong euro which allowed workers in Europe to go on international shopping sprees, sex tours of poor Asian nations and so on. But the price was, Europe’s industrial base would vanish or end up controlled by either Japan or China.
For months the ECB held sternly to the high ground of orthodoxy as the US, Japanese, British, Canadian, Swiss and Swedish central banks slashed rates towards zero and embraced quantitative easing, but a confluence of fast-moving events is now forcing it to move.
The credit default swaps that measure bankruptcy risk on the debts of Ireland, Austria and a clutch of Latin Bloc states have vaulted to dangerous levels. In the case of Ireland, the slump is spilling on to the streets. Some 120,000 marched through Dublin over the weekend to protest austerity measures.
The slow fuse on Eastern Europe’s banking crisis has detonated, leaving Austrian, Belgian, Italian and other West European banks with $1.5 trillion (£1 trillion) in exposure.
It is happening just as industrial output collapses in the eurozone’s core states. Germany’s economy contracted at 8.4pc annualised in the fourth quarter. ECB president Jean-Claude Trichet said on Monday that “a process of negative feedback” has set in where the banks and the real economy are pulling each other down in a self-reinforcing spiral. Eurozone credit is contracting. Banks are rationing credit as deleveraging gathers pace.
Italy’s Mario Draghi is in the “activist-easing” camp. “The experience in the US in the 1930s and Japan in the 1990s suggests that it is necessary to fight, in the early phases of the crisis, the tendency for real interest rates to rise,” he said….
This amounts to a mutiny against the Bundesbank-dominated executive in Frankurt. It is no great surprise. They have to answer to their democracies. The plot is thickening.
Unlike Japanese workers who seem almost totally disconnected from reality, the European workers are more like Chinese workers: they are loud and they mean business when they get moving, en mass, to besiege their leaders. The hopes of the New World Order creeps is, there are no political leaders who can change one jot of the agenda no matter how enraged the masses are! When the masses march on helpless leaders, they get a government that is like in the US: the new leaders will refuse to listen to the masses just like the old leaders.
In Japan, when faced with no choices, the people there tend towards suicide. But in the US and Europe, they will riot and will kill leaders of all parties in what we call ‘revolutions’. History is clear: China, Europe and the US are very prone to revolutions. In revolutions, all the older leaders are killed or driven out. South America is the same, too. A long history of periodic revolutions is part of the history of these countries. And will continue to be a part of our history.
Europe, like America, wants the old status quo back. They also, like the US and Japan, want ZIRP interest rates. No one wants to reward simple savings. If one wishes to protect one’s money, one can play the economic lottery directly or one can save money via parking it somewhere safe which happens to be in a very unstable place: gold.
Gold’s utility used to be its immobility. It was safe because it retained purchasing power vis a vis a stable currency. But wars killed the golden goose and in order to pay for these wars, Britain and the US debased the currency which meant, they had to deny gold’s role as a stabilizer that prevented currency devaluations and government overspending as well as trade imbalances!
If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.
Austria’s finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria’s GDP.
“A failure rate of 10pc would lead to the collapse of the Austrian financial sector,” reported Der Standard in Vienna. Unfortunately, that is about to happen.
The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a “monetary Stalingrad” in the East.
Germany always played ‘big brother’ to Eastern Europe. Sometimes, Germany would go insane and become a murderous ‘big brother’. But in general, Germany prefers to keep all the countries on its eastern flank fat and happy, not a herd of starving cattle, mooing for fodder. Austria ought to worry us.
The Long Depression began with a run on banks in Vienna. The Austro-Hungarian empire was very similar to the barely-stable European Union. It was prone to banking collapses. Germany itches to clean up the messes to its vulnerable eastern frontier [Putin gave them yet another reminder of all this during the winter]. Unlike childish American commentators, German leaders know that a collapsing Russia is not a good thing at all if there is any signs of powerful leadership that is ruthless, at the helm.
Russia will not sit idle while Eastern Europe and former Soviet states collapse, this is something history is crystal clear about: Russia will fill the political void. The collapse of energy prices harmed Russia but only temporarily. Europe still needs to consume Russian energy products and even with a global depression, the price of oil has stopped dropping. Eventually, it will begin to rise again.
All things are relative. We don’t see a void for long, all empty spaces are filled by something or someone.
By Ambrose Evans-Pritchard
“This gold rally is driven by safe-haven fears and has a very different feel from the bull market we’ve had for the last eight years,” said John Reade, chief metals strategist at UBS. “Investors are seeing articles in the press saying governments should deliberately stoke inflation, and they are reacting to it.”
Gold jumped to multiple records on Tuesday, triggered by fears that East Europe’s banking crisis could set off debt defaults and lead to contagion within the eurozone. It touched €762 an ounce against the euro, £675 against sterling, and 47,783 against India’s rupee.
Jewellery demand – usually the mainstay of the industry – has almost entirely dried up and the price is now being driven by investors. They range from the billionaires stashing boxes of krugerrands under the floors of their Swiss chalets (as an emergency fund for total disorder) to the small savers buying the exchange traded funds (ETFs). SPDR Gold Trust has added 200 metric tonnes in the last six weeks. ETF Securities added 62,000 ounces last week alone.
In Mr. List’s book, Gold Wars: The Battle Against Sound Money As Seen from a Swiss Perspective: he mentions how South Africa and Russia should be happy to see gold be used as a source of savings, not jewelry. When gold is decorative, it is devalued. When it is used to balance trade or save value of currencies in decline, it becomes precious. The relentless rise in gold value when all other commodities, even other rare metals, were dropping, is a signal that gold still is the Queen of Currencies.
The long, long push to devalue gold and to deny Gold’s rightful spot on the Throne of Money, is collapsing. Even pushers who wanted to displace Gold with Paper are now giving up. This reminds me of the Japanese game, ‘Rock, paper and scissors.’ Paper wraps rock and rock breaks scissors but scissors cuts paper.
Paper is now being absolutely shredded as all paper currencies are flying in opposite directions, fast: to zero interest rates on savings, hyper inflation for the lesser currencies and absolute value to the main trade currencies. The rising value of paper money is due to restricting trade to the point of collapse via a collapse in the international lending system. This is the ‘scissors’ that is slicing up all bonds, banking certificates, etc.
The rock here is gold. It breaks the scissors. But can be controlled by paper only if paper isn’t being shredded.
Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.
“People can see that the only solution to the credit crisis is to devalue all fiat currencies,” said Peter Hambro, chairman of the Anglo-Russian mining group Peter Hambro Gold. “The job of central bankers is to allow this to happen in an orderly fashion through inflation. I’m afraid it is the only way to avoid disaster, but naturally investors are turning to gold as a form of wealth insurance.”
I agree with this latest Pritchard article. We can’t devalue all fiat currencies at the same time. Something has to give here and I would suggest, it is time for paper to give up and hand over things to rock at this point. For scissors is another name for the Goddess of Deflation.
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