There Are No Currency Wars

There are no “Currency Wars”.

There are no currency wars – just coordinated central bank manipulations.

Central Banks are in a coordinated relay race to debase with each central bank taking turns debasing their currencies.

“Currency Wars” is an often repeated urban meme.

Podcast Summary

0:00-5:00 Introduction

Retail Sales

5:00-9:18 the U.S economy is based on consumer spending and consumer spending is down in 2015. Discussion of the weather’s impact on consumer spending and economists’ forecasts. Despite the “robust” non farm payroll numbers, consumers are not “buoyant” and do not have the jobs or the income to sustain retail sales growth.

The only economic data that has been good the past few months is the non farm payroll number. Yet Wall Street fixates on that as if it, along with the rising stock market, are indicators of the health of the overall economy.

When will the mainstream media realize that the public doesn’t believe their rosy characterization of the economy?

A recent Bloomberg article seems to be indicating the start of a shift in reporting.

Will the Fed Remain Patient?

9:18-11:12 The upcoming Fed meeting and direction of short term interest rates is discussed. The Fed probably will do a .25% rate hike at some point for credibility sake. Interest rates, however, will not be boosted in any meaningful way because the U.S. economy is poor and the U.S. government can’t afford higher interest rates. Once it becomes clear to the Fed and the public that there is no economic recovery and the media can no longer push the “solid” economy narrative, the Fed will reverse course, lower rates an begin a new stimulus program in the form of “hoily accalmaudative mawnetree paulicy”.

There are no “Currency Wars”

11:12-13:55 Refutation of the common meme that the world is engaged in “currency wars”. Rather the world’s central banks (U.S. Federal Reserve, Bank of England, European Central Bank, Bank of Japan, Swiss National Bank are engaged in coordinated manipulation of interest rates, primarily to keep sovereign borrowing costs low and to provide support for their multi-national export companies. All central banks want lower rates.

Relay Race to Debase

The Bank of Japan instituted their latest round of stimulus just as the Fed ended QE3. The Fed Vice Chair Stanley Fischer urged the European Central Bank to institute quantitative easing which they did earlier this year. Other central banks play along like Denmark and Switzerland committed to keeping their currencies weak.

On March 12, 2015, Marc Faber made a similiar point on CNBC. Click here to listen.

Currency Wars ——> Trade Wars —–> World Wars

The oft cited meme above may have been true in the 1930’s but today the currency debasement is coordinated. The central banks of the United States, Japan, England, Denmark, Switzerland and the European Union are not at war. The current Russian U.S. battle arose out of geo political issues over Ukraine and Crimea not currency ones. Currency/oil wars between the two countries have ensued since.

China and Gold

Does the United States “let” China Accumulate Gold?

Jim Rickards the grand father and chief propagator of the “currency wars” meme, describes the U.S. as “letting” China accumulate gold. Besides being preposterous speculation that the US “lets” China accumulate gold, such coordination of the flow of gold between nations also runs counter his thesis of “currency wars”.

Chinese mining production

Is the United States “letting” China mine all that gold?

Central Banks Use Monetary Policy to Mask Structural Defects in their Economies

13:55-17:54 Central banks have dug themselves a hole so deep that stopping the digging wont help.

Discussion on the incessant chatter over the Fed and whether/when they might raise rates. Discussion of how the economic numbers are going in the opposite direction the way the Fed wants them yet they are still talking about raising rates. The Fed printed $4 trillion to create inflation and by their own numbers they have failed as the CPI was negative last month.

The Monthly Non Farm Payroll Number Sustains the Market

17:54-22:10 The non farm payroll number is the only good number of the month and that sustains the narrative that the economy is doing well. The other central banks are lowering their interest rates, all the economic data is flat or declining and the dollar is rising. Under these circumstances from the Fed’s perspective, it wouldn’t make sense to raise rates. Yet the robust economy narrative persists to help build or sustain confidence in the Fed’s ability to backstop the economy via boosting the stock market. Discussion of central bank involvement in the stock futures markets.

Who is Janet Yellen?

22:10-24:10 A recent survey shows that most Americans do not know who Federal Reserve President Janet Yellen is. The impact of such ignorance is discussed.

Zillow and other non Profitable Multi-Billion Dollar Companies

Revenue Growth vs Profits

24:10-35:35 discussion of Zillow and other companies that make no profit and their prospects. Revenue growth is the key to a high stock valuation. Revenue can often be bought at a loss. Discussion of equity value and stock value. Today losing money is not an impediment to a higher stock price.

Why Doesn’t the Fed Mandate Bank Lending?

35:35:37:02 discussion of alternative Fed stimulus plans.

Voting Yourself a Raise

37:02-39:20 how democracy devolves in to majority rule where 51% can vote to tax the 49%. Warren Buffett’s views on wealth inequality and his thank you letter to the U.S. government are discussed.

Financial Services

39:20-42:48 A good portion of the U.S. economy is “financial services” What financial services does the public get? Higher bank fees? Discussion of bank fees.

New Rule From the Consumer Protection Bureau Regarding Preapproval Mortgage Letters

42:48 Discussion of mortgage pre approval letters.

There Are No Currency Wars

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Further Reading:

@Smaulgld btw, did you ever analyze the “currency wars” in the 1930’s?

— BullionStar(@KoosJansen) March 21, 2015

ECB institutes QE at Prodding of the Fed

Swiss National Bank and the Euro Peg

Danish National Bank and the Euro Peg

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