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Current Currency Wars

22 Feb

World Reserve Currency Teeter-Totter-- if they go up, we go down

World Reserve Currency Teeter-Totter–
if they go up (inflate), we go down (deflate)

In “Currency Battle Is Tethered to Obama Trade Agenda,” The New York Times recently offered some bases for insight and conjecture concerning currency:

 

 

“A number of countries — China most prominent among them — have long acted to hold down the value of their currencies against the dollar, helping their industries by keeping exports to American consumers cheaper and making goods from the United States more expensive.”

 

Since the fiat dollar is still the World Reserve Currency, there’s a teeter-totter relationship between US dollars and the rest of the world’s major fiat currencies.  When foreign countries hold their currencies down in relation to the dollar, they hold the dollar up. That is, by inflating foreign currencies they make the dollar more valuable and thereby contribute to dollar deflation.

Deflation is a cause, or at least a characteristic, of economic depression.  Thus, when foreign countries inflate their currencies to make them less valuable, they indirectly deflate the US dollar, make it more valuable, and push the US towards recession and/or depression.

More importantly, it seems likely that, being the World Reserve Currency, the fiat dollar occupies a place in opposition to all other foreign fiat currencies.  When their end of the teeter-totter goes down in value (inflation), the US end of the teeter-totter must go up.  Given that the foreign countries inevitably want inflation make their products more competitive in international trade, the World Reserve Currency is destined for destruction by deflation.

Get that?  To assume the role of World Reserve Currency is to voluntarily commit a kind of financial suicide.

The competition between nations to inflate their currencies, make them less valuable, and then gain jobs by raising imports among other nations is the essence of the “currency wars” that animate today’s international monetary system.

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“Now, a growing bipartisan majority in Congress is coalescing around a demand that could derail President Obama’s ambitious trade agenda before it really gets moving: include a robust attack on international currency manipulation or no deal.

“If members of Congress are to be believed, unless the president’s trade negotiator includes strict, enforceable prohibitions on policies of foreign countries to intentionally hold down the value of currencies, any completed trade accord will die on Capitol Hill. But, administration officials say, demanding the inclusion of such prohibitions would kill the trade deals before they were completed.

You cannot be pro trade and pro this kind of currency mechanism,” warned Tony Fratto, a former official in the George W. Bush administration who is working against the congressional currency push. “They are completely incompatible. It will in fact kill a deal.”

 

In other words, global free trade depends on currency manipulation.  Like love and marriage, you can’t have one without the other (or so they say).

More, foreign countries will allegedly not agree to enter into the proposed global free trade agreements, unless they can suppress the price of their currencies—and, unintentionally or otherwise, push the US into deflation, recession or depression.

Conversely, US government officers and officials can’t support global free trade policies unless they knowingly help to push the US economy deeper into recession and depression.  If a Trans-Pacific Trade Treaty is to be enacted, our own government must agree to further reduce Americans’ standard of living in order to benefit of whatever foreign nations or multi-national corporations will profit from global free trade.

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“None of the officials representing the 12 nations, including the United States, want to see such prohibitions in the Trans-Pacific Partnership . . . . Treasury Secretary Jacob J. Lew said, ‘We remain concerned that an enforceable provision on currency could have a negative impact on our ability to protect American workers and firms and set back our international efforts.’”

Secretary Lew lies.

The proposed Transpacific Trade Treaty will no more “protect American workers and firms” than did our government’s previous efforts to support Global Free Trade by cutting tariffs and shipping US industries and jobs to China.  Our own government’s Executive Branch is actively working to diminish our economy, reduce you and your children to poverty and destroy the American Dream.

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“There is little wonder why lawmakers from both parties say the United States has endured a large, chronic trade deficit, intensified by China and some other trading partners that have deliberately kept their currencies cheap relative to the dollar. The Peterson Institute estimates that currency interventions have cost the United States as many as five million jobs over the last decade.

“The Obama administration fears that prohibitions on currency intervention [manipulation] could boomerang on Washington, allowing trading partners to challenge policies of the independent Federal Reserve Board and possibly even basic fiscal policies, like stimulus spending in times of recession.”

 

In other words, our government is telling foreign countries, “don’t do as we do, do as we say.”  I.e., even if the US passes laws to prevent foreign countries from manipulating their currencies, those foreign countries shouldn’t insist that the US also stop manipulating its own currency.

After all, where would the US be if it couldn’t manipulate the value of the fiat dollar, the prices of gold and silver, and even the stock market indices?

What we’re seeing here is a conflict between the US government—which has manipulated currency prices for most of seventy years—being challenged by other countries who also want to play the “manipulation game”.

We’re seeing an inevitable consequence of using intrinsically-worthless, fiat currencies.  Because the values of fiat currencies can be anything governments say they are, a fundamental basis for international trade competition is not to produce better products at lower prices, but instead, merely adjust currency values to allow the sale of products at artificially-lowered prices.

More, currency manipulation may even be required to sustain the value of the one “World Reserve Currency” (the fiat dollar) in its teeter-totter relationship to the multitude of foreign currencies. The foreign currencies inevitable push to devalue and inflate would necessarily push the fiat dollar into deflation—unless, the Federal Reserve was somehow able to cause persistent inflation (say, 2% per year?) in the fiat dollar.

In other words, once the US government opted to ride the “World Reserve Currency” tiger, it may have had no choice but to manipulate and artificially inflate the dollar in order to protect the dollar against the collective weight of foreign currency manipulation/inflation.

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“Corporate America is badly split. Some industries, including automobiles, steel and textiles, are standing with Congress. Ford Motor has threatened to oppose the Trans-Pacific Partnership if it lacks a currency chapter. Other companies, better positioned to take advantage of growing globalization, are perfectly happy to buy components from Asia that are artificially cheapened by currency manipulation.”

 

Here, the article admits that foreign countries make their products seem cheaper by currency manipulation.  In fact, foreign countries do us a great service by inflating and devaluing their currencies.  American consumers get to purchase foreign commodities, goods and services at prices that are so low that they might not even reach their actual costs of production.

But while Americans exploit their ability to buy products from China at fire-sale prices, we’re also losing jobs and industries as American workers and corporations are left idle.

On one hand, China is transferring its wealth (in the form of irrationally cheap products) to Americans.

On the other hand, Americans are transferring industries and jobs to China and leaving large number of American unemployed.

Thanks to manipulable fiat currencies, the US robs China of underpriced products and China robs the US of some of its industries and jobs.

The first question is:  Who’s getting over who?  By selling its products for fire-sale prices, is China being robbed the most?  Or is the US being robbed more by giving away its industries and jobs?  What’s more valuable—things or jobs?

The second question is:  Are we really well-served by a fiat monetary system that predisposes all of us to become thieve, hustlers and con-artists?  What’s more valuable—things or morals?

Are we really better off with a fiat currency that’s so inherently fraudulent that it encourages us to behave dishonestly and strips us of our claim to be moral men and women?

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“The [Obama] administration has a crucial ally in Representative Paul D. Ryan of Wisconsin, the Republican chairman of the House Ways and Means Committee. The trade promotion authority bill he plans to push through his committee by March will include new reporting, monitoring and transparency rules to spotlight currency manipulation, but it will avoid retaliatory enforcement rules that he fears could prompt a trade war.

Such a result could jeopardize our status as the world’s leading currency,” said Brendan Buck, the committee’s spokesman.”

 

Translation:  The proposed bill will expose currency manipulation—but it won’t stop it.  Why?  Because the fiat dollar’s status as “world’s leading currency” depends on currency manipulation.

Implication:  Without currency manipulation, the dollar would fall.  A, perhaps the, primary force supporting the fiat dollar’s perceived value is government’s ability to manipulate that value on the fiat currency “teeter-totter”.

How much confidence should Americans (or the world) have in a fiat currency whose perceived value depends on “currency manipulation”—especially if the term “currency manipulation” is code for “fraud”?

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“It is difficult at times to distinguish between currency manipulation and market forces that can push currency values in directions that work against the United States. The global currency market is naturally biased toward a strong dollar, . . ..”

First implication?  The “global currency market” is naturally biased towards pushing the US dollar into deflation and the US economy into depression.

Second implication?  We should rethink our willingness to allow the dollar to be World Reserve Currency, since that status will create the US vs the World “teeter-totter” which will inevitably deflate the dollar and collapse the US economy.  I.e., so long as most of the other nations of the world devalue/inflate their own currencies in relation to the fiat dollar, the teeter-totter effect on the “global currency market” will push the fiat dollar down into deflation.  That deflation will ultimately cripple or collapse the US economy.

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“Last week US lawmakers from both parties introduced legislation that would allow companies in the United States to petition for relief from foreign competitors benefiting from currency manipulation, setting off a mandatory Commerce Department investigation. That investigation could lead Washington to impose duties on imports that benefit from depressed currencies.

“Legislation would also allow the US government to counter manipulation with manipulation: If China spent $1 billion to buy United States dollars to drive up their value, the United States could buy the same amount of Chinese currency to negate the move.”

 

Our government is practically famous for manipulating the prices of gold and silver, crude oil, rates of inflation, and stock indices like the Dow.  When the prices of commodities and equities are manipulated, it’s necessarily evidence that the value/purchasing-power of the fiat dollar is also manipulated.  Two sides of the same coin.  You can’t manipulate the prices of things without also manipulating the value of your currency.

Thus, it seems ironic and perhaps hilarious that the US government—the world’s #1 currency manipulator since the end of WWII when the dollar became the World Reserve Currency—is enacting laws to not only punish other countries for currency manipulation but also to legalize US currency manipulation that’s been ongoing for the past seventy years.

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“‘With more U.S. jobs at stake every year, we must stand up to protect Americans from unfair trade practices by countries who fight dirty via currency manipulation,’ Senator Richard M. Burr, Republican of North Carolina, said at the bills’ unveiling.”

Senator Burr is such a kidder.  It is to laugh.  Ha.  Ha.

Does anyone in Congress (who’ve voted to cut tariffs, encourage global free trade, ship American industries and jobs to China, welcome an invasion by millions of job-seeking illegal aliens and sustain the dollar’s status as World Reserve Currency) really give a damn about “protecting Americans from unfair trade practice”?

Whatever “unfair trade practices” Americans may suffer, most of that unfairness has been imposed by our own government.  It’s not the foreign countries that we should fear.  It’s the treasonous whores in the cathouse on the Potomac.

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“‘Would the Federal Reserve’s program of quantitative easing— basically printing money to keep interest rates low— be an actionable offense under a strict currency regime?’ asked Bruce Josten, a senior lobbyist at the U.S. Chamber of Commerce. What about large government spending programs financed by international borrowing?”

 

Exactly.  How can our government pass laws to restrict currency manipulation by foreign countries that don’t also restrict currency manipulation by the US government?

But, perhaps more importantly, why would the US government be so obviously hypocritical in its attempt to stop foreign currency manipulation at this time?  Given our political history, aren’t prohibitions on foreign currency manipulation something like passing laws to prevent foreign countries from invading Iraq?  Haven’t we done that (invaded Iraq)?  Twice?  Aren’t we still doing that to some degree?  How can we demand that others not to do what we’ve done and continue to do?

So, what’s changed in geopolitics to motivate our government to play the hypocrite and complain about currency manipulation?

Have other nations simply become as adept at currency manipulation as we’ve been for the past seventy years?

Has the weight of foreign currency manipulation (causing inflation in foreign currencies) become so oppressive that it’s overcome the former powers of the Federal Reserve?  Has global currency manipulation grown to a point where foreign countries can manipulate (inflate) their own currencies in such a way as to cause deflation of the fiat dollar and possible economic depression in the US?  Is the Federal Reserve no longer strong enough to prevent deflation of the US dollar?

Doesn’t our government understand that currency manipulation is an inherent and inevitable attribute of fiat currencies?  I.e., because fiat currencies have no intrinsic value, governments can arbitrarily set those values in ways that are self-serving and even irrational.  Is the temptation gain short-term, political gains by means of currency manipulation too great to be resisted?

Is it even possible to stop currency manipulation without first abandoning fiat currencies and returning to a money that has a fixed (unmanipulable) weight and mass—like gold?

If so, is it possible that the recent push for currency manipulation prohibitions may constitute a first step towards ending fiat currencies?

Has currency manipulation been necessary for the past seventy years as a way to prevent the deflation that would otherwise follow and destroy any currency that assumed the unique role as World Reserve Currency?

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“‘Treasury needs to figure out what kind of flexibility it needs to manage the economy,’ said Tom Linebarger, chairman and chief executive of Cummins, the diesel engine giant. . . .”

Another comedian.

The central planners in Washington DC have already done such a magnificent job of “managing our economy” that many of our jobs and industries have fled to 3rd world nations, our national debt is overwhelming and suicidal, the middle class is disappearing, illegal aliens are encouraged to invade and depress the wage scale, the American Dream is dead or dying, and we’re teetering on the edge of a national economic catastrophe.

Yes, indeed.  Given government’s history of successful central planning, what this country really needs is more power to the communists in Washington DC who advocate “central planning” for our economy.

Power to the Planners—Boom, boom!  Power to the Planners—Boom, boom . . .!

Right?

Or maybe not.

Is more central planning what we really need?  More government control, spying and manipulation?

In fact, don’t we really need a government that recognizes that the biggest threat to American prosperity and the US economy is the US government, itself?  Government’s persistent attempts to “manage” the US and global economies have nearly destroyed this nation.  And now they want more “flexibility”—more power—to subject this country to further “management”.

We don’t need “management”.  We don’t need central planning.  At least not to the extent we currently endure.

We don’t need Globalism and the New World Order.  We don’t need to supply the World Reserve Currency.

We need freedom to manage our own lives, businesses and personal affairs.

Of course, some people are afraid of freedom.  Some people fear that average Americans, left to their own greedy and short-sighted ambitions, can’t be trusted with the responsibility of managing their own affairs.

They might be right.

But even if that were true, why not give freedom a go?  There’s no way that the American people, free to manage their own affairs, could inflict more harm upon this nation than has already been achieved by the central planners in Washington DC.

Up with freedom?  Down with central planning?

Why not?

 

 

 

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8 responses to “Current Currency Wars

  1. Henry

    February 22, 2015 at 3:12 PM

    That’s funny. I was under the impression that the party responsible for controlling (manipulating) the dollar’s value is the privately-owned Federal Reserve – which issues the U.S. dollar (their U.S. dollar) into circulation by loaning it, at interest, to the government and everyone else.

    But Al, you seem to be saying the U.S. government also plays a role in manipulating the value of the dollar. That’s news to me.

    How does the government do this? That is, what means does the U.S. government have at its disposal to manipulate the privately-owned Federal Reserve’s privately-owned U.S. dollar?

     
  2. Adask

    February 22, 2015 at 4:20 PM

    When I refer to “government,” I refer–at least in part to the definition implied by Baron Rothschild when he said (roughly), “I don’t care who makes the laws so long as I control the money.”

    You think my article is funny.

    I think it’s funny that you’d suppose that the actual “government” (although not necessarily the “constitutional government”) does not include the Federal Reserve/currency-maker.

     
  3. Henry

    February 22, 2015 at 5:03 PM

    Any discussion that includes a privately owned, and mostly foreign controlled, corporation as part of the “government”, despite the fact that most people will be mislead or confused by such an unconventional use of the term “government”, is funny.

    But hey, it’s a funny world we live in, where words are put to all sorts of funny purposes.

     
  4. 30nancy

    February 22, 2015 at 6:01 PM

    I WISH THERE WERE A PRIMER THAT WOULD IN VERY SIMPLE TERMS EXPLAIN WHAT ALL THIS MEANS . I DON’T UNDERSTAND ANY OF IT

     
  5. Roger

    February 22, 2015 at 6:07 PM

    Henry,

    Why do you insist on applying the American people’s de jure definition of “government” to Al’s articles, when Al clearly prefers the Money Power’s comedic definition as used by Baron Rothschild?

    The federal courts, on the other hand, have chosen to stay out of the comedy business, at least on this point.

    “Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purposes of the FTCA, but are independent, privately owned and locally controlled corporations.” – Lewis v. United States, 9th Circuit, 1982

    On the other hand, maybe when Al includes the Federal Reserve as part of the “government”, this is shorthand for “invisible government” (see below). If so, that’s great, though perhaps Al should notify readers that this abbreviation is being used, to avoid misinterpretation.

    “Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people.” – Theodore Roosevelt, 1912

    “This act establishes the most gigantic trust on earth. When the President signs this act the invisible government by the money power, proven to exist by the Money Trust Investigation, will be legalized.” – Congressman Charles A. Lindbergh Sr., concerning the Federal Reserve Act, 1913

    “The real menace of our Republic is the invisible government, which like a giant octopus sprawls its slimy legs over our cities, states and nation. To depart from mere generalizations, let me say that at the head of this octopus are the Rockefeller-Standard Oil interests and a small group of powerful banking houses generally referred to as the international bankers. The little coterie of powerful international bankers virtually run the United States government for their own selfish purposes.” – John F. Hylan, Mayor of New York City, 1922

     
  6. Henry

    February 22, 2015 at 9:57 PM

    You got a point there, Roger.

    Perhaps we should be less uptight and simply legitimize the Federal Reserve by referring to it as part of the “government”. For example, Al Capone could clearly be considered part of the “government” of Chicago in the 1920s, right?

    Never mind the false impression such idiosyncratic use of language might cause in the minds of ignoramuses who haven’t heard that the Fed is a privately owned corporation.

    What are we, fanatics for the precise use of language or something? No one is paying us to teach economics or, much less, history, are they?

    So maybe we should take it easy, slacken off considerably, and let the dummies do their own background study before they try to derive anything resembling the truth from blog articles about currency.

     

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