THE GLOBAL CURRENCY WAR
Jon Christian Ryter
October 10, 2010
The Finance Ministers of 187 nations began meeting in Washington, DC on Thursday, Oct. 7, 2010 to discuss the growing concerns that the world is now in the grip of an "international currency war" initiated by China. According to the liberal British newspaper, The Guardian, China's economic policies started the "war" by manipulating its own currency to an unrealistic low. In a media interview at the end of September, Brazil's Finance Minister, Guido Mantega coined the phrase, "international currency war," after the central banks in Japan, South Korea, Switzerland and Taiwan reduced the value of their currencies to make the commodities manufactured in their countries more attractive to foreign buyers. Brazil is one of those nation's impacted by China's currency policies. It's currency is now overvalued, placing Brazil at a disadvantage in the world of global trade.
On Mon., Oct. 4 the Bank of Japan reinstated its zero interest rate policy and pledged to buy ¥5 trillion ($60 billion) of assets. Brazil responded by doubling a Brazilian tax on foreign investors (currency hedge funds like George Soros' Soros Fund Management and Quantum Fund which Soros used to nearly collapse the Bank of England) while cashing in on the declining value of the Euro, earning Soros and an undisclosed group of hedge fund operators in New York hundreds of billions of dollars betting against the Euro).
Soros, like Barack Obama and recently-resigned Obama Chief-of-Staff Rahm Emanuel never lets a good crisis go to waste. It is important to note that currency manipulation—particularly by the Soros-led hedge funds—was one of the triggers that caused what we now know as the global financial crisis of 2008-09. In the pre-global economy days, the shock-waves of local or host-market currency crises were regional rather than global. As banking became more globalized, so too were the consequences of financial shocks waves which now have profound effects across the globe. The Soros run on the Euro actually triggered a decomposition of private capital flows from Europe into the emerging markets, threatening billions of dollars of debt invested by Europeans and Corporate America in the emerging economies in their frantic search for those elusive potential consumers of the 21st century from what is now a global pool of human capital created by 37 years of mistaken social progressive abortion policy. (For every "action" there's a reaction—and for every human folly there is a cost. The loss the Christian industrialized nations are paying for nearly four decades of abortion rights is the loss of our national identities and our national sense of well-being. Welcome to Utopia.)
The catastrophic financial crisis blamed on President George W. Bush was real. It just wasn't real here. It began in 2002 with a slowdown of capital direct investment by US investors in the emerging nations as more US investors, feeling a renewed sense of hope and patriotism about America, invested at home. According to the International Monetary Fund's April, 2009 World Economic Outlook Report, the decomposition of private capital flows fueled the fire that created the financial crisis. International capital flow into the emerging economies dropped dramatically between 2007 and 2008—to the tune of about $530 billion, with most of the decline coming from Asia and Europe.
The subprime mortgage collapse in the United States—triggered specifically by hedge fund short sellers (who sold the bottom out of the mortgage industry because they were allowed, by the repeal of the 1934 Uptick Rule, to do so) and the Soros raid on the Euro, were largely responsible for the sudden illiquidity of banks in the industrial world. The illiquidity shock wave reverberated around the world. Central bankers feared a monetary collapse was inevitable if funds were not poured—not into the US and European economies but—into the economies of the emerging nations where financial illiquidity threatened to shatter the global banking infrastructure and cause a domino-collapse of the central banks of the world.
Both the United States and England raced to enact financial crisis bailouts. Both the elected political leaders of the United States and England were lied to by the central bankers who planned, before one piece of legislation was even proposed, to hijack the bailout funds that American and British taxpayers were told would be used to buoy their local economies, to bolster the second and third world economies that actually threatened to collapse the world's monetary system—literally bankrupting the United States and Europe as it salvaged the economies of the emerging nations where 70% of the world's human capital resides. That human capital, which has nothing and needs everything, is the market upon which the princes of industry and barons of banking and business are pinning their hopes of a profitable 21st century—at the expense of the rest of us. (Can you say, "Thank you, Barack, Nancy and Harry"? ObamaChange, as America is quickly learning, has nothing to do with taking the "surplus" from the rich in the United States and giving that "surplus" to the poor in America. Rather, it is the redistribution of the national wealth of the United States to the third world—tomorrow's consumers of the invisible ultra rich whose names do not appear on the Forbes or Fortune lists of the world's wealthiest people.)
About a week or so before the world's Finance Ministers came to Washington on October 7, 2010, the Institute of International Finance which represents some of the largest banks in the world, urged the International Monetary Fund to take unilateral action after the Bank of Japan moved to lower its interest rates to 0.1% specifically to weaken the yen to in order to better compete with China's yuan. Social progressives, forgetting the lessons of German hyperinflation in the late 1920s and early 1930s, have suggested to the Obama Administration that they have one weapon they can use against China—the printing press. Simply print enough money to pay off America's debt to China with worthless money if China does not revalue the yuan.
Better yet is the measure enacted by a 348-79 vote in the House of Representatives on September 29 (just before the House recessed) that would allow the United States to impose trade sanctions against any nation that manipulates their currency to gain trade advantages. China's devaluation, and that of Japan, makes products manufactured in those two countries much cheaper in the United States and, conversely, makes US products searching for a customer in Japan or China, more expensive. The measure was sent to the Senate just before adjournment. The bill's fate is unknown since its unclear whether the Senate will enact the legislation in the lame duck session after the Nov. 2 elections. Democrats are telling their constituents that the sanctions bill, HR 2194 which amends the Tariff Act of 1930 will return millions of jobs to the United States. Republicans realistically know that the sanctions bill, if enacted and signed into law, will add about 10% onto the cost of most Chinese products sold in US stores and will not impact job growth. On the heels of the House passing the measure, China said the legislation contravenes World Trade Organization rules. Both George W. Bush and Barack Obama have refused to recognize China as a currency manipulator out of fear of retaliation from the country that bought most of America's debt until Obama's rush to destroy the US dollar.
The World Bank entered the money fray on Oct. 7, warning the G-20 nations against launching a global currency war with World Bank president Robert B. Zoellick vying for more international cooperation to stem what looks like a currency war as the Asian rim nations demand greater voting power on currency issues. "Today," Zoellick said, "we face currency tensions. Tensions can lead to trouble if not properly managed...If ever there was a time we should shouldn't turn our backs on international cooperation, it's now. History shows there is no future in 'beggar thy neighbor' policies." Zoellick alluded the international trade wars that broke out during the Great Depression and worsened the economic conditions throughout the industrialized world.
The international currency war began with China devaluing the renminbi (commonly referred to as the yuan) by about 40%, creating the biggest trade distortion in the global economy: America's trade deficit with China. Many currency experts believe that the dispute between the renminbi and the US dollar has such far-reaching consequences that it will impact the currencies of every industrialized nation in the world. That's why the debate at the 2011 G-20 will be focused on the need to engineer a currency accord like the Plaza Accord at the end of the Carter Years in 1980 where a basket of currencies was going to replace the dollar as the world's "currency of last resort," which led to a global devaluation of the US dollar.
French president Nicholas Sarkozy, who will host the 2011 G-20, has already suggested that the United States, the European Union and other unnamed nations should work with China to find a currency accord before the G-20 Conference next year. An attempt to lay out the framework for such an accord, proffered to China this week, was a nonstarter. The one-worlders want to introduce a new currency, issued by the World Bank to ultimately replace all 187 national currencies. China is slightly less ambitious. They want the renminbi (the yuan) to replace the US dollar as the world's reserve currency.
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China simply is not interested in negotiating the issue. Zoellick noted that the time has come for resolving trade differences amicably. "There should be a common interest in trying to figure out how to manage this," he said. "Maybe the time has come. Sometimes when you have a moment like this, it's important to try to steer it in constructive direction." Zoellick noted that China has benefited greatly from its undervalued currency while other nations have suffered from it.to leave behind.