Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that meetings of the International Monetary Fund over the weekend failed to resolve the tensions in global foreign exchange markets that have come to be known as the 'Currency Wars'. \
Markets are now expecting the US Federal Reserve to unleash a second round of quantitative easing from November 3 after very employment data over the weekend.
The US dollar continued to fall against some currencies. It fell to a 15 year low vs the Yen overnight, increasing the pressure on the Bank of Japan to ramp up its own programme of quantitative easing or money printing.
This 'beggar thy neighbour' race to the bottom in currency markets is putting huge pressure on currencies in developing nations and those that depend on commodity prices (including Brazil, India, Russia, Australia, South Africa and New Zealand), who are seeing their currencies rise.
Ukraine, Brazil and India and all indicated over the last week they will intervene to try to keep their currencies down in the face of mass money printing by America, Japan and China, which is refusing to let its currency rise vs the US dollar. Europe is also expected to join the race to the bottom, with growing noises of concern from the ECB about the rising euro.
Gold bounced back to US$1,350/oz as investors hunted for hard assets immune to the competititive devaluations of Fiat (paper money) currencies.
Meanwhile, China appeared to tighten monetary policy overnight to try to control the inflationary pressures coarsing through its economy as it builds up export surpluses and foreign reserve surpluses.
China temporarily raised reserve requirements for 6 banks by 50 basis points.
The pressure on China to let its currency rise as an automatic stabiliser to reduce these imbalances. China is set to announce a US$17.8 billion trade surplus for September. China's surplus for the year is expected to top US$200 billion, boosting its foreign reserves to US$2.5 trillion.
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12 Comments
An absolute Pearla here from AEP...>
"Devaluation was not the mistake of the 1930s: it was the cure, albeit a bad one. The Gold Standard broke down during the inter-war years because the US and France had structurally undervalued exchange rates (like China/Asia today) and ceased recycling their trade surpluses (like China/Asia today). This caused a deflationary downward spiral for everybody.
Escaping from such a deformed system was a path to recovery. The parallel with modern globalization – though not exact – is obvious."
Excellent link mouse.........and yet at the end of it the Elephant remains in the room making trunk calls while eavesdroppers pretend their not listening.
Re. the currency wars, I was thinking that if I was China I would agree to allow the currency to appreciate on the provisio that:
a. The US, Europe and Japan commit to not debasing their currencies vis QE or other forms of money printing;
b. The US should relinguish supervision of its fiscal budget to the IMF.
I doubt the US would agree with this, given their political pressures, however it may save China from being targeted as being the "bad guy" and expose the US.
The whole point of it GG is for China to be the bad guy.......this is not a situation looking for a reasonable resolution.......it is a propaganda campaign looking to an end game.
One would expect that the Chinese govt would know how to play the game. It would be so disappointing if they're not equally matched.
Having just had a read of this... http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10679909 I have to conclude the govt is desperate to pork the property bubble based on manipulating demand. National are evolving into Labour!...how funny.
Phil Heatley is trying out Helen's skirts. Which colour do you like Phil?....yes they do hang down a tad but Helen had to hide the legs mate....we don't mind seeing your hairy rubbish.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10679838........must rush to the bog to throw up.
Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.
Here comes the implosion:...... http://www.theage.com.au/business/foreclosures-the-real-us-time-bomb-20101011-16g4e.html.......imagine that....anyone for some CDO paper?
Slicing the pork....slicing the pork....how does that tune go?
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10680029
"The Government will sink an additional $55 million over the next two years to meet demand for places at universities just three weeks after Tertiary Education Minister Steven Joyce ruled out more cash...................(WHY?)
Mr Joyce said Cabinet this week agreed to the extra $55 million to create 1580 more undergraduate places next year and 1315 more in 2012.
He said the increase was good news for students and their families as well as the wider economy, "as the very significant increase we expect in the number of university graduates from 2013 will help create a strong platform to support future economic growth".
Letter from Jewleya in aus:
Dear Mr Joyce, can't tell you how pleased we are to see the NZ taxpayers are putting more into training future Australian workers. Jewleya
ps: let me know how many extra votes it brought National will you?
Do we really have that much money? Aren't we already borrowing $250 million a week?
With the currency wars come the trade wars, which consequently lead to political wars - a dangers scenario.
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