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yes and it took communists to start the war. they don't believe in free exchanges so why should they accept them. why is anyone surprised? its what communists believe.

The devaluation of the pound presumably will have a reduced impact in term of the 'magic' growth bullet through exports. The pressure will be on to restore any competitive advantage gained by the recent devaluation. Just when do we declare currency war has broken out. For an economy heavily dependent on imports at least in the short to medium term keeping up with the devaluating Joneses means giving another twist to inflation.

Well done Paul it appears your scenario was relevant

I avoided being a gold bug at 700 bucks an ounce and have been trying to convince myself that 1300 bucks an ounce is another bubble yet to go bust... but I can see a plunging dollar sending gold soaring.

Perhaps the gold bugs were right after all.

The Yanks will have to introduce trade tariffs otherwise the buck will plunge and they will be forced to raise interest rates rapidly to protect the Dollar.

Tariffs and a trade war, something we have blogged much about on here, is now inevitable. Or will we see Helicopter Ben do a massive monetary u-turn and raise the Fed rate? I assume the latter, whilst it still may be forced on him, would be politically and professionally suicide... so war it is.

We, of course, will dutifully follow along.

Its a race for the bottom now, remember every finance minister knows that those who devalue first recover first, but for every winner there is a loser...that is the nature of the game. Who is going to be left high and dry when the music stops? Of course as your post this morning alluded to, faster deficit reduction in the UK gives Merv the excuse he needs to start the money presses again, as taking all that money out of the economy will leave a hole only fillable with monetary stimulus. Conveniently devaluing the pound at the same time. But if we're all going to be doing it then just who exactly are the currency manipulators? China, Japan, the USA...or us?
And wouldn't the average Brit have something to say about the knock-on effect for inflation if QE2 is needed, that seems like a fair point to debate when thinking about faster or slower deficit reduction.

I would imagine the UK would be double-hit in such a war - I doubt we would benefit from cheaper prices of imported goods, oil, other commodities, etc. This is, after all, rip-off island populated by those nice but dim mugs.

On the other hand, those drivers of British economic growth - whisky and cheese - will suddenly become expensive to all those in far-flung lands. Even our biscuits might no longer be so enjoyable to taste in lands where no man ever dreamed a rich tea or custard cream would be dunked.

There is, after all, only so far that any currency can be de-valued before it becomes worthless. At that point, but hopefully before for now being punished British and US savers, central banks would be forced to step in and raise interest rates - perhaps suddenly and rapidly, beyond the scope that many can now even imagine.

The City should flourish and profit from a global trading war re the currency markets. It is one of the one things 'we' still do and do well. Drinks and lap-dancing clubs all round!

Longer-term, the polarisation of the globe into blocs will continue but with increasing pace. The US - the West - needs time to modernise, re-skill and re-equip to take on the Chinese economically. Politically, a trade war might even save the current President from just one term in Office.

Hazel Blears is looking rather sultry on NN tonight!

only joking!

I've changed my mind and Jenni(sic) Russell of the Guardian looks the most sultriest!

I know what you mean DebtJuggler - seeing Hazel Blears on TV tends to make me reach for the whisky bottle also.

Paul,

You should profile the likely winner of the up-coming Brazil election.

She is very interesting.

More interesting than ed anyway....

but there again who isnt!

Why cant we have politicians with a past life as well?

#9 I know I'm making light of the whole political charade.

But let's face it, none of them give a fig about us or this country.

Why do we all pretend otherwise?

I guess Paul's blog subject is deadly serious...but it's gone beyond a joke now. The political class should now be very wary of the lumpen proletariat...for we are now sharpening our pitchforks.

The one thing the political class needs to fear the most..is/are the angry masses. They need to tread very carefully indeed in the coming months/years.

tawse57

I just quoted you (with reference) on another NN blog. I hope you don't mind?

/blogs/newsnight/fromthewebteam/2010/09/monday_27_september_2010.html

No, you carry on quoting DebtJuggler - feeds my narcissism and strengthens my plan for World domination ;-)

I am flattered.

IT'S ALL GOING PETE TONG NOW

At last!...a major journo calling it for what it really is (excepting Paul of course!)...

Shut Down the Fed (Part II)

Using QE to stoke inflation on purpose crosses monetary Rubicon

Sell shares and cash for physical gold (if you can find it).....and fast!

"pressure within the USA for tariffs to punish so called currency manipulators"

This is the arm lock that the US has over every other nation. Study the behaviour of the US, not their rhetoric. Since the 1970s the US deliberately runs a trade deficit (politely termed "benign neglect"). This means that countries running a surplus with the US either have to let their currency appreciate (i.e. forced dollar depreciation of the very currency for which they owe the outside world!), or buy up treasury bonds (thereby funding the US's federal deficit). Do they have any intention of paying this back??

Any attempt by a country to evade this stranglehold can easily get tarred with the "currency manipulator" label. Ironic given that this has been their covert strategy for almost 40 years. It's such a cunning plan, I'm just annoyed I didn't think of it myself.

Fortunately, Michael Hudson is on to them:

If there is a currency war starting, then we are going into uncharted territory that has several substantial dangers.

The first is that as the dollar is so chronically over-issued, there are simply too many dollars and US Treasury Bills sloshing around and trying to drive down their value might well be the catalyst that precipitates a sell off and a truly massive fall in value. But as the dollar is the world's reserve currency, if it were to collapse that would mean all those holding dollar denominated assets would have to write down the value of their reserves dramatically - this would destroy most banks and prompt sovereign wealth funds to retrench rapidly. Bye bye world banking system...

The second is that as so much world trade is demoted in dollars - commodity prices expressed in dollars would rocket - the markets for oil, food and raw materials will go ape.

Thirdly what about the pound? We couldn't stand by and allow our currency to appreciate against others, so we'd need to act too, but imports priced in non-falling currencies would get a lot more expensive.

The other dimension to this is globalisation that depends on a supine attitude to trade and chronically undervalued and over-issued currencies continuing. If the plug were to be pulled then the cost - price differentials that manufacturing in places like China to then sell in the UK swing wildly negative post relative-devaluation, rapidly choking off demand as retail prices rise sharply. A lot of household names will simply go bust because their business models no longer work - the same effect in reverse that led to the great British manufacturing names of te past disappearing in a few years.

I'd take a good look at the deposit guarentee scheme if you have money in the bank - spread it around several different banks to protect it.

Stock up on dried and canned food - fill vehicle tanks and top up on heating oil - if there is a currency war, all these things are going to be in short supply - its also time to buy those consumer durables you might want - they could become quite scarce for some years.

On the other hand this could all be just sabre rattling to get the Chinese to revalue their currency - or is it?

I have to admit that when I heard the remarks by the Deputy Governor of the Bank of England I did a double take - how could someone in such a position be so foolish or so desperate to make such a statement?

The economy is obviously in a far, far worse state than they are letting now and now, it seems, it is not merely enough to allow inflation to rob savers for being prudent. Negative interest rates anyone?

Have a read of this Moneyweek article;

Has the pound just had its Ratner moment?

17 tawse57

If you count inflation into the equation we already have negative interest rates.

I had been holding my breath that the denizens of the Bank of England knew what they were doing. Following the utterances of the Deputy-Governor I have exhaled, concluding that they have now lost it completely.

Surely, any fool can work it out that if you cut interest rates on savings to nothing that savers will only save more. Talk about living on another planet.....

We won't get economic recovery without sound money that reflects a value. This is the mistake the Japanese made and the mistake the Americans are now making. This will have to be done if we are to restructure our economy away from its dependence upon banks and government.

With regard to the race to the bottom: what price globalisation now?

#17

Mr Bean has shot his bolt and hit his foot. Trying to resurrect our corpse of an economy through more consumer spending is absurd. To quote Max Keiser "You can't have Capitalism without capital. You can't have Capital without savings." Forget all the bluff & bluster (rhetoric), as we clearly don't have a Capitalist economy.

#16

For a truly vivid description of life after currency collapse see Dimitri Orlov's "Re-inventing Collapse":

By negative inerest rates I meant 0% interest on savings in bank plus -0.25% to -1.0% charge by the banks on the deposited sum by the banks for 'safely' looking after your money. In other words, the banks start charging fees for saving accounts.

The alternative being keeping your money under the mattress or being forced to stick it into speculative ventures such as property, gold, shares, etc, etc.

A few months back the BOE were talking about the need for British people to save more and pay down debt. Now the plan appears to be to rob savers in order to prop up the greedy and feckless who have stupidly ramped up and paid ludicrous sums for house prices, got into heavy credit card debt, etc.

The message obviously being not to save, not to put money aside for a rainy day but jump on the credit bandwagon, join in every financial bubble you can find and hope that the bubble never bursts.

Judging by the rise of the gold price against Sterling today it appears that many investors are clearly taking Charlie Bean's words as being that the Bank of England is happy to trash Sterling in order to force British savers to spend.

Truly staggering and frankly I am amazed, although not surprised, that the mainstream British Broadcasters have not been going all out on Charlie Bean's comments.

Only Moneyweek, and now late this afternoon a blog over on the Telegraph, have picked up on this. The markets, re my gold comment, obviously saw it as it is straight away.

Gee, I wish I was not such a gold cynic when gold was 700 bucks an ounce and the Pound was still relatively strong against the Dollar.

"20. At 5:23pm on 28 Sep 2010, tawse57 wrote:

"The message obviously being not to save, not to put money aside for a rainy day but jump on the credit bandwagon, join in every financial bubble you can find and hope that the bubble never bursts."

Look into the causes of the group hostility in Germany in the 1920s and 1930s. Is it possible that the entire credit crisis was engineered to a) weaken the public sector and b) let those assets move easily/cheaply into private sector hands - i.e those running financial services? The debt was private sector debt, the cost of bailing out those borrowers is the public sector!

Another good AE-P article on this subject...

Gold is the final refuge against universal currency debasement


States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.

#18 stanilic wrote:

'With regard to the race to the bottom: what price globalisation now?'

---------------------------


Remember a certain 'fruit-cake' conspiracy theorist's axiom...

Problem!
Reaction!
Solution!



(OK, I concede the music's a bit OTT)

1960s student unrest in Paris, London, and USA universities. The misguided public just sees images of scruffy protesting students and mistakenly think anarchists are left-wing, even though thes eare Trotskyites who despise Stalinism/Fabianism. At the time, the UK and French governments were left-wing. The idea here was to vilify the left using stupid students and clever activists?.

Much of this was student naivety coupled with subversion by post-war migrant/emigre teachers in their universities (e.g. LSE). The effect was to sour the vision of the left for many - and thus began the fatal 70s march towards right-wing Libertarianism and the erosion of western statism.

Humans are largely stupid. To see this, watch John Humphry's film which screened last night, The solution to the 'education gap by one state school girl was to close down the Independents! This is the Pol-Pot approach to equality. Presumably her solution to other inequalities in life e.g. height would be equally Procrustean - how about inequality in looks, compulsory scarring or acid baths for the attractive?

That's what happens when one leaves school with a few O levels and can't be bothered to listen to people who seem to think they're better than you. You just don't learn nuffink.

52. At 11:00pm on 28 Sep 2010, brossen99 wrote

Tip: If you can find any alternative source to Alex Jones for stories please, do so, as a) he seems a bit more mad than your even regular American anarchist and b) he seems to be just one of many using shock to get advertisement funding, sell 'merchandise' and get donations.

Unless you're using him for levity like one of those tabloids which used to report fascinating stories like "Hitler is happily living on the moon and planning a big comeback!".

PS. Mimpromptu - that wasn't a real/true story

"52. At 11:00pm on 28 Sep 2010, brossen99 wrote:
Forget traditional tame Hitler eugenics,"

Hey lighten up on Hitler already, it was the Real Labour Party (Hitler and Stalin just picked up on socialism from the Fabians - seriously).
Don't you get it yet? The Labour Party was really evil. They wanted to make Britain a nicer/safer place and to reduce the number of spivs/speculators/criminals aka entrepreneurs and biznussmen. Russian accent - Russian Mother: "Segei, we used call him a criminal, but nowadays, we have to call him a biznussman!.

We were saved from a Fabian horror by Hayek, Thatcher and New Labour etc.

Remember this:



that's them! - See Keith Joseph's profile he's subdued Spike!.

;-)

"52. At 11:00pm on 28 Sep 2010, brossen99 wrote:
Forget traditional tame Hitler eugenics,"

Hey lighten up on Hitler already, it was the Real Labour Party (Hitler and Stalin just picked up on socialism from the Fabians - seriously).
Don't you get it yet? The Labour Party was really evil. They wanted to make Britain a nicer/safer place and to reduce the number of spivs/speculators/criminals aka entrepreneurs and biznussmen. Russian accent - Russian Mother: "Segei, we used call him a criminal, but nowadays, we have to call him a biznussman!.

We were saved from a Fabian horror by Hayek, Thatcher and New Labour etc.

Remember this:



that's them! - See Keith Joseph's profile he's subdued Spike!.

;-)

56. At 11:41pm on 28 Sep 2010, DebtJuggler wrote:

"If only they knew how stupid they looked."

Given how our society has devolved over recent decades, many probably think they've joined the Masons. You should see those who signed up to be 'Future Leaders' (look this up) in education. These were the alchemists who, to mix metaphors, were going to turn the nation's pigs ears into silk purses. Now Michael Give is doing the same. How they were/are ever going to do this given all of the research evidence speaks volumes to me about the New Labour Project's Education, Education, Education and the similar ideas of the Con-Dems too, yet spelling out the folly to them will fall on SEN ears.Try it. The truth is so at odds with their core (false) dogma that it usually doesn't even register, and if it ever does, it just elicits rage. That is how bad things have become. Dawkins should try getting through to this lot as they are more dangerous than any of his witches and warlocks.

"22. At 11:55pm on 28 Sep 2010, DebtJuggler wrote:
Another good AE-P article on this subject...

Gold is the final refuge against universal currency debasement"

Is it though? China and India have bought a lot of gold if we are to believe the press, but then China and India have the planet's largest populations and cheapest workforces for manufacturing. China is a state, so when China buys gold, the state buys gold. For what given that gold is just another metal/commodity? One question I'd like to see addressed is how much of this gold which is being bought is going into electronics given the phenomenal demand for consumer (and other) electronics which uses gold.

"A total of 165,000 tonnes of gold have been mined in human history, as of 2009.[1] This is roughly equivalent to 5.3 billion troy ounces or, in terms of volume, about 8,500 cubic meters, or a 20.4m cube.

Although primarily used as a store of value, gold has many modern industrial uses including dentistry and electronics. Gold has traditionally found use because of its good resistance to oxidative corrosion and excellent quality as a conductor of electricity."



Second, from the link (journalists just love this hydraulic speculation don't they, even though only a year or so ago people were confession left right and centre that economists didn't really have a clue when thinking along these lines as the credit crunch had taken everyone by surprise. Now, look, these journalists know it all! - see any problem?

"If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness.
This is the default cure if all else fails, and I believe it is well under way."

China is not a capitalist country, it is still more Stalinist than the USSR ever was after 1953. The USA and other Liberal-Democracies like to make out that China is just part of the world economy now, but that probably isn't the way that China sees it. During the conflict with its revisionist neighbour, Mao in on record saying that they could afford to lose a good part of their population and still win. What's the difference to them if they lose lots of orders in their factories, it's a lot easier to bear than mass nuclear devastation surely? How many troops/employees would they be prepared to sacrifice in order to preserve their system or so it taken up elsewhere? They still have a welfare state for their state employees. No cuts to their public sector, that would be subversion which is a crime in China..

Yet another AE-P article...

Capital controls eyed as global currency wars escalate


Stimulus leaking out of the West's stagnant economies is flooding into emerging markets, playing havoc with their currencies and economies.

"28. At 12:53pm on 29 Sep 2010, DebtJuggler wrote:

"Stimulus leaking out of the West's stagnant economies is flooding into emerging markets, playing havoc with their currencies and economies."

The reason why nation states don't work is because without strict currency and population management, nations can't exist. National Socialist China knows that. The pre 1953 USSR knew that. This is presumably why the USSR treated Trotskyites (international socialists/socialist internationals/cosmopolitans) and capitalists as one and the same. It just does not matter how they rationalise what they do to themselves and to others, as reasons are not causes, and one has to look to the identical consequences. That 'history does not walk on its head' is a quintessential behaviour analytical principle is deserves careful reading. Remember that 1990 paper and how it ended? The Experimental Analysis of Behavior was a very specific reference, it was not a casual choice of words. This is why so many people do not get it.

They have no idea what the EAB is, they generally lack the attention span which is required in order to grasp that this is descriptive, Machian, engineering. It's a male preserve.
..