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Posts Tagged ‘currency manipulation’

US Dollar About to Lose Reserve Currency Status – Fact or Fantasy?

Courtesy of Mish

A number of sites are commenting on a Bloomberg video in which El-Erian, PIMCO Co-CEO says "Dollar could lose its reserve currency status".


Bloomberg: "Mohammad what does a weak dollar signal to you, a dollar that can’t jump up here on a day like we’ve seen today?"

El-Erian: "It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. That people are starting to worry about the fiscal situation in the U.S. They are starting to worry about the level of debt. They are starting to worry about what they hear about states and municipalities. So, I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past."

Reserve Currency Definition

Before we can debate whether or not the US will lose reserve currency standing, we must first define what it means.

Investopedia defines Reserve Currency as follows.

"A foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate."

I accept that definition. Unfortunately Investopedia rambles on with nonsense about the implications: "A large percentage of commodities, such as gold and oil, are usually priced in the reserve currency,causing other countries to hold this currency to pay for these goods."

That sentence is a widely believed fallacy. The reality is no country is obligated to hold dollars to buy goods denominated in dollars.

Currencies are Fungible

Currencies other that illiquid currencies with low or no trading volume (think of Yap Island stones or the Cuban Peso) are fungible. It is a trivial process to switch from one currency to another.

You can buy gold or silver in any country, and I assure you those transactions do not all take place in dollars. Thus, just because a commodity is widely priced in dollars does not mean it only trades in dollars.

That holds true for oil as well.

I keep pointing this out, unfortunately to no avail, that oil trades in Euros right now. There is no selling of Euros to buy dollars on the front causing the oil producers to trade dollars for euros on the back end. The oil states simply sell oil for a price in Euros and then hold Euros in their…
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America’s Jobs Losses are Permanent

America’s Jobs Losses are Permanent

Courtesy of PAUL CRAIG ROBERTS, originally published at CounterPunch

Businessman carrying office belongings

Now that a few Democrats and the remnants of the AFL-CIO are waking up to the destructive impact of jobs offshoring on the US economy and millions of American lives, globalism’s advocates have resurrected Dartmouth economist Matthew Slaughter’s discredited finding of several years ago that jobs offshoring by US corporations increases employment and wages in the US.

At the time I exposed Slaughter’s mistakes, but economists dependent on corporate largess understood that it was more profitable to drink Slaughter’s kool-aid than to tell the truth. Recently the US Chamber of Commerce rolled out Slaughter’s false argument as a weapon against House Democrats Sandy Levin and Tim Ryan, and the Wall Street Journal had Bill Clinton’s Defense Secretary, William S. Cohen, regurgitate Slaughter’s claim on its op-ed page on October 12.

I sent a letter to the Wall Street Journal, but the editors were not interested in what a former associate editor and columnist for the paper and President Reagan’s Assistant Secretary of the Treasury for Economic Policy had to say. The facade of lies has to be maintained at all costs. There can be no questioning that globalism is good for us.

Cohen told the Journal’s readers that “the fact is that for every job outsourced to Bangalore, nearly two jobs are created in Buffalo and other American cities.” I bet Buffalo “and other American cities” would like to know where these jobs are. Maybe Slaughter, Cohen, and the Chamber of Commerce can tell them.

Last May I was in St. Louis and was struck by block after block of deserted and boarded up homes, deserted factories and office buildings, even vacant downtown storefronts.

Detroit is trying to shrink itself by 40 square miles. On October 25, 60 Minutes had a program on unemployment in Silicon Valley, where formerly high-earning professionals have been out of work for two years and today cannot even find part-time $9 an hour jobs at Target.

The claim that jobs offshoring by US corporations increases domestic employment in the US is one of the greatest hoaxes ever perpetrated. As I demonstrated in my syndicated column at the time and again in my book, How The Economy Was Lost (2010), Slaughter reached his erroneous conclusion by counting the growth in multinational jobs in the U.S. without adjusting…
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German Economy Minister Accuses US of Currency Manipulation

German Economy Minister Accuses US of Currency Manipulation

Courtesy of Mish

At long last a major player is finally pointing a the currency manipulation finger where it needs to be placed, the US.

Please consider Germany Says Fed Is Headed ‘Wrong Way’ With Monetary Easing

The Federal Reserve’s push toward easier monetary policy is the “wrong way” to stimulate growth and may amount to a manipulation of the dollar, German Economy Minister Rainer Bruederle said.

Fed Chairman Ben S. Bernanke yesterday gave Group of 20 finance ministers and central bankers meeting in Gyeongju, South Korea an overview of the U.S. central bank’s efforts to jumpstart the world’s largest economy. His strategy, which investors expect will soon include greater asset purchases, drew criticism at the talks, said Bruederle.

“It’s the wrong way to try to prevent or solve problems by adding more liquidity,” Bruederle told reporters yesterday, saying that emerging-market officials were among the critics. Bruederle, a member of the Free Democratic Party, the junior partner in Chancellor Angela Merkel’s government, stepped in for hospitalized Finance Minister Wolfgang Schaeuble at the meeting.

“Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate,” Bruederle said. The minister has taken a pro-market stance in his first year in office, criticizing state intervention in cases such as providing aid for General Motors Co.’s German Opel unit.

The Big Point

I have been saying for years that the US was every bit the currency manipulator we accuse China of being. My stance is that interest rate policy decisions in and of themselves are manipulative.

Moreover, we have since gone one step further with futile unwarranted rounds of quantitative easing baked into the cake.

Thankfully, the German economic minister is willing to say what anyone with an ounce of common sense has known for a long time: “Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate.”

Correction:
Rainer Bruederle is "Bundesminister für Wirtschaft und Technologie", "Federal Minister for Economy and Technology", not Finance Minister. He was filling in for hospitalized Finance Minister Wolfgang Schaeuble at the meeting.

Mike "Mish" Shedlock

 


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No Children, You Cannot ALL Be Export Economies

No Children, You Cannot ALL Be Export Economies

Courtesy of Joshua M Brown, The Reformed Broker 

Children, children, please!  Stop your bickering and sit down in a circle.  China, have a seat, you too Brazil.

Japan, you get a Time Out.  That kind of aggressive currency behavior simply will not be tolerated – you lose arts and crafts privileges for one week.  Origami swans count, put that paper down!

The simple fact is that although you’d all like to be export-driven economies, this is a logical impossibility.  If everyone in the G20 is to be a net exporter, then we’ll either have to convince Mongolia to start buying a lot of stuff or find alien life elsewhere in the galaxy to market and sell to.

Ah!  Now you’re quiet!  Very good children.  Dropping your currency will be punished the same way as dropping your pants in this classroom – it is strictly forbidden.

And picking on Brazil will also not be put up with.  Brazil is a growing boy and needs to be able to export, too.  Stop snickering, Timmy, I saw right through your ‘Strong Dollar’ speech the other day.  And China, your cosmetic rate hikes are just as phony, none of us are fooled.

Here’s the deal, children…If we can go the rest of the day without any more jawboning, saber-rattling or currency manipulation I will reinstate milk-and-cookies time this afternoon.

Do try to behave.

Read More:

Market Break into G20 (Points and Figures)

FX Wars Escalate: Brazil Cancels G20 Participation (Zero Hedge)

Brazil Boosts Firepower…but is it Shooting Blanks?  (beyondBRICs) 


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Talk of Trade Wars with China, Tariffs, and Currency Manipulation Move to Forefront; US Trade Imbalance – Whose Fault is It?

Talk of Trade Wars with China, Tariffs, and Currency Manipulation Move to Forefront; US Trade Imbalance – Whose Fault is It?

Courtesy of Mish 

BEIJING, CHINA - MAY 15:  (CHINA OUT) Dollars and yuan notes are seen at a bank on May 15, 2006 in Beijing, China. China's official exchange rate rose today to 7.9982 yuan per U.S. dollar, its highest level since a revaluation in last July, the government said. (Photo by China Photos/Getty Images)

Congress is one again shaking its currency-manipulation rattle. What’s different this time is Geithner appears to be listening.

Please consider Geithner signals U.S. patience waning on China currency.

Treasury Secretary Timothy Geithner indicated U.S. patience on China’s currency policy was wearing thin on Thursday as a key lawmaker warned that he would move soon on legislation that would penalize Chinese goods.

Striking his toughest tone on the yuan since delaying a decision in early April on whether to name China a currency manipulator, Geithner told a U.S. Senate hearing Chinese policies had a harmful worldwide impact.

"A stronger renminbi would benefit China because it would boost the purchasing power of households and encourage firms to shift production for domestic demand, rather than for export," he told the Senate Finance Committee.

"The time is long past for any Treasury Department to admit publicly what everyone else already knows, that China is manipulating the value of its currency in order to gain an unfair advantage in international trade," said Charles Grassley, the senior Republican Senator on the committee.

Democratic Senator Charles Schumer told Geithner to "be prepared" because lawmakers would move forward soon with legislation that would slap anti-dumping penalties and countervailing duties on goods from China and other countries with a "fundamentally misaligned" currency.

Senator Graham Threatens Veto-Proof Currency Legislation

Congress is increasingly frustrated with the China’s currency peg, so much so that senators suggest there may be enough votes to override a presidential veto. Bloomberg reports Graham Says China Yuan Measure Has ‘Huge’ Support in Congress.

U.S. Senator Lindsey Graham said legislation aimed at getting China to raise the value of its currency has “huge” support in Congress, and President Barack Obama “runs the risk” of being overridden if he vetoes it.

“The frustrations with China’s trade practices are growing by the moment,” Graham, a South Carolina Republican, said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

He called the measure a “test” of the administration because Obama “campaigned that he would stand up to China currency manipulation.” Graham has joined Senator Charles Schumer, a New York Democrat, in sponsoring legislation targeting China’s yuan.

Lawmakers are pushing for a vote on


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Zero Hedge

"Paid To Wait"? Microsoft Tumbles 10%, Destroys 4 Years Of Dividend Gains

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Why but bonds when you can buy stocks that earn a higher dividend? "it's the risk, stupid!" Microsoft is down around 10% this morning, the equivalent of almost 4 years of dividend gains... still wanna get "paid to wait."

...

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Phil's Favorites

Time to Focus on Europe?

Weighing the Week Ahead: Time to Focus on Europe?

Courtesy of Jeff Miller, 

There is plenty of economic data this week and earnings season is in full swing. Despite this, I suspect that news from Europe will dominate the market discussion.

I expect market participants to be watching closely for The Message from Europe.

Prior Theme Recap

In last week’s WTWA I predicted that there would be a focus on the message from corporate earnings reports. That was very accurate for the week as a whole. The big exception was the ECB celebration and commentary on Thu...



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Chart School

Richmond Fed Manufacturing Composite: "Expanded Modestly" in January

Courtesy of Doug Short.

As a resident of the Fifth District, this is a regional manufacturing index I pay close attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region's connection to the nation's Central Bank.

The complete data series behind the latest Richmond Fed manufacturing report (available here) dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components.

The January update shows the manufacturing composite at 6, down from 7 last month. Numbers above zero indicate expanding activity. Today's composite number was spot on the ...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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OpTrader

Swing trading portfolio - week of January 26th, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: With the Fed fading into shadows, investors look overseas for new catalysts

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

By Scott Martindale

Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...



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Market Shadows

Are You Trading or Gambling?

ARE YOU TRADING OR GAMBLING?

An interview with John Ehlers of Stock Spotter and Mesa Software

By Ilene

Ilene: John, in our last discussion about trading systems in general and yours in particular (Can trading be reduced to cycles, stresses and vibrations?) you mentioned Monte Carlo simulations and their use in measuring performance. Can you explain more about how you measure the performance of a trading system?

John: Let's start with comparing trading with gambling. The two have several things in common.  In both ...



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Digital Currencies

Jitters After Bitcoin Exchange Suspends Services

So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.  

Jitters After Bitcoin Exchange Suspends Services 

By 



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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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