US Wants ONLY China To Stop Using FOREX Holdings As Currency Tool

The US is still much too anxious about preserving ‘alliances’ despite these alliances eating insidiously away at our entrails.  This is why the US is trying desperately to accuse China of monetary abuses which ALL our trade partners do: hold US trade dollars in FOREX reserves in order to keep the dollar strong!  Instead of an honest accounting of what is going wrong, the US has to pretend that only China ‘manipulates’ currency values.  Alas for that storyline, all our trade partners do this!  And the first to do this was Japan, not China.  And Japan is still doing this.  And even said they will increase doing this for trade purposes.

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ΩΩHere is a recent editorial by the supposedly famous and smart US economist, Dr. Krugman:

Op-Ed Columnist – Taking On China and Its Currency – NYTimes.com

Widespread complaints that China was manipulating its currency — selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China’s exports artificially competitive — began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account — a broad measure of the trade balance — of $46 billion.

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For years and years, I have pointed out the dangers of JAPAN doing this.  Japan invented doing this as a means for keeping the value of the yen cheap so they could infiltrate and destroy US native industries while keeping the US locked nearly totally out of Japan’s domestic markets.  The US struggled for years to force Japan to raise the value of the yen but once Japan began its ZIRP lending coupled with an immense FOREX hoard, all attempts at making the yen ceased.

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This was wrecked by China in August, 2007.  After Japan joined the US and EU in demanding China cease holding US dollars and euros, China snapped back that Japan was doing this, how dare they order China to stop doing what Japan was doing!  Japan then sneered at China, saying, ‘We can do whatever we want because we are allies of NATO countries, HAHAHA.’  China then retaliated by forcing the Japanese to pay China in yen, not dollars.  Then, China began hoarding yen and this drove up the value of the yen against the dollar and this killed the Japanese carry trade which caused all that free ZIRP Japanese credit to suddenly vanish and this is the true trigger of the banking collapse, not US homeowners defaulting on loans.

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WHEW!  Now, over time, I used national banking statistics and IMF facts, etc. to explain the machine that created the flood of credit which is based not on tricky bankers but rather, on the insane unbalance international trade which still continues unabated. It may shrink in a depression (note: this depression was not caused by US protectionism, it was caused by currency manipulations launched by JAPAN) but it doesn’t go away.  All the stupidest solutions to this ‘banking crisis’ don’t address the fundamental problem at all.  Nor does the looming currency war with China fix a damn thing: the US is  being totally selective in who it accuses of ‘currency manipulation’.  The entire floating fiat currency system is one big, fat manipulation of the value of money!  Money has no fundamental basis to gage relative value.  Gold sits inert, locked in various reserve funds, doing absolutely nothing but lurking there, waiting patiently to return.

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Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

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This is why I call Krugman a fool. What sort of idiot is he, to make this outrageous and OBVIOUSLY FALSE claim? The Chinese FOREX policies are EXACTLY the same as Japan’s! How can Krugman miss this ridiculously easy to see fact? Is he in the pay of the Japanese? I don’t say this lightly: there is a good chance he has various entanglements with the Japanese who fund many US university programs in order to control the professors so they won’t go after Japan’s obvious protectionist/currency manipulative policies. Japan also, like AIPAC, bribes Congress since they are allowed to do this after they established hostile factories in the US, set up to circumspect any attempts at protectionist moves by the US to stop Japan from taking over all our systems.

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And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.

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ΩΩJapan can’t fix this liquidity trap because first, Japan has to be able to hold US dollars while NO ONE HOLDS YEN.  The US FOREX holdings do have some pitiful few yen, IMF Country Information Page:  the US holds only $45 billion in both euros and yen, about $14 billion in yen. Meanwhile, Japan holds a trillion in US dollars and euros, mostly US dollars.  Japan holds 22 times greater foreign currencies than the US holds!  Meanwhile, Germany holds the same amounts as the US.  This is why the euro was so strong against the dollar for the last 8 years.  If Germany chooses to imitate Japan, the euro will become cheap against the dollar.

 

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ΩΩThe real puzzle here is why Krugman can’t see the obvious.  I wish I could debate with him directly and thus, agitate him enough to cough up the truth.  Is he protecting free trade because this makes Israel much richer at US expense?  One can speculate but not prove this.  The US government, which is working very hard to NOT protect our economy from being ravaged by nations holding US dollars in FOREX reserves, has decided to attack only China.  I will note that no other trade power is joining in this.  That is, they are silent.  They know they are all complicit.  Here is an editorial written by the owners of the Times that refuses to reveal why the NYT supports ‘free trade’ even as it destroys our economy:

 

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Editorial – Will China Listen? – NYTimes.com

Since 2003, China’s central bank has been purchasing huge amounts of dollars to keep the value of its currency, the renminbi, artificially low against the dollar. China backed away somewhat in 2005, allowing its currency to appreciate slowly from 8.25 renminbi to the dollar to about 6.83 renminbi by 2008. As the global recession hit, China slammed on the brakes in order to protect its exports. The renminbi has remained at about 6.83 since then, and the pain has been felt in countries as far apart as Mexico and India.

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How is this impacting on India and Mexico?  HAHAHA….well…they both are sucking down vast numbers of US jobs and then the money from US business flows to them and they use these dollars to buy imports…which gives both China and Japan huge trade advantages!  Is Mexico mad about this?  HAHAHA, again: Mexico is working hard to build huge ports for Chinese imports…which the Mexican government then wishes to shove northwards to the US which is why Mexico wants Mexican truck haulers to move deep into the US and which is why Texans have to keep fighting off this massive truck highway being planned which will slice across all of Texas so Chinese goods passing through Mexico can go to Kansas via cheap Mexican truckers!  Sigh, this has been obvious for years, by the way.

. Beijing’s intervention is a textbook example of the beggar-thy-neighbor competitive devaluation forbidden by the International Monetary Fund’s charter.

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HAHAHA….this is why ‘protectionism’ MUST rule!  Everyone MUST protect their own home bases!  This was done for ages via tariffs.  Now, this is done via the floating currency regime.  And obviously, doesn’t work, it ‘beggars’ whoever doesn’t hold foreign currencies!

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The challenge now is how to persuade China to at least moderate its strategy without unleashing something even more destructive. As the decibel level has risen in Washington, Chinese officials have implicitly warned that they could retaliate by dumping Treasury bills from their central bank’s $2.4 trillion cache.

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China has had quite a few secret meetings with Japanese bankers this year. The Japanese are terrified.  They know if they so much as make a peep in support of the US singling out China, China will punish Japan by destroying Japan’s FOREX holdings and this will bankrupt Japan which will have to default on loans to the Japanese people which will make them poorer than the Icelanders!  Sheesh!  Isn’t this obvious as hell????

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The problem wasn’t the bankers making mysterious instruments: these grew out of the trade imbalance/FOREX revolution.  The floating fiat currency regime is, in itself, the cause of all this mess!  We can’t cling to it and fix the mess.  So long as the floating fiat currency regime continues, the imbalances will continue!

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This would be risky for both countries. The move would weaken the dollar and lessen the value of China’s holdings. The United States might weather a sell-off or even benefit from the drop in the dollar’s value, but any precipitous move could further disrupt the skittish financial markets. And Beijing has other potential weapons, like tariffs and quotas. There is no guarantee of rationality in these showdowns. The fallout from a trade war would be felt around the world.

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ΩΩChina is being quite rational. It is the US which is being insane.  Sanity means recognizing the truth about systems and about oneself.  Insanity is when someone tries to impose a fake reality on reality.  Paranoia, delusional thinking, irrational suppositions, outright lying leads to the destruction of the crazy entity.  An empire has to be ruthlessly rational.  It can’t ride on delusions, this leads to destruction.  For example, Hitler’s megalomania led to his downfall just as Napoleon, broken on the vast Russian plains.

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ΩΩUnderstanding the truth is life an death.  Delusional thinking leads to suicidal actions.  The US has pursued an obviously suicidal trade policy since 1971 when Nixon dropped the gold peg on the dollar.  Credit expanded and so did inflation. To fix inflation, the US allowed trade partners to hold excess dollars.  This, in turn, lead to more trade deficits!  DUH.  Double DUH.  The only way the US can fix this is to hold yen and euros.  We can’t do this unless we first have some yen or euros to hold!  This is called ‘a trap’ and we are deep in this hole, trapped.  And we can’t climb out unless we go after ALL our trade partners including Israel.  And this is why our government is paralyzed: the system is set in cement to run against the American people and too many people at the top of society benefit with this ridiculous, unbalanced system and have zero desire to change it at all.

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FOREX-Euro struggles on Greek aid comments, dollar up | Reuters

Analysts said escalating tensions between the United States and China over Beijing’s yuan policy also remained on traders’ radars and may provide more support to the dollar.

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ΩΩEurope benefits with the euro dropping in value: they can export more to the US!  DUH.  And of course, the US wants the dollar to be cheaper and this isn’t working. DUH.  We are dumber than a box of dead turtles.  Here is a series of pictures of US products which US companies no longer make in the US.  And in this story is the story of the American flag.  This is one of the VERY FEW things still manufactured in the US:

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Famous American Brands No Longer Made in the U.S.A. – Newsweek

Next time you wave your Stars and Stripes, check the label. Foreign-made flags aren’t all that common, but they exist. They represent only about 1.5 percent of the market, thanks in part to America’s protectionist policies on flag production. Several states have laws that ban sales of American flags not made in the United States, and Oklahoma Democrat Dan Boren has introduced a similar bill in the House, which, if passed, would prevent importation of American flags made overseas. Here Kathy Hibble works at Annin Flags in Oaks, Pa.


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ΩΩNote how this was fixed: good old protectionist laws!  HAHAHA.  So, this proves that any industry can also be protected this way.  For example, we used to make computer parts in the US.  This has been now nearly totally offshored.  The list is long, the vital industries that are now offshored.  And if we think we can fight WWIII with no native computer industries that have everything from top to bottom, HAHAHA to hell.  We can’t.  We barely have a steel industry!  Another ‘duh’ moment.  The US has hogtied itself into knots and can’t do anything with our very expensive Pentagon except kill barely armed Muslim peasants.

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ΩΩOur ‘victory’ in Iraq came only after we totally disarmed Saddam.  The UN assisted in this venture.  There is zero hope of totally disarming nuclear China.  And if we think we can beat China in a nuclear war: no.  We can’t.  China will not only totally destroy Japan and Okinawa, Russia will annihilate all of Europe and the US can’t annihilate all of both Russia and China. And any nuclear war will see both Russia and China, SPONTANEOUSLY in the first 10 minutes, attacking ALL US ALLIES as well as the US.  This is what both Europe and Japan fear.

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ΩΩHere is an old article from two years ago about how the both Japan and China are using their FOREX reserves to manipulate the value of the dollar upwards:

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Debt Man Walking: The US, China, Japan and the Foundations for a New Bretton Woods. — Britannica Online Encyclopedia

Asia-Pacific Journal: Japan Focus, November 24, 2008 by John B. Judis What are the links among Japan, China and the United States that will shape the outcomes of the current economic and financial crisis that appears to have metastasized into a global crisis of the whole postwar international order? Because that order rests heavily on Asian export-led export growth strategies and the transfer of massive Chinese and Japanese trade surpluses that support the dollar’s role as the universal currency, any solution for the US and the international order will require the cooperation of the two Asian economic powers

. …For decades, the United States has relied on a tortuous financial arrangement that knits together its economy with those of China and Japan. This informal system has allowed Asian countries to run huge export surpluses with the United States, while allowing the United States to run huge budget deficits without having to raise interest rates or taxes, and to run huge trade deficits without abruptly depreciating its currency. I couldn’t find a single instance of Obama discussing this issue, but it has been an obsession of bankers, international economists, and high officials like Federal Reserve Chairman Ben Bernanke. They think this informal system contributed to today’s financial crisis. Worse, they fear that its breakdown could turn the looming downturn into something resembling the global depression of the 1930s.

So, everyone at the top knows the role these huge FOREX holdings have in trade issues!  HAHAHA.  Krugman should talk to Bernanke!  HAHAHA.  Note that they know that BOTH China and Japan are doing this.  The reason everyone is OK with is is obvious: it suits the people who are CUTTING TAXES ON THE RICH.  The rich love tax cuts.  They want more tax cuts.  The rest of the US public loves spending money with no consequences.  Everyone loves ZIRP banking.  Like in Japan, it allows wild borrowing.

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I hear lots of whining about how we need more credit. The idea that credit MUST have limits is very unpopular.  The idea that a gold basis for currency value limits credit is essential towards balancing world trade.  And thus, extremely unpopular.  Even gold hoarders don’t want this.  They love the idea that gold is a commodity and are gleeful whenever gold shoots up in value.  They want it to shoot up to $2,000 an oz.

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…At the end of World War II, Japan had adopted a strategy of economic growth that sacrificed domestic consumption in order to accumulate surpluses that it could invest in export industries–initially labor-intensive industries like textiles, but later capital-intensive industries like automobiles and steel. This export-led approach was helped in the 1960s by an undervalued yen, but, after the collapse of Bretton Woods, Japan was threatened by a cheaper dollar. To keep exports high, Japan intentionally held down the yen’s value by carefully controlling the disposition of the dollars it reaped from its trade surplus with the United States. Instead of using these to purchase goods or to invest in the Japanese economy or to exchange for yen, it began to recycle them back to the United States by purchasing companies, real estate, and, above all, Treasury debt.

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See? By 2008, some economists finally figured out what I figured out back in 1986 when the Chinese swore they would imitate Japan’s FOREX holding system.

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That investment in Treasury bills, bonds, and notes–coupled with similar purchases by the Saudis and other oil producers, who needed to park their petrodollars somewhere–freed the United States from its economic quandary. With Japan’s purchases, the United States would not have to keep interest rates high in order to attract buyers to Treasury securities, and it wouldn’t have to raise taxes in order to reduce the deficit. As far as historians know, Japanese and American leaders never explicitly agreed that Tokyo would finance the U.S. deficit or that Washington would allow Japan to maintain an undervalued yen and a large trade surplus. But the informal bargain–described brilliantly in R. Taggart Murphy’s The Weight of the Yen–became the cornerstone of a new international economic arrangement.

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ΩΩOf course, this was never ‘explicitly’ agreed!  DUH!  It is immensely illegal: it is total currency manipulation!  Big time!  And it is a conspiracy: the US ruling elites wanted tax cuts. They couldn’t do this unless someone agreed to buy US debt, first.  The Japanese made this devil’s deal and the US elites were very happy with it: the value of wealth has shifted in the US from the middle class to the elites thanks to this devilish deal.  Instead of holding 20% of US wealth, the very rich top 1% now holds half of US wealth!  And the middle class is rapidly losing all forms of employment.

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ΩΩHere is a Japanese article debunking all the US/UK hysteria about how China is on the verge of collapse:  China is doing very nicely for the moment, thank you › Japan Today: Japan News and Discussion

China’s extraordinary statistics tell a decidedly different story from the doom and gloom in Japan and the West. While the G-8 nations fear a double dip recession and voice concerns over happens next once all the massive state funding is removed, China sails regally on.

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China’s critics may well be correct to caution over the massaging of some of the numbers, but the general picture is surely hard to refute. An 8.7% GDP growth and a juicy $364 billion current account surplus isn’t too bad when compared with the United States’ meager 0.1% GDP record and and its $465 billion deficit. Japan, incidentally, comes in somewhere between the U.S. and the PRC with a respectable current account balance but remains in negative territory over the latest GDP results….

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HAHAHA….um, Japan is again, ahead of the US in current account balance, big time.  They have a positive flow while the US exports more and more and more and has a greater and greater negative current account flow.

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….Clearly, China is transforming itself at high speed into an economy with a formidable industrial presence coupled with a much improved infrastructure and an advancing rural sector. Wen and the Communist Party expect to continue with their balancing act of encouraging market reforms, while utilizing “the socialist system’s advantages” over decision-making and the directing of resources.

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ΩΩThe entire world watches the US elites destroy the US while Chinese elites make the Chinese richer and stronger.  Conditions in the US are deteriorating badly.  Conditions in China are IMPROVING RAPIDLY.  There is social unrest in China but this is healthy unrest: the workers want more and are able to fight for more.  While in the US, whole industries are removed and US workers are helpless.  They have given up hope. They hang their heads in shame and shuffle away from shuttered factories, hoping to get a job in some whorehouse or casino or deal illegal drugs.

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ΩΩYes, illegal drugs have taken off in all working class communities.  Especially the new trade in antidepressants which can be ground up and cooked and then injected.  And speed: to run around, being reckless, ingesting speed and then injecting antidepressants leads to an up/down life that erases memories of being a productive worker.  The moral collapse can’t be fixed by joining a religion.  A whipped dog doesn’t become a pack leader by praying to gods.  There is only one way: to fight back.  This means, taking on the free trade demons who infest our government and academia.  This emphatically includes the stupid Dr. Krugman.

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Credit Feast And Famine – Forbes.com

In the 2000–08 period bank credit outstanding doubled from $4.7 trillion to $9.4 trillion, but that was hardly the sum total of the intoxicant that soused the world financial system. To avoid minimum capital requirements mandated by the Basel Accord, banks created off-balance-sheet vehicles and coupled them with new methods of securitization to juice total so-called nonbank credit (that includes lending by insurance, mortgage and finance companies but excludes asset-backed securities, commercial paper and repurchase agreements) from $6.3 trillion to $14.9 trillion.

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ΩΩThat is, upfront credit doubled in only 8 years which is a classic ‘hockey stick’ graph dynamic and worse, the non-traditional credit which grew out of the trade deficit/FOREX holding system more than doubled!  If we add both the ‘normal’ and the ‘new’ credit created from 200-2008, it was $34.3 trillion dollars were created out of thin air but this was capitalized by the US trade deficit.  Yes, capital creation is the key here: Asian and EU industries produced manufactured goods which capitalized credit markets via lending from ZIRP banks in Japan and then ‘carried’ to other banks which then was used to capitalize more lending by these international banks.

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ΩΩUnderstanding this is very important and nearly totally ignored.  I talked about this back in 2005 and it is about time that other economists catch up and figure this obvious thing out before it is too late.  Steve Forbes loves tax cutting and wants more tax cuts so it is amusing that his own magazine points out that trade imbalances coupled with government overspending leads to destruction.  Yet, he wants more of this.  He loves free trade and tax cutting.  His solution is the stupid Tea Party solution: cut all social spending to the bone. Then, the poor die off, displaced workers imitate Japanese workers and cease breeding, and voila!  The rich can keep the loot and the poor die.  Happy days, if one is cruel and self-centered!

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ΩΩEasy credit will not fix what is ailing the US.  We had years of easy credit and all it did was accelerate job losses and eat out the heart of our own industrial empire.  Trade deficits got much, much worse, very fast.  The US trade deficit from 200-2008 was about $3.4 trillion which happens to be 10% of global credit creation!  And this is what ‘capitalized’ global credit!!!

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Feldstein Sees Greek Euro-Exit Pressure as Plan Fails (Update1) – Bloomberg.com

Harvard University Professor Martin Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis.

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Under pressure from investors and fellow policy makers, Prime Minister George Papandreou’s government is striving to knock four percentage points off its budget gap this year from 12.7 percent of gross domestic product and has vowed to meet the EU’s 3 percent limit in 2012 for the first time since 2006.

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“The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan, said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.”

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His diagnosis clashes with that of European Central Bank President Jean-Claude Trichet, who calls Greece’s strategy “convincing” and rejects as “absurd” any speculation it might leave the euro zone. Investors nevertheless aren’t ruling out Feldstein’s analysis. Billionaire George Soros said last month that the euro “may not survive,” and credit default swaps indicate a 22 percent chance Greece will default within five years, up from 16 percent a year ago.

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ΩΩThis is always the solution: cut social spending.  The IMF does this all the time: to get an IMF loan, first, a country must promise to cut spending.  The US will be forced to do this. Of course, the US could raise taxes on the rich back to the pre-Reagan levels.  HAHAHA….but this is not even mentioned.  This is why the ‘Tea Party’ is being massaged and petted by the GOP: they are successfully turning this reactionary band from talking about the Federal Reserve or war spending and aiming this organization to be the front for cutting social spending and denying medical care to the poor.  The poor will die.

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ΩΩNow, to remind readers what is sane and what is crazy, if inoculations against dangerous deadly diseases are ‘killing’ people, there would be no reason to deny medical care to the poor, all we would do is give them vaccinations.  Of course, vaccinations save lives and protect the poor from epidemics.  So they live. This means, they need other forms of medical care and this is puzzling the elites who want to be humane but who don’t want to spend lots of tax money keeping people alive.  See, vaccinations are CHEAP.  As well as ridiculously safe, not deadly at all.

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ΩΩBut modern medical care is expensive!  This is why we are engaged in a very crazy debate about national health insurance.  All our trade rivals have this!  We don’t.  And excess US workers are an embarrassment and so letting them slowly die of various illnesses that are expensive is increasingly the end result of cutting social services while destroying the national industrial base!  The plan is to provide minimal health services to prevent epidemics which can strike at rich people, while denying all other forms of medical care.  An odd situation that is easy to figure out if one isn’t all tied up in knots, trying to prove the ridiculous contention that vaccinations are a plot to kill everyone.

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ΩΩNow, people hate me when I mention this sort of thing because it clashes with contemporary paranoias.  Well, sorry, but being unable to see reality leads to death.  The ruling elites are NOT TOTALLY EVIL, they are often STUPID.  And want to have their own way instead of looking at things rationally. Humans struggle to be rational.  Sometimes, the elites try very hard to do the right thing but then, greed takes over and they do stupid things.  This has to be understood:  NO ONE IS PERFECT.  Whoever runs any system is prey to greed and delusional thinking.  Just as if anti-vaccinationists were to take over and rule us, they would immediately remove one of the best protections against epidemics and deadly diseases and a billion people will die!

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ΩΩIf people who fear global warming take over, they will cheerfully freeze to death everyone in the northern hemisphere which is very cold (all the places that used to be under a mile of ice in previous Ice Ages!) which is why I distrust and even dislike many global warming believers.  They don’t care if we die!  Many of these people live in balmy places!  Even Al Gore lives in a very balmy place, he should  move to Vermont and then talk about restricting CO2 production.

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ΩΩThis is why I sound so bizarre to people: I don’t have an ideology, I don’t hate all bankers or all ruling elites or all vaccinations or so on.  I feel we must thread our way carefully through the maze, not blast forwards, ignoring things.  This is why vaccinations must have birth controls running alongside: vaccinations are so successful, nearly everyone lives!  And don’t die of hideous epidemics.  But this destroys the ecosystem due to too many humans.  And yet, there are people who believe the elites want to kill us…one of the most unsuccessful programs on earth must be the ‘elites want to kill us’ since human populations are doubling every dozen years!  Except in Communist China which restricts the birth rate via fiat. And who is most successful today?

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ΩΩCHINA!!!!  Wow.  Amazing, isn’t it?  And China also pushes vaccinations of children!  And isn’t having lots of dead children because of this.  China is also expanding schools and improving the lives of the peasants as much as humanly possible.  Why is this?

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ΩΩGermany was one of the very first countries to have both national vaccination systems coupled with national schools including inventing ‘Kindergartens’ which have a German name even today, and Germany invented the national health insurance system as well as other things all designed to move the peasants rapidly from being weak, unhealthy and ill educated to being healthy, strong and powerful.  To this day, Germany beats the US in industrial global expansion and has a better social system that doesn’t have a huge gulf between rich and poor like we see in the US.  And China is imitating Germany, not the US.  Indeed, in the 19th century, when Japan sent envoys across the planet to see who best to imitate, they decided to imitate Germany, not the US!

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ΩΩTo this day, Japanese students often still wear pre-WWI German style uniforms and until very recently, Japan also had Saturday schooling like in Germany (yes, half days on Saturday!  How well I remembered this!).  The US has to reform many systems and as I keep saying, we have to imitate our RIVALS, not do as we please.  We are in competition with rivals.

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Alistair Darling ‘risking a run on the banks’ by refusing to bail out town halls – Times Online

Alistair Darling refused last night to bow to demands by town halls, police authorities and charities to protect £1 billion of taxpayers’ money held in collapsed Icelandic banks.

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After an emergency meeting between ministers and council chiefs the Chancellor agreed to give “appropriate” help in the severest cases. But he rejected their call to extend the guarantee from individual savers to public and commercial bodies who also risk losing their cash.

.

Even as the meeting took place The Times learnt that some town halls were considering withdrawing all their cash from private institutions and putting it into more secure Government bonds. If dozens of councils follow suit this could lead to a damaging run on the banks, local government experts cautioned. Westminster and Kensington and Chelsea, two top London councils, said that they were looking at this option.

ΩΩΩΩΩΩΩΩΩΩΩΩ

 

ΩΩAsia puts their money in EU, UK and US government bonds!  But England wants its own towns to put their money into private banks to keep these capitalized.  HAHAHA.  And this is why Britain wants money from the poor people of Iceland: to capitalize British borrowing, they must do this.  The Crown has no desire to bail out the British people.  The Crown is a parasite that eats wealth and the Crown colonies that are banking pirate coves eat the British financial system and depletes tax revenues by hiding wealth offshore.  And the British people can fix this by getting rid of the Queen who is a total leech, anyway.  Note that China got rid of their royals!  As did the Germans.  But not the Japanese which is probably why the workers there are mired in poverty while Japan’s elites feast off of immense trade surpluses.

sunset borger

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30 Comments

Filed under .diplomacy, .money matters, Free Trade, gold

30 responses to “US Wants ONLY China To Stop Using FOREX Holdings As Currency Tool

  1. CK

    CK wonders if there are any chinese-israeli dual nationals that could be foisted onto the chinese government? Where is the Chinese Emmanuel or Chertov.
    Watching the parasites infest and hollow out the USA is sorta fun. In a few decades the USA will be just another backwater in the world, a spectator on the great game instead of a motivator. Or maybe not, either way I will be dead and aprés moi let it rain let it rain let it rain ( to paraphrase one of the old french kings.)

  2. CK

    So I read along and see the paens of praise to the american bunting and flag industry. Wonder where the sewing machines were made. Wasn’t someone on this blog condemming the sewing of sneakers as a non nation building job. Flags are different I guess. Sprightly young seamstress in the photo, all the old workers must have retired.

    ΩΩΩΩΩΩΩΩΩ

    ELAINE: The point is, the ONLY industry that is protected by barriers is this flag sewing business.

  3. EconCurious

    I so often hear stories about China (and Japan) manipulating its currency by buying dollars to keep the exchange rate artificially low. But isn’t this just a by-product of their current account surplus? If I am a U.S. importer, I have to pay for Chinese goods with yuan. So I will go to a Chinese bank or foreign exchange dealer to trade my dollars for yuan. That bank, in turn, probably does not want to hold dollars, so it will go to the Chinese central bank and sell the dollars to get yuan. The result of this is a massive pile-up of dollars at the Chinese central bank. There doesn’t seem to be anything sinister in this; it’s just what happens when you run a current account surplus.

    I guess the question is what exchange rate the central bank provides to the local banks (they do seem to have control over this). If they don’t allow their own currency to rise, there will be a flood of yuan circulating in the Chinese economy with every new dollar that comes in. I suppose this should be inflationary? Perhaps they offset some of this by increasing the banks’ reserve requirements (i.e., sterilization?)

    ΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: Yes, you are correct in every detail. Yes, this is not due to ‘evil Chinese’, all our trade partners do this! This is due to the trade surplus on the side of our trade partners. It is a SYMPTOM not a cause. The cause is simple: lower wages or more government support of exporters such as Japan’s MITI supporting Toyota exports.

  4. PLovering

    @DrKrbyLuv

    What’s with the huge sale of US physical gold?

  5. ”global warming believers”

    glad you are not referring to me, i don’t ‘believe’ i just can’t deny the theory and have to follow the evidence.

    ΩΩΩΩΩΩΩΩΩ

    ELAINE: I spent half of today digging out glacial till rocks, one of which was just immense. Dropped by mile thick ice sheets.

  6. Joseppi

    Elaine whipped up an impressive, thought provoking tutorial today.

    The expectation of immanent collapse of the present imbalance of trade and the resulting FOREX accumulations seems to be unfounded.
    If we consider the benefits to China and Japan and the US ruling elites with their low taxes and cheap imports. Everyone is happy except of course the excess population of US workers, which is going to be thinned by denying them health care. (Brilliant deduction Elaine!)

    The Japanese Yen carry trade, diminished but still in place and joined by the dollar carry trade is attempting to resuscitate the gasping credit markets, while the Chinese, instead of using their cash reserves in a carry trade because of the inconvertibility of the remembi, use their ability to presently create credit from their FORE reserves into domestic infrastructure and oil imports and therefor assuring them future empowerment.

    In this dynamic tension of the imbalance trade and currency misalignments there is the insanity factor that hangs over this international drama like a flock of Black Swans flying over head ready to poop nukes.
    The irrationality of greed is the alpha leader of this flock of Back Swans. The other element that gives the situation unpredictability is if the peasants put the puzzle together and realize that they can change the course of history.

    ΩΩΩΩΩΩΩΩΩΩ

    ELAINE: All humans are crazy as far as other animals are concerned. Even our dogs think we are nuts but don’t mind this, we feed them and let them have fun. Our cats tolerate our insanity but have to give us frequent warnings to watch out.

  7. DeVaul

    History has shown that the peasants never put all the pieces of the puzzle together, much less manage to hack through all the jungles of disinformation and outright lies.

    That leaves the Black Swan event. History has shown that a few insane individuals at the very top can conspire with each other to drop a nuke on a defenseless city and then make excuses for it that are believed by many people for generations thereafter.

    I don’t mean to be all doom and gloom, but this is what history shows. On a brighter note, one nuclear power did collapse recently and no one was nuked, so…

    There is still hope. Not alot, but some.

    ΩΩΩΩΩΩΩΩΩ

    ELAINE: I often remark on that. Russia fell and didn’t bring Götterdämmerung down upon all of our heads. Even after losing in Afghanistan.

  8. Dibbles

    Elaine,
    You wrote “…the US has to pretend that only China ‘manipulates’ currency values.”

    “…if we think we can beat China in a nuclear war: no. We can’t.”

    Isn’t that what the currency carry trade is all about? Central bankers manipulating to maximize profit? Sovereign nations do it for their country and provide reward for productivity. Global free-traders do it for themselves using other peoples’ investment and retirement accounts from their productivity.

    This seems like a “show’em or fold’em” moment when the global free-trade crowd’s response is to pretend and single out China’s currency manipulation.

    We have a FIRE economy (paper flipping) instead of a real productivity oriented one. So trying to out-psych everyone in the world – like it’s just a big game of Texas Hold ‘em” – generates real wealth for “the house” (global investment bankers). But “the house security” got tied-up in the middle east. So when “the house” loses money, we cooks and bottle-washers have to pony-up and pay-off. The American post-, present- and future- working class has to be put on austerity programs in order to transfer our real wealth to the global poker players to keep the game going.

    ΩΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: Correct in all areas covered, yup. :)

  9. Dibbles

    Kind of OT, but kind of not. I came across these articles yesterday and today:

    Brazil steps between Israel and Iran

    http://www.atimes.com/atimes/Middle_East/LC18Ak03.html

    Brazil President in West Bank: I dream of a free Palestine

    http://www.haaretz.com/hasen/spages/1157087.html

    The different perspectives is quite telling.

  10. JT

    I´m not totally sure that China holds all the cards.
    Right now China has a choice either to keep up buying dollars and keep 6% growth (import inflation).
    Or let Yuan go higher and face a recession.
    IMO the US plan of making China a free market economy has partly worked, the Chinese leadership has to keep the people happy and the economy growing.
    They do not have quite as much power as they used to.

    On the other hand the US could do what Elaine suggests and start putting up trade barriers and import taxes (both of which Europe would propably follow).
    And see how China and big companies react.
    I think Europe will put up import taxes based on CO2 emissions of products in the near future.
    Are you totally sure US will not do this sometime in the future too? The big multinationals would lobby against this of course.

    Inflation is the thing that makes everybody happy now.
    a us debt
    b china growth
    c multinationals make huge profits (selling cheap Chinese stuff to westeners at western prices)

    The losers are of course western middle class and the 50 million western workers who will be out of a job.
    But all the big boys are happy with the current situation.
    Isn´t it funny that everybody else except the US has to worry about the value of the dollar?
    US has only debt (companies, consumers and government).

    It´s good to use the reserve currency as your own. Even though you have to protect it with military.
    If that status changes (especially oil trading in other currencies than $) the fall is propably fast. Then you cannot buy Chinese stuff anymore and China will dump you in a heartbeat.
    That maybe still 10-20 years away as Elaine says.
    But that is not the end. I´ve seen it in Russia. Few years of disarray and new bold amero and on with the show ;) .
    100 hundred years from now the Chinese will have the same problems.

    ΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: The CO2 tax must be prorated so that people in the northern areas that are not warm at all, are not hammered by this tax. Since this is NOT the plan but the opposite, the cold, dark north (very few people in the southern hemisphere see even any snow!) will be very unpleasant if there is a CO2 tax. Everyone will have to move to balmy places. I prefer for it to be warmer here than to be forced to move. I would suggest northerners will move violently (displace balmy weather people via using bombs) so the CO2 tax is a no starter.

  11. Dibbles

    JT @ 8:48 pm

    “I´m not totally sure that China holds all the cards.”

    I’m not either. But I know that we have losing cards at present unless our federal government sends in the EMTs and tries reviving the cooks and bottle washers. And if that’s successful there’d better be pay raises for the resuscitated.

    China’s internal currency allows them alot more maneuvering power for their citizens than our global debt currency (backed by you and me).

    We should drop the “global economy” charade and go back to international trade. If that includes tariffs, so be it. But let’s drop the CO2 pretense and be honest about “global free trade” failing the vast majority of American citizens.

    Who cares about multinationals?! They haven’t done anything for Americans except use them and destroy a productive middle-class. If they want to keep using us, then they need to go back to paying their fair share of taxes.

    I won’t be around 100 years from now and at the rate we’re going our country may not be either. But those elusive “global” citizens may be.

    ΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: When China has a straight Ace-royal flush hand while the US holds 2 deuces, a joker and the Queen of Spades, guess who gets the pot?

  12. adammateyko

    The US could adopt an internal and an external form of currency just as the Chinese have in place. The UK used currency controls in the past. In fact with the electronic form of money, simple rules of exhange for inside/outside use of USd or what the external USd can buy, can be implemented. We should look for signs of experiments in out of the way places of commerce or fx to see if this is being tried out. In fact the good example is the UNOCAL deal blockage which showed that external USD are not freely convertible at all.

    And would China be allowed to buy Northrup Grumman or General Dynamics? NO way.

  13. PLovering

    Corrupt Scientist who lied about vaccines and autism vanishes with millions, by F William Engdahl

    http://tinyurl.com/ydzb3ef

    ΩΩΩΩΩΩΩΩΩΩΩΩΩΩ

    ELAINE: I keep wondering when you will get some interesting communicable disease. You know, there will soon be a vaccination for HIV, for example.

  14. Dibbles

    adammateyko @ 9:53 pm

    I think the dual-currency idea is worth pursuing too, at least and until Glass-Steagall and regulation is re-legislated. The “good bank/bad bank idea was discussed, but I don’t know what’s become of that or how it would work.

    A dual currency system could work for our states if it were like the Silver Note that JFK introduced. And it would allow the federal government to do it’s job of issuing “coin” for the states instead of those people from Globalistan.

  15. newoaktown

    Jfk introduced a “silver note”? I’ve never heard of that before.

    Do tell.

  16. newoaktown

    This is only one webpage and I don’t have time to research further. However if true this completely explains motive for JFK’s assassination.

    http://www.john-f-kennedy.net/executiveorder11110.htm

  17. Dibbles

    Re Ex. Order 11110

    Yes, I have vague memories of seeing these. Those Silver Certificates that were not destroyed are still in existence in private collections.

  18. Dibbles

    Just another thought:

    I believe the Executive Order allowed JFK to issue these through the Treasury Dept. since Congress had “farmed out” their responsibility in 1913.

    Also, according to Ellen Brown (if my memory is not too fuzzy), the Federal Reserve Act stipulates that the federal government can rescind the Act by paying the Federal Reserve X amount of dollars (in the millions – not billions or trillions).

  19. OT, but if you don’t look at that link i posted above you miss THE most amazing thing i’ve ever seen.

  20. Joseppi

    China boomeranging US dollars back into foreign financial companies….

    http://chinastakes.com/2010/3/safes-billions-slipping-into-us-foreign-markets.html

    “If China abandons the US dollar peg, then the yuan should under current circumstances increase in value. That is, China’s currency should buy more oil, more iron ore and other imported items which its domestic economy needs.

    Perhaps, what Governor Zhou is really saying is that China’s policy needs to shift from favoring an increase in its foreign exchange reserves to increasing the purchasing power of it currency. The later will have a much greater impact on moderating inflation than monetary tightening. Fixed exchange rates are joined at the hip with China’s inflation risks. If this analysis is correct and if such a switch does occur, then hopefully this switch in policy will occur simultaneously with increase capital mobility for Chinese investors who wish to invest abroad.”

    http://chinastakes.com/2010/3/are-there-advantages-to-governor-zhou-xiaochuans-dollar-peg-exit.html

    ΩΩΩΩΩΩΩΩΩΩ

    ELAINE: The Chinese recognize that they, not the US, will benefit even if the dollar collapses. Everyone will rush to the euro or the yuan.

  21. DrKrbyLuv

    PLovering wrote:

    @DrKrbyLuv

    What’s with the huge sale of US physical gold?
    ______________________________

    I was hoping to find some verification of the story:

    “Note the HUGE size of the transaction, which in bullion terms, at 1,000 per ounce would represent ¾ of all sovereign gold alleged to be held by the U.S. Secondly, note that the authors of this report [that being the Fed] did not report this MASSIVE transaction in the quarter which it occurred. Additionally, when this transaction was finally allocated it was not highlighted, asterisked, or footnoted as having occurred in a period other than the current reporting period [most people only look at the current period]. What is one to think of this style of reporting of such a major transaction involving a notional amount representing ¾ of the entire U.S. sovereign gold reserve?”

    http://news.goldseek.com/GoldSeek/1268755740.php

    GATA posted it today without comment or verification. I don’t know that it matters as it looks to me like our gold became the property of the private Federal Reserve back in 1933.

    Under the Emergency Banking Act of March 9, 1933, the secretary of the Treasury issued orders requiring all gold coin, gold bullion, and gold certificates to be delivered to the Treasurer of the United States. A new type of gold certificate, series of 1934, in denominations of $100, $1,000, $10,000, and $100,000, was issued only to Federal Reserve banks. The special gold certificates were never issued again after 1935.

    In 1983, the “Report to the Congress of the Commission on the Role of Gold in the Domestic and International Monetary Systems” was published. In it, is a revealing statement:
    _ _ _
    “Gold certificates…are a liability of the Treasury, are issued to the Federal Reserve by the Treasury against its gold holding. The certificates represent a Federal Reserve claim on the assets of the Treasury, for which the Treasury has recieved a counterpart deposit in its account with the Federal Reserve.

    All gold held by the Tresury has been monetized in this fashion.”
    _ _ _

    It looks like the U.S. Treasury has been storing rather than owning our gold for the past 50 years. Good ‘ol FDR was a treasonous snake.

  22. DrKrbyLuv

    @ Plovering

    “Corrupt Scientist who lied about vaccines and autism vanishes with millions, by F William Engdahl”

    You might want to have a look at “MURDER BY INJECTION, The Story of the Medical Conspiracy Against America” by Eustace Mullins…available free online

    http://www.bibliotecapleyades.net/archivos_pdf/murderinjection.pdf

    Written in 1988, it gains credibility by accurately predicting much of what we are seeing today.

  23. PLovering

    @DrKrbyLuv,

    “He who owns the gold, makes the rules.”

    The Zionazis have been stealing and hoarding gold for centuries. Come the Rapture and gold based money, they figure to be in total control.

    Eustance Mullins and I are old acquaintances. Nobody understood the Zionazis Agenda better than Mullins.

    Vaccines are very productive … just ask the 250,000 USA soldiers with Gulf War Syndrome.

    The Fed just announced that it was changing its policy from bailing out banks and real estate. Now, the Fed says it “will employ its policy tools as necessary to promote economic recovery and price stability” … read destruction of the dollar.

    The six D’s in order of appearance:

    De-leveraging, disinflation, deflation, depression, default, and Doomsday.

    Just two D’s to go.

    ΩΩΩΩΩΩΩΩΩΩ

    ELAINE: The death rate from vaccinations is utterly dwarfed by the lives saved by vaccinations. Tremendously. Therefore, Mullins and others who believe otherwise are delusional.

  24. ron_o

    Elaine said:
    “See? By 2008, some economists finally figured out what I figured out back in 1986 when the Chinese swore they would imitate Japan’s FOREX holding system.”

    R. Taggart Murphy’s, “The Weight of the Yen” was written in 1996-’97.

  25. emsnews

    Yes, some individuals did figure this yen business out (aside from the Chinese, obviously) and guess what? No one listened to them, either.

  26. thank’s for your information. i will follow your step for get the winning

  27. MJ

    I recently came accross your site and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

  28. ika

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