The Currency War

Reality is a funny thing. It exists mostly in the Thoughts of men. During times of change those Thoughts will eventually coalesce into physical reality. Right now there are many different Thoughts making their way through the world. Everyone knows that we are in a time of change, but the reality of that change has yet to coalesce.

We are truly in the opening rounds of the "currency war" that Another spoke of:

If one closely follows "in the footsteps of giants" ( not the book ) , he will also be preparing for a "currency war"! Time passes, thoughts change, people consider and value is perceived differently. Persons say, "the seasons are all the same", but we know "the weather is never the same". A storm approaches YOUR SHORES from across the pacific! -Another, March 26, 1998

There is much talk circulating right now about "a new currency". Jim Willie hears talk that there is a plan to "kill off the US" with a currency basket that includes the Ruble, the Euro, the Yen and the Dinar.

Europe is presenting "a blueprint for a new worldwide currency system" to President Bush this weekend!

(Hat tip Randy)


The UAE is talking about "isolating" itself from "negative global sentiment".

The UAE stock markets must conclusively break their correlation with global exchanges to sustain upward momentum in the longer term...If this is achieved, the UAE could become a safe haven for overseas funds, especially now that the government has guaranteed all bank deposits.

On Friday, Bahrain denied rumors that it will depeg it's currency from the dollar.

"There is no change affecting the relation between the Bahraini dinar and the dollar, and we will maintain the ratio," he said.

Kuwait, the fourth largest OPEC producer, continues to struggle with high inflation exported by the US even a year and a half after depegging from the dollar.

Emerging economies such as China and India are now to be included in the November G8 "global bank reform summit" in the US.

Here is a short and interesting South African perspective.

And here is what I think is going on:

In hindsight, Paulson's "rescue plan" of the past 3 months comes into very clear focus. From the beginning it was a top-down confidence game (a con) on the rest of the world in favor of the dollar. The plan was to shore up a select few of the top financial institutions (the one's that Paulson could "count on") with other people's money, pay off a few of the most powerful victims of the fraud (perhaps China's central bank), and make the dollar appear to be strong.

And because the Euro has squandered its initial promise over the past decade in favor of the dollar faction, it was easy for Paulson to get the European central banks to cooperate which provided cover for his very self centered actions.

This mountain of money injections by Paulson and Bernanke have helped only a select few at the very top by removing the consequences of their bad bets and making someone else pay those consequences. Everyone else has been screwed. Americans have watched their 401K's evaporate and the rest of the world has felt equal or greater pain.

And the "smoke and mirror" efforts to make the dollar appear strong have caused grievous injury to almost every other nation around the world. If you listened to the Jim Puplava audio in my previous post, it is clear that these efforts began in great earnest on July 15th, 2008. Paulson, through the President's Working Group on Financial Markets, also known informally as the PPT (the Plunge Protection Team), which includes JPMorgan, Goldman Sachs and the US Federal Reserve, began a massive campaign of short selling gold, oil, and other worldwide commodities.

At the same time, Paulson banned the short selling of US Financial firms like JPMorgan and Goldman Sachs through the SEC. This had the effect of reversing the market trend of 2008 up to that point. It caused great losses in the net worth of many people who had been making correct bets in the markets, and it did massive damage to countries around the world who stake their international claim as suppliers of gold, oil and other commodities.

The dollar appears strong when less dollars can buy more oil, gold and commodities. That is the way it works. Also, by getting the European central bankers to adopt his tactics, he ensured that the Euro would continue to decline faster than the dollar, making the dollar appear to rise on the USDX which is a worldwide accepted gauge of dollar strength, even though it is mostly measured against the Euro.

So in other words, Hank Paulson "stopped the bleeding" on Wall Street by rescuing his friends (and his own retirement, scheduled to begin January 20th, 2009), paid off the most immediate threats (China dumping dollar holdings), and screwed over the entire world to create the false impression that the dollar is still the strongest currency on earth and should be loved and used by everyone because it is so great.

Now this might have worked except that it is soooo damn transparent that even a commoner like me can see what he did. And the clearest sign that his con job on the world has failed is all this talk now about a new world currency.

So that brings us to the Middle Eastern oil producing countries. They have something THE WHOLE WORLD NEEDS! Oil! And what do we have to offer in return? Paper! Do they need our paper? I think not. They are perfectly capable of making their own paper.

In fact, as it stands right now their valuable commodity, oil, is at the mercy of our "paper oil" in New York City. This was clearly evident on September 22nd when oil prices briefly spiked up 25% as buyers insisted on physical delivery and the sellers of "paper oil" had to scramble to find some "real oil" to deliver.

Now if I know this, don't you think OPEC does too?

Which brings us to this OPEC meeting on Friday in Vienna. What is the purpose of an OPEC meeting? The real purpose is the press conference after the meeting and the statement that they will make. It is this statement that affects the markets. Again, reality is in the Thoughts of men.

One thing all these players know is that whomever owns the press that prints the currency in which oil is priced and sold, owns something much more valuable than gold!

Ownership of that very printing press is what has made America into THE superpower.

The battle lines have been drawn. Talk of a new currency is "in the air". Who will print the new reserve currency? As Another taught us, it is the currency that prices oil that IS the reserve currency of the world.

Here are the faces of the Dollar/Euro faction:









And here are the faces of OPEC, as found in a simple Google image search of "OPEC":
















Can you see the difference?

The world should pay close attention to the press conference after the OPEC meeting on Friday. My guess is that there is about a 25% probability that it will be VERY important.

One question still needs to be answered. On March 31, 1998, Another asked:

The world US dollar based economy is about to change, and America will find "no point" for warships in the Gulf. I ask you now, "who will defend Arabia"?

Does anybody know the answer?