Sunday, October 19, 2008

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?


Anonymous said...

Very inspiring article FOFOA, thank you.

By Arabia, I assume you mean Saudi Arabia. Here are my thoughts on the protection idea. The rising powerhouses as I see it are Russia, China, India and Brazil. These will vy for the oil.

Russia has it's own oil. It might very well want to control Saudi Arabia in order to be the sole power house. However I fell Russia will not risk such behaviour since they seem to be on semi friendly terms with China.

Brazil, has supposedly found its own oil that dwarfs many of the largest oil fields. I don't think they have the means currently to focus on this oil field as well as Saudi Arabia's.

This leaves China and India. I'm not very familiar with the two countries terms, but I believe that they are unfriendly. The two countries both need out from foreign places and both are close to Saudi Arabia. I believe that India has the backing from the U.S. and China has backing from Russia. China vs. India. Thus the struggle ensues!

Justin_n_IL said...
This comment has been removed by the author.
Justin_n_IL said...

Who will defend Arabia? A bit of research reveals that they are becoming cozy with Russia. As you eluded to, OPEC is not dumb. They know full well that the dollar is on it's death bed. In fact most everyone on the planet knows that except for the American populous. Look for Arabia to buddy up to the next strongest (militarily) nation on the planet.

Another bit of research reveals that Russia and China a.k.a. the Kings of the East have grand plans for America. Sweeping it with the broom of destruction. It's plain to see that the rest of the world is befriending those two nations. At the end of the day it's about "survival".

If anyone thinks that Russia and China will be content with a third world America think again. They have a agenda that assures America will never have the chance of being the global bully again. There's only one way to assure such a thing.

As far as Russia and China being uneasy friends think again. There is a grand deception being put out by those two. They window dress so as to make it look like they are not really pals. Once again a bit of research reveals that they are in cahoots with one another militarily. Their plans are to get rid of America and divide the world amongst themselves. Are they dumb enough enough to reveal such a thing in plain sight?

Anonymous said...

"Can you see the difference?"

Non-whites vs. whites (caucasians)? East against West? Smiling against not-so-smiling? Oil vs. gold?

What did you mean?

Anonymous said...

"As far as Russia and China being uneasy friends think again"

Very intersting justin_n_il, and very convincing. However I'm still wondering what will happen with India and Brazil? Both emerging and very populous. Also Russia and China have only one thing in common "Get rid of the U.S." I'm sure they will be vying for the upperhand once America is ruined.

FOFOA said...

Yes, there are many differences. That is what I mean. This isn't just two groups with a difference of opinion like Republicans and Democrats. These are two groups of people that come from very different worlds. The differences run very deep.

Capt. and Justin,
Those are good points. One possible outcome I can imagine is that it will still be US warships that will "defend Arabia". The difference would be that the Commander in Chief would ultimately answer to the Saudi Royals.

It wouldn't be very different than a billionaire Saudi Princess who lives in Bel Air in Beverly Hills and hires the LAPD to provide security at her compound. LAPD officers paid by her sit outside the gates. Inside the gates she has stealthy security which roams the grounds. True story.

He who controls the currency which prices oil has the benefit of running unlimited budget and trade deficits. That is how we have financed our military. Without that control, we will need a new way to finance it.

This outcome would be seen by the US as preferable to "mothballing" our military machine. And to "Arabia", or at least to the elites in "Arabia", this may be the best alternative as they may not trust the other alternatives.

Also, our warships could not do anything that would upset those who could turn off the oil and financing spigots in a heartbeat. So imagine that any action outside of the Gulf region that would be considered by the Pentagon would first have to be cleared through Riyadh. On first glance, this world would look very similar to now. But under the surface it would be very different.

FOFOA said...

Also, if this were judged by "Arabia" to be preferable to, say, Russian warships in the Gulf, then they may want to make a move on the currency front before anyone else does. The earliest bird usually gets the worm.

FOFOA said...

Jim Willie Interview

FOFOA said...

OPEC discussion on Al Jazeera

FOFOA said...

Wow. Today sure looks like a "strong dollar" day. The dollar is up and literally everything else is down. Gold, stocks, foreign currency. Only the dollar is green on Kitco.

Here is a quote from ANOTHER:
"The US$ is soon to become a " regular paper currency"! To this end, holders of US dollars and US$ assets, must make a decision that will impact all assets, worldwide! To this end, assets will move to "physical gold " and cash dollars" first, driving up the dollar against all currencies. Then the dollar will be sold as it is deployed into real things. - April 18,1998

Jim Rogers said the same thing in this CNBC interview yesterday:

And in the Jim Willie interview above he said that the one thing he got wrong over the past couple years was this dollar strength we are seeing. But that he now realizes this dollar strength is a sign of the end of the dollar.

I wonder if the PPT has considered this.

FOFOA said...

Russia is getting cozy with OPEC members.

"The meetings went well and big decisions were made"

Also indicated in this ariticle is that gas in addition to oil is an important component of energy control for world domination.

Anonymous said...

Good analysis.

At the risk of sounding "unpatriotic," it's about time that someone challenged U.S. domination of the world.

I've been wondering if there's something deeper going on with gold than manipulation for its own sake, or to benefit the dollar.

We're seeing the following today:

* Prices manipulated downward to dissuade purchase and encourage liquidation
* Supply seemingly constrained worldwide to limit access; mints not selling coins to public
* TV commercials offering to buy gold seemingly irrespective of price movements (are these government front companies?)
* Central banks no longer selling
* Miners getting hammered

Superficially, one might conclude that the powers-that-be are simply suppressing gold and silver to boost the dollar. But is there more to it? Are all these present conditions part of a plan to covertly "confiscate" gold in preparation for some purpose, such as a new, gold-backed currency?


Anonymous said...

I dont see how can they introduce a gold-backed currency without a collapse in the $ and all debt denominated in it. It is a mess to unwind that.

Confiscation again? Sounds extreme but governments have such powers. This time however, I wonder if they have the manpower to get that done. Subtle confiscation as in the post above? Maybe.

In any way, we should be seeing some movement, both internationally and in the US in order to trigger things. It seems quiet now, everyone is waiting.

Maybe just a new panic on Wall Street triggered by technical breakdowns in the trading patterns of the indexes? Or a sudden default on COMEX brought by a play from a "big guy"? I will personally watch pension funds as a next domino.

FOFOA said...

From timecode 13:50 to 16:40 in this video clip, John Embry of Sprott Mgmt. discusses the possibility of a COMEX default come the December contract expiry.

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