Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the currency wars raged with a vengeance overnight.
US Federal Reserve Chairman Ben Bernanke said overnight he was ready to buy more US Treasury bonds, setting in stone expectations the Fed will unleash a second round of quantitative easing (QE II) or money printing from its November 3 meeting, shortly after mid-term elections.
This talk dragged the US dollar lower against most currencies, including the New Zealand dollar, which rose towards 75 USc in early trade.
The gold price jumped to a fresh record high of US$1,342/oz and the oil price rose to nearly US$83/barrel as investors repriced the commodities to take account of a deavluing US dollar.
Meanwhile in Asia, the Bank of Japan cut its official rate to 0% and announced plans to buy US$60 billion worth of bonds in its own fresh round of money printing. This is sparking fears of competitive devaluations by those countries trying to fire up their economies with lower currencies. The Dow rose 200 points before a slight dip in late trade saw it close up 180 points, although it was virtually unchanged when measured in Gold or Euro or Oil terms.
Those emerging economies with higher interest rates that are vulnerable to capital flight from the devaluing Northern Hemisphere economies are moving to protect themselves.
Brazil announced overnight it would double its tax on foreign investments in Brazilian bonds to 4%. South Korea announced plans for new capital controls and Taiwan's central bank intervened to push its currency down.
The Reserve Bank of Australia surprised many by holding its Official Rate at 4.5%, no doubt in part as it fears a rise in the Australian dollar towards parity vs the US dollar.
Meanwhile in Europe, Societe Generale rogue trader Jerome Kerviel was sentenced to 3 years in prison and to repay 4.9 billion euros in losses suffered by his bank. He was found guilty of forgery and unauthorised computer use.
(Updated to include links and Daily Exchange Rate)
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17 Comments
The currency wars might not be a good metaphor.. It suggests there are winners and losers..???
Peter Schiff article shows the stupidity of it all.
http://www.lewrockwell.com/schiff/schiff116.html
BUT... what causes the grief is the reliance on overses Capital ( credit) and the impact of foriegn direct Investment.
Roeloff: At heart of the currency wars is the policy of economic imperialism by the Chinese. They manipulate their currency so that their exports can out-compete all others. As a result of the cheap Chinese products flooding the market, consumerist countries buy them frantically, displacing their own products & making the country unable to pay for them. "No problem" say the Chinese. "We will lend you the money so you can buy our products."
When it becomes clear that debt is becoming unmanageable, the Chinese say "That's OK - instead of repayment, just sell us your productive assets." In Oz, that means mines; in NZ it means farms.
Even housing-obsessed NZers (some of them anyway) can see the end conclusion to this - tenants in our own country as J Key says. Other countries can see the same issue, hence the competitive devaluations to try to rebalance national accounts.
Cheers to all
Philly.... just as imperialist is the USA.... In order to pay for those Chinese imports ..USA has been expanding its money supply for years....
The USA has the Global reserve currency in the $US... They have been able to expand their Money supply ...for so long... without domestic inflationary pressures, because of this.
I personally feel they have misused their privilage in regards to the $US being the Global reserve currency.
Cheers Roelof
Roelof: I totally agree about the US. However, I think you will find that the Chinese will take economic imperialism to a level undreamed of in the States.
Those who have decried Yanqui Imperialists for decades should be careful what they wish for. While the US is certainly a less than perfect model, try comparing China with them for the following factors:
Democracy
Rule of law
Property and personal rights
Free speech
Free press.
....... Be afraid. Very afraid.
Cheers
A very insightfull piece Philly.When China has bought the very ground you walk on,any Imperialist maintains the right to defend his interests wherever they may be.Hence the massive build up of the Imperial fleet.
I saw a news Item with American mothers on the TV..last night,they were all "Clinicly Obese" and were waddling.I had the image of a thin fit Chinese girls,shovelling food down their mouths,like in the monty Python film..Saying... "Here have a leeetle bit more"...mabey its patriotic to eat burgers in the States.But when it gets so obvious theirs something that needs to be done on a national level.
"Two bottles of vino amino please"
http://www.telegraph.co.uk/health/healthnews/8044018/A-genuine-elixir-of-life-at-least-for-mice.html
"The cocktail of amino acids - building blocks of proteins - was found to increase the lifespan of mice by 12 per cent.
Researchers believe it may also benefit humans, especially the elderly or sick."
This will do wonders for the Noddyland pension liabilities...hehe!
Are you starting to get the ......Big Picture .....yet Bernard.....it's going just as I told you it would with the exception of the AUD holding.
It was all on from the time I told that dude a while back the BOJ would intervene and from that moment it was all on.....while Bolly sits on his hands to hold back the the inevitable outpouring........we are getting more exposed by the day now instead of month.
The AUD holding itself is sending a message to... I fear.... deaf ears.....take this as the first step in having to choose..........now we are going to see China teeth and not in a happy way.
As I said before regardless of the position the U.S. are in... China are the provocateur here in terms of where this is going......I am convinced the Americans would have planned for China's responses to revalue.
At present China are convinced they are holding the cards in a winner take all and we know how that usually ends in the Wild West ....don't we...?
Anyone for an nosefull of the best BS out there?
phew what a pong!
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