Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the New Zealand dollar rose over 75 USc overnight as the US dollar continued to weaken on talk the US Federal Reserve is about to print a lot more US dollars.
The Chicago Federal Reserve President Charles Evans told the WSJ yesterday the US needed much more stimulus to get going again. This helped drag the US dollar down against most currencies, except for the British Pound, where there is new talk Britain will also print more money to try to get its economy going again.
The gold price jumped again to a fresh record high of US$1,351/oz as investors fled those Fiat currencies seen as vulnerable to devaluation. It is on its longest rally since 1920.
Safe haven buying by many investors and banks saw the yields on the 2 year Treasury bond drop to 0.38% and the yield on the 10 year Treasury bond drop to 2.3%. Many expect the Federal Reserve to buy these bonds in an attempt to lower long term interest rates.
The tension is rising in these currency wars as fears grow that developed economies laden with debt will try to print their way to freedom through a series of competitive devaluations, but this leaves the developing world struggling with more highly valued currencies that could hammer their export sectors.
New Zealand faces the same pressures, given its economy is very weak but its currency is still pressing towards 10 month highs.
Meanwhile, the IMF has warned against a slide into currency wars and has cut its forecasts for global economic growth. Tension is ratcheting up ahead of a meeting this weekend of officials and ministers from the G20, World Bank and IMF in Washington. US Treasury Secretary Tim Geithner warned of a 'damaging dynamic' in developing economies who are holding their currencies down to boost their export sectors.
The meeting is shaping up as a clash between America, which is laden with debt and trying to get its economy going, and China, which wants to keep its currency low to keep its export sector growing.
There are calls for a fresh restructuring of the global currency system in some sort of new Bretton Woods or Plaza Accord.
No chart with that title exists.
22 Comments
Here is a small chunk you posted yesterday B.H.......
Although American officials, at the Federal Reserve and the Treasury Department, declined Tuesday to comment on the Bank of Japan’s interest rate decision, a senior Treasury official suggested that Japan’s efforts to devalue the yen were a source of concern. It “will be something that we’ll want to discuss this weekend,” when finance ministers from around the world gather in Washington for the annual meetings of the International Monetary Fund and the World Bank, said the official, who spoke to reporters on condition of anonymity under ground rules set by the Treasury.
As I keep saying if QE was a plan it was a shit plan yes..........? but the above statement goes someway to find out why.
Overview...The Fed printing and further talk of printing is causing havoc now on a global scale... reflected in the recent currency strategies adopted by affected parties to what probable outcomes...?
In an effort to force China to revalue the Yuan...? I don't think the Americans are that naive and further had reckoned on China holding firm....to what probable outcome...?
I would suggest America is still pursuing a unilateral ground zero policy.....if we are going to blow it up and start again we need to take it all down in order to maintain control from the bottom up....
Two objectives that would need to be achieved for this to "happen" would include ..
.1. the alienation of China by demonizing them as the root cause for failure to "rebalance " developed economies ...in this I think they are succeeding thus far.
2.The decimation of global fiat currencies by means of a race to the bottom while maintaining a foreign policy of... "we are all in this together"...... posture.... in this the evidence speaks for itself.
In a very real sense I think America is waging a war on global economies...that is about control.....while the rhetoric about fiscal stimulus for internal reasons...(which almost everyone thinks is a shit plan).....they are playing a big picture game with high casualty rates that will give the term "collateral damage" a whole new meaning.
hey christov (and anybody else for that matter) i've got a question, as a non-financialissimo:
if governments were to print and issue money in a slow and steady way, and only use that money to fund national infrastructure (roads, power grid etc) what do you thiink would be the outcome of that?
ok there is a risk of that, but if the road in question was a motorway from kaitaia to invercargill, and the power grid was modernised to allow home/microgeneration and give people to be suppliers and consumers, and a bunch of slack dole-bludging teenagers were employed........
what i'm getting at is, if govts are hell bent on, is there not a way to do it that helps the country, without leaving it to a "free market" system that is so captured by short term looking special interests that its not a free market?
VL
The same, Firstly I think you should do some research on what 'Money' is, Money is debt and you can only go increasing debt if you have the qrowth of offset it.
The only difference in your case is that 'Infrastructure' is a fixed asset but then you have to ask what is the benefit of this infrastructure, roads for example do not 'increase productivity' IMO
Neven911
yeah i'm not advocating printing unlimited $$ to build bridges to nowhere, but a few things, like a proper tip-to-toe motorway, some proper rail connections in akl (ie to albany), and some newer power and phone cables around the place, a moat around hamilton etc could take 10 years while the world sorts it's sh!t out, soak up some youth unemployment (and lets face it they'll all be on P if we don't give them something to do) and leave us in a better position. make is sunset legislation, so it can't go on forever......
i think most people like the idea of the free market, but we're in trouble so why not at least explore some other options?
VL there was a thread dedicated to just that yesterday..... there were fights breaking out ...slander.... and a real unwillingness to find consensus.....because when fear is present...the shutters go up the blinkers go on...and the hardware comes out of the glass case.
Before we can agree on any sort of forward planning we (I think ) must first have a better grasp on where we as a Nation figure in the scheme of things for tomorrow and the next day.
Without a complete understanding of what Nations we depend upon( for more reasons than just Trade) are positioning themselves for ...we are adopting a wait and see attitude......
In the case of the U.S. I am trying to establish motive that gives cause to act out such a bad plan the ramifications of which are not trickle down but pour down.....to what end..?
And that's where I just don't buy the internal stimulus rhetoric as the carnage is becoming rapidly obvious....and they have a built in scapegoat for a looming Ground Zero in China who now are on record as not wanting to play ball.
If you are to bet on tomorrow and you are looking for an edge....you need to at least speculate that a certain amount of this meltdown is being controlled as far as is possible....then ask in whose interests.
I'll put it now as a statement of fact that if America are to bottom they want that bottom to be unilateral..... in the interests of control.
Thanks for bringing us Olly Newland's article , Bernard . It was highly entertaining reading the bloggers response , fireworks to enlighten a dull old Wednesday night .
And for what it's worth , Olly packs alotta information into his piece . The Warren Buffett snippets are pure gold , to anyone disciplined enuff to use them .
[ the " merchant of doom " crack was pretty funny too .............. ah come on big guy , getcha sense of humour back ! ]
I have not been as bad as the silly sods who paid $ 2.2 billion for the Yellow Pages in 2007 . Meeting with Korda Menthol ....... to sort out the losses . Guesses are that the YP's have a current market value of $650-$800 million .
A long cold retirement for those Canadian teachers .......... Go to the Warehouse guys , and share in your discount tent . ............. What's winter 'like , up in Yellowknife ?
Its not worth $650 million, hell its not even worth $1m.
On paper recycling day practically everyone in our neighbourhood takes the Y.P bag unopened from their letterbox and puts it politely next to the curb for pickup. ..
Presumably the guys involved with Y.P haven't heard of the INTERNET. ?
And now Yellow Pages could be in a race to the bottom with NZ Post - http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=106…
FYI, Graeme Hart in second biggest global junk bond sale so far this year - http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=abKIGAu.dqmw
Graeme Hart's Reynolds Group sold $US 3 billion of bonds this morning , at yields between 7.15 and 9.00 % , much lower than expected . The funds are to aid the $US 6.5 billion takeover of USA company , Pactiv .
America lets Kiwis invest there ! Isn't pulp & paper a strategic asset , minister ?
[ bugger it all , Gareth beat me to the headline ............ spoil-sport ! ]
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.