Currency Wars is a very popular book in China. It’s author, Bing Debkang, has tapped into a rich vein of nationalism and suspicion about the West, especially the role of US investment banks and global jewish bankers.
His book was part of Beijing IFS special project, which is entirely futuristic, is that group of investment bankers of khazar elites have dictated the course of world history since the Napoleonic wars, are the gatekeepers to the US presidency, and - should they be allowed into the Chinese economy - would bring the current benign social order crashing down to serve their own evil interests. The US had created a USD 13 Trillions Debt in 2010 by issuing more bonds, securities, derivates and credits through the FED and megabanks.
We discussed this book with a Japanese and Korean researcher who works in the financial sector and he said that its popularity was an interesting social phenomenon. But the author was so obviously a crazy conspiracy theorist that his work had no influence at all in policy or finance circles.
Central bankers and Finance graduates might be able to see through the smoke and mirrors, but the book had a major influence on public opinion, and a follow up - imaginatively entitled ‘Currency Wars II’ - has just hit the book stores. If you dont understand just read the comments by Warren Buffer and G.Soros- the manipulators of Asian currencies crisis in 1998s.
This is R.Fekkel translation of the main points from a chapter in the first Currency Wars, focusing on the potential evils of allowing foreign investment banks into the Chinese economy, and the benefits of returning to gold as the basis of the international financial system:
‘Control of money supply is key to control of the economy. You might think that foreign banks have no way of influencing the money supply in China, that the People’s Bank of China controls the supply of money. In fact, by issuing loans, banks influence the money supply. Let foreign banks into China, and they would deliberately manipulate the money supply, using excess supply to cause inflation, and restricting supply to cause deflation, crippling the economy, as they have done to destabilize foreign countries throughout history. Remember how the British wage an opium war to China and establish the capitalistic Hong Kong port?
The US is already using its influence to disrupt China’s money supply. By manipulating its trade deficit with China, the US can increase the money supply in China, and that can lead to bubbles in the property sector and equity markets. China’s Central Bank can only control the problem by selling bonds to soak up the additions to the money supply, but this increases the national debt. Today China hold about USD 2 Trillions of US bonds or debts ! What if it just devalued 10% by tommorrow, next week or month ? A lost of USD 200 billions !
These are the currency wars, and as long as the US dollar is the main international currency, China has no way to fight back. Only when gold again becomes the basis of the international currency system can we have an independent, fair, and harmonious financial system.’
Of course, there is a kernel of truth in all this. Hedge funds, many of them US hedge funds, were instrumental in destabilising Asian economies in the Asian Financial Crisis. China’s trade surplus, combined with the fixed exchange rate, does cause problems for the People’s Bank of China. The role of the US dollar in the international financial system is beneficial to the US and harmful to its creditors. Many muslim nations already thinking of using the gold dinar currency to safeguard against the fiat paper money instability and crash like Iceland, Greece and Euroland soon.
But the way all of these facts is put together is not completely wrong. It’s not foreign banks who are creating a problem in China’s money supply, it is all the mega banks interlinked together with prime rates, credit creation and printing presses controlled by Governments. And a US dollar based international financial system might have its flaws, but the world moved away from the gold standard for a reason - because it tied money supply to the availability of a scarce commodity - and a return is not on anyone apart if you are smart enough. The gold prices had jumped 300% in the last 5 years ! Gold is the ultimate fortress for our financial tsunanmi !
Happy reading and decoding between the enemy lines and eyelashes -Sun Tzu.
The Real Drivers of Diversification in China’s FX Reserves
ReplyDeleteWhere is China hiding its USD2.5trln in foreign exchange reserves? The answer to that question is one of the best kept secrets in the world of finance. The State Administration of Foreign Exchange (SAFE) - the organisation charged with the management of the USD2.5trln - certainly isn’t telling anyone, and for good reason. When you are moving around the kind of money that SAFE is moving around, telegraphing intentions to the market can make everything you want to buy terribly expensive and everything you want to sell awfully cheap.
But in the absence of real information, rumours proliferate, and sometimes fire the imagination of the markets. This is one of those times. First, at the end of May, came reports that SAFE was growing tired of the ups and downs of the euro, and reconsidering its holdings of European debt. Those rumours were enough to send the euro plunging 1.5% against the dollar over the course of a single day’s trading. A denial from SAFE calmed the markets. But a few weeks later, rumours from Tokyo suggested that, despite its protestations to the contrary, SAFE was indeed growing weary of the euro, and was switching to Japanese government debt, with purchases of USD6.3bln over the first four months of the year. The next week, another rumour, this time suggesting that SAFE was back in the euro game, with a purchase of E400mln (USD516mln) in 10-year Spanish bonds.
Japanese bonds one week, Spanish bonds the next, if the press is to be believed, China is buying anything but US Treasury debt. But what have we really learned from the claims and counterclaims of the last few weeks? Not a lot that we did not know already. If China’s FX reserves are allocated in roughly the same proportions as global FX reserves as a whole - a reasonable assumption - then around 61% should be parked in dollar debt, with 27% in euro debt, 3% in yen, and the rest invested in other currencies. That means that SAFE has something like USD675bln in euros, and a smaller but still sizeable USD75bln in yen. In this context, the purchase of a few million in Spanish bonds and a few billion in Japanese government debt can hardly be regarded as anything other than business as usual.