January 29 2013
China Just Threatened a Currency War If the Fed Doesn't Stop
Printing
The tension between Central Banks that we noted yesterday continues
to worsen. This
time it was China and the EU, not just Germany, that fired warning shots at the
US Fed.
A senior Chinese official said on Friday that the United
States should cut back on printing money to stimulate its economy if the world
is to have confidence in the dollar.
Asked whether he was worried about the dollar, the chairman of
China's sovereign wealth fund, the China Investment Corporation, Jin Liqun,
told the World Economic Forum in Davos: "I am a little bit worried."
"There will be no winners in currency
wars. But it is important for a central bank that the money goes to the right
place," Li said.
Speaking at the same session, French Finance Minister Pierre
Moscovici voiced concern that the euro was becoming overvalued as a result of
quantitative easing and other stimulus actions taken by other nations' central
banks.
"Certainly, the level of the euro is high and creates some
problem," he said, attributing the single currency's recent gains partly
to the return of confidence created by the European Central Bank and euro zone
governments in starting to overcome Europe's debt crisis.
Source: Reuters.
So
first Germany begins pulling its Gold reserves from the US, and now China and the EU are saying publicly that the Fed's policies
are damaging confidence in the US Dollar.
This does not bode well for the financial system. The primary role
of Central Banks is to maintain confidence in the system. If the Central Banks
begin to turn on one another, it is only a matter of time before the system
breaks down.
Remember,
every time the Fed debases the US Dollar it forces the Euro and other
currencies higher, hurting those countries' exports. The
Fed has recently announced it will be printing $85 billion every month
until employment reaches 6.5% (obviously the Fed is
ignoring the mountains of data that indicate QE doesn't create jobs).
How long will the other Central Banks tolerate this before they
initiate a currency war? Both Germany and China have fired warning shots at the
Fed. And we all know that just beneath the veneer of goodwill, tensions are
building between the primary players of the global financial system. More importantly,
how can investors profit from this? Remember, entire fortunes can be made
during times of crises.
This is precisely the sort of "unquantifiable"
investment analysis we specialize in with our Private
Wealth Advisory newsletter.
With most of the markets dominated by computer programs and Wall
Street sharks, the only way to make serious money is by focusing on the
opportunities and risks that no computer or group-think Wall Streeter can come
up with. If you can do this, you can still making a killing in the markets.
We're speaking from experience here.
Phoenix Capital Research
No comments:
Post a Comment