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GATAs Bill Murphy says JPM silver scandal to be bigger than Liborgate "by Christmas"
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Even as China tries to promote the Yuan as an international currency, Reserve Bank of India (RBI) has joined the effort of chipping away at the dollar's pre-eminent position as the world's currency. The central bank on Monday called for inclusion of emerging market currencies as alternative reserve currencies to the dollar.
Delivering the 46th A D Shroff Memorial Lecture in Mumbai on Tuesday, RBI governor D Subbarao said that the dollar's monopoly as a reserve currency had resulted in many countries facing a liquidity problem as foreign creditors and foreign investors turned risk averse. "Paradoxically, even as the US economy was in a downturn, and its central bank resorted to extraordinary quantitative easing, the dollar strengthened as a result of flight to safety," Subbarao said.
The governor pointed out that one alternative was to have a menu of reserve currencies. "But this cannot happen by fiat. To be a serious contender as an alternative, a currency has to fulfill some exacting criteria. It has to be fully convertible and its exchange rate should be determined by market fundamentals; It should acquire a significant share in world trade; The currency issuing country should have liquid, open and large financial markets and also the policy credibility to inspire the confidence of potential investors. In short, the 'exorbitant privilege' of a reserve currency comes with an 'exorbitant responsibility'," he said.
According to the governor, another option of developing special drawing rights (SDRs) - an overdraft facility that countries have with the International Monetary Fund to get credit denominated in dollars, pounds, euro or the yen - is not a feasible option as SDRs would have to be automatically acceptable as a medium of payment in cross-border transactions, it should be freely tradeable and its price has to be determined by forces of demand and supply.
The Obama administration on Tuesday said China's currency remained "significantly undervalued" but stopped short of labeling the world's second-biggest economy a currency manipulator.
In a congressionally mandated semi-annual report, the U.S. Treasury noted that yuan had risen 12.6 percent against the U.S. dollar in inflation-adjusted terms since June 2010. An official said it was up 9.7 percent on a nominal basis through Tuesday, when it closed at a record high.
Although Beijing keeps the yuan, also known as the renminbi, in a tight trading band, the Treasury said China did not meet the legal requirements to be deemed a currency manipulator. The label is largely symbolic but would require Washington to open discussions with Beijing on adjusting the yuan's value.
The Chinese government had "substantially" reduced its intervention in foreign exchange markets since the third quarter of 2011 and loosened capital controls, the Treasury said in the report, which examines the currency practices of major U.S. trading partners.
"In light of these developments, Treasury has concluded that the standards ... have not been met with respect to China," it said. "Nonetheless, the available evidence suggests the renminbi remains significantly undervalued."
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"The world is headed toward a new reserve currency,either backed by the IMF SDRs (special drawing rights) , or some other neutral basket," he said.
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The head of the Bank of England warned on Monday that too many countries were trying to weaken their currencies to offset the impact of the slow global economy and the trend could grow next year.
"You can see, month by month, the addition to the number of countries who feel that active exchange rate management, always to push their exchange rate down, is growing," Mervyn King said in a speech.
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The irony is King bitches about exchange rate management while encouraging Bernanke to do the same, and doing the same himself.
A "renminbi bloc" has been formed in East Asia, as nations in the region abandon the US dollar and peg their currency to the Chinese yuan — a major signal of China's successful bid to internationalize its currency, a research report has said.
The Peterson Institute for International Economics, or PIIE, said in its latest research that China has moved closer to its long-term goal for the renminbi to become a global reserve currency.
Since the global financial crisis, the report said, more and more nations, especially emerging economies, see the yuan as the main reference currency when setting their exchange rate.
And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar. Only three economies in the group — Hong Kong, Vietnam, and Mongolia — still have currencies following the dollar more closely than the renminbi, said the report, posted on the institute's website.
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Oh snap!
"The world is headed toward a new reserve currency,either backed by the IMF SDRs (special drawing rights) , or some other neutral basket," he said.
Precious metals are the only *neutral* "basket".
Ambrose Evans-Pritchard said:...
The Swiss and UK central banks are effectively fighting a low-intensity currency war against each other. It has come to this.
One awaits with curiosity to see what will happen when Japan -- 15 times the size -- kicks in with its own nuclear plans to drive down the yen, and Asia follows suit.
The latest IMF data of central bank holdings shows the biggest jump in sterling bonds held by advanced central banks ever recorded. It jumped from $79 billion to $98 billion in the third quarter.
These holdings are usually stable so it is obvious that the SNB is responsible. The Swiss are already sated on eurobonds as they frantically intervene to hold the franc at E1.20. By their own admission they have been diversifying energetically.
Analysts say the SNB has already bought $80 billion of EMU bonds, enough to cover half the budget deficits of Euroland over the last year. The SNB has been acting essentially as a conduit for capital flight from Italy to Germany.
It has since branched out, allegedly into Aussies, Loonies (Canada), Scandies -- Won?, Real? -- but above all pounds. "There aren't many places to go in this 'ugly contest' if you don't like the euro, dollar, or yen," said David Bloom, currency chief at HSBC.
"Everybody is trying to weaken their currency at the same time. The Swiss have got away with it and now the Japanese want to try. The Sandinavians are pulling their hair out. The Turks are cutting rates even though their economy is overheating and putting in credit controls instead because they don’t want the currency to rise."
"Policymakers are doing things that if you had suggested four years ago they would have put you in a straitjacket and thrown you in a cell. I don't rule out anything any longer in this market. Desperate times lead to desperate acts," he said.
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Sprott Inc. President Kevin Bambrough said:...
The burning question that I always have, I’m amazed at their ongoing willingness to continue to accumulate, and hold, such large amounts of US denominated bonds. It’s been my view that they are basically playing a Ponzi scheme.
I’ve had that confirmed when I’ve had long discussions with different sovereign wealth funds and different government agencies around the world. They’ve been willing to play this game, but more and more now, as their domestic economies have grown and the US portion of their exports becomes smaller, and with the amount of T-Bills that they have (already) accumulated, I believe they’ve reached the boiling point where they are really going to be unwilling to grow their reserves (of US Treasuries).
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I ask them, ‘Do you actually imagine that this next generation, that’s very frustrated with the current situation, is going to go to work in the US and produce more goods than they will consume so that they can pay back the debt and honor the T-Bills that you currently hold? Does anybody actually believe that’s going to happen?’
It’s quite funny because often these conversations occur with a translator, so it takes a little bit of time to go back and forth, and I always enjoy watching how the expressions change on the (faces) of the people in the meeting. Half of the time they don’t know whether to laugh or to cry because they realize they are in a very precarious position.
They hold huge quantities of paper that will ultimately become worthless. They generally are all agreeing and saying, ‘Yes we realize this is a huge problem.’ And that if they start spending that money, what will it do? A loss of confidence in the currency (the US dollar) will occur, and it will spur other nations to dump (the dollar).
I asked the Chinese, ‘What would you do if the Japanese were aggressively selling all of their T-Bills, and buying up companies and gold?’ I asked the same question to the Koreans. These countries view themselves in an economic resource war already. They realize they have to go out and acquire (hard assets such as gold).”
Gold, the renminbi and the multi-currency reserve system
The world is preparing for possible twin shocks from the parlous position of the two main reserve currencies, the dollar and the euro. As China weighs up its options for joining in the reserve asset game, gold – the official asset that plays no formal part in the monetary system, yet has never really gone away – is poised, once again, to play a pivotal role. Many dismiss gold as a relic of the past or as an inadequate hedge against inflation. But from an asset management point of view, as well as on the basis of political analysis, gold has a lot going for it; it correlates negatively with the greenback, and no other reserve asset seems safe from the coming dollar shock.
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The Russian central bank will continue to buy gold as it seeks to diversify its foreign reserves away from paper assets it views as risky, First Deputy Chairman Alexei Ulyukayev said on Thursday.
The Bank of Russia has built up the world's fourth-largest foreign reserves, worth $530 billion, by buying oil export dollars to keep the rouble competitive. The hoard includes two rainy-day budget funds that guard against fiscal shocks.
The bank has also been a bullion buyer and the share of gold in its reserves is approaching a medium-term target of 10 percent, raising questions over whether it would keep buying gold.
Ulyukayev, speaking during the World Economic Forum, said the central bank would continue to buy gold, but gave no indication on whether there would be any change in the share of its reserves it allocates to the precious metal.
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The Bank of England is prepared in principle to become the first G7 central bank to enter into a foreign exchange swap agreement with China, opening the door to another substantial step in moves to liberalise the yuan currency.
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It would be the latest in a string of bilateral currency agreements that China has signed in the past three years to promote use of the yuan in trade and investment.
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Does anyone remember what happened after the 1930 currency war that impoverished millions?
The Group of Seven nations are considering saying they won’t target exchange rates when setting policy as they try to calm concern the world is on the brink of a currency war, two officials from G-7 countries said.
Finance officials from the world’s key industrial economies have drafted a statement on currencies now being reviewed by senior policy makers, they said on condition of anonymity. The current wording, which still may be changed, combines the traditional backing for market-set exchange rates with a new line that governments don’t direct fiscal or monetary policy at driving currencies, one aide said.
Japanese Prime Minister Shinzo Abe’s push for more aggressive monetary policy has raised concern abroad that his government is directly seeking to weaken the yen, something it denies. In the talks, Japan has questioned the statement’s contents -- which would mark a strengthening in rhetoric from the G-7’s last joint comment in 2011 -- as it doesn’t want to be singled out for criticism, another official from a G-7 nation said, also on the basis they not be named.
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The U.S dollar is shrinking as a percentage of the world's currency supply, raising concerns that the greenback is about to see its long run as the world's premier denomination come to an end.
When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business.
While the American currency still reigns supreme -- it constitutes $3.72 trillion, or 62 percent, of the $6 trillion in allocated foreign exchange holdings by the world's central banks -- the Japanese yen, Swiss franc and what the IMF classifies as "other currencies" such as the Chinese yuan are gaining.
"Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown," Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. "But it will be, and this defrocking may occur in as short a period as five to 10 years."
Bove uses several metrics to make his point, focusing on the dollar as a percentage of total world money supply.That total has plunged from nearly 90 percent in 1952 to closer to 15 percent now. He also notes that the Chinese yuan, the yen and the euro each have a greater share of that total.
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... As the WSJ reports,"The president of China's giant sovereign-wealth fund warned Japan against using its neighbors as a "garbage bin" by deliberately devaluing the yen, joining growing international griping about a potential currency war."
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http://www.silverdoctors.com/jim-wi...gold-to-meet-bundesbank-repatriation-request/We have an attack announced on Mali in North Africa to wrest gold & uranium timed when the Germans asked for repayment of their gold reserves. The quantities really fit. There was a suspicious comment by the French and British saying it will be repaid in 7 years. 300 tons over 7 years is approximately what Mali produces in gold that will cover almost exactly the German repayment. That was organized by France and the US.
If it was a Western mining company, it wouldn't make sense. It has to be state owned operation or several small local mines.Where would that gold normally go? Surely this would be easy to verify, if true, in the coming months as gold from Mali doesn't flow through it's normal channels.
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