Do you think he reads this site?
“We’re in the midst of an international currency war,” warned Brazil’s finance minister Guido Mantega on September 27. Governments around the world are competing to drive down their currencies to boost their exports.
How dangerous could that be? Well, in my September 20th post I compared the destructive potential of a global beggar your neighbor currency war to the Smoot-Hawley tariff of 1930 that helped turn the stock market crash of 1929 into the Great Depression. (See my post https://jubakpicks.com/2010/09/21/japans-intervention-to-drive-down-the-yen-is-more-dangerou-than-it-looks-remember-smoot-hawley-and-the-great-depression/ )
Brazil’s finance minister didn’t name names but last week the country’s foreign minister Celso Amorim went to great lengths to defend China from charges that kept its currency artificially depressed. After a meeting of the BRIC countries of Brazil, Russia, India, and China he said, “I believe that this idea of putting pressure on a country is not the right way for finding a solution.” And then he added “We can’t forget that China is currently our main customer.”
‘Nuf said.
That’s almost exactly the same language used by South Korean Finance Minister Yoon Jeung-hyun. The upcoming G20 summit on November 11 and 12 might take up exchange rates in general, he said, but call out China’s yuan policy? No way.
“I do not believe that it is appropriate to have a discussion regarding the foreign exchange rate or level of a specific country,” Yoon said in an interview with Reuters on September 23.
South Korea hosts the November G20 summit of the world’s major economies.
It certainly seems that when United States makes its arguments in Seoul that China needs to let the yuan appreciate almost nobody will be listening.
Chowda,
A couple of high risk/low risk commodities may provide an answer to sitting in gold with the other bugs.
Jim mentioned that China is in the driver’s seat on rare earth minerals in a column the other day, and you can bet the Chinese will use it to their advantage.
Another area is energy, which is looking a lot better on a technical level.
Then again, all the political posturing brings fertilizer to mind.
Be fair, Jim: Roosevelt’s administration devalued the dollar by 69%, unilaterally, despite pleas from other nations. It wasn’t just Republicans or just protective tariffs with funny Ferris Bueller names; it was a populist national government manipulating the currency to defend its people’s interests, just the way the Chinese do. Sore losers, we complain only when our ox is gored.
Just for fun, what if my worst fears come to fruition? Where to stash the cash?
The Great Chicken Fight between the US and China, combined with Japan’s currency attempts, with every other countries attempts to “beggar thy neighbor” via currency is flashing warning bells in my head. Smoot-Hawley, anyone?