Currency fight Club aka G-7 .... Ninth rule of Currency fight Club - when it gets serious , lie......

                                                                        Rules of  " Currency "  Fight Club 
1. You do not talk about 'Fight Club'.
2. You do not talk about 'Fight Club'.
3. When someone yells "Stop" or goes limp, or taps out, the fight is over.
4. Only two guys to a fight.
5. One fight at a time.
6. No shirts, no shoes.
7. Fights go on as long as they have to.
8. If this is your first night at 'Fight Club', you have to fight. 


http://www.silverdoctors.com/escalating-currency-wars-may-make-2013-the-year-of-the-epic-economic-failure/

ESCALATING CURRENCY WARS MAY MAKE 2013 THE YEAR OF THE EPIC ECONOMIC FAILURE

FEBRUARY 13, 2013 BY THE DOC 5 COMMENTS

By SD Contributor AGXIIK:

The trade between Japan and Europe and China and Europe will be hit very hard when Europe can’t afford goods from China and Japan.  The east will suffer badly as devaluations won’t overcome the recessions and depressions in Europe.

These are real and dangerous tipping points that won’t hold back very long. The people in Italy, Greece and Spain are near the breaking point.  I doubt if the Fed will have enough money to bail out Europe when Benny is spending all his political capital in bailing out the US, although I would not be surprised if the Fed doesn’t give it a try, nonetheless.   
If we thought 2012 was the year of the epic failure, it may have been just a warmup act to 2013.

Virtually all the big GDP countries are engaged in ZIRP  printing to devalue their currencies, racing to this end to keep the trade engine going.
All the major GDPs are showing red arrows in their economic indicators.  For one country to win, others will be hurt.
Japan, China, the EU and US are all on track to accomplish this rampant devaluation business.   Japan is probably on a fast track to the bottom in their current bout of devaluation.
Abe is out for war, FIAT or hot, it does not seem to matter to him
South Korea is being hammered by the Yen but they are unlikely to launch missiles against the Japanese homelands.
China sees these FAIT effects on their exports.

What affects China in that regard is going to have repercussions that could easily go beyond a war of words and money as these two countries face off over the Sendaku Islands. China’s currency reserves are 300% larger than Japan’s.  That is some serious ammunition to use is trade wars.
The bond bubble could easily be broken in a currency or a shooting war.  Either way, the fragile bubbles could be popped with ease and at the slightest pressure.  Japan’s largest pension fund, with $1.2 trillion in assets, is trying to lightened up on Yen bonds. Other funds are trying to buy gold.

The bubble is going to break and it probably won’t be the UST first.  The US is still considered the world’s safe harbor for excess funds.  It is even more likely that when overseas bond bubble  monies flood to the US, the rates will drop again, like the last time money flowed into the UST market in 2008.
This time the flood could be in the trillions, instead of a few hundred billion.  Money market funds are having enough problems funding a home for the money they see coming in.

One unintended consequence will be NIRP rates offered by the Fed on short term notes.  Laws are being written that will allow MMAs to break the buck.   The Fed can keep our bubble intact for quite some time since they buy most of the debt. The wash of foreign capital will probably help sustain our deficits too boot.

Japan is running out of other people’s money.  Japan  could fail first but Europe is a train wreck moving faster with the Italian bank derivatives losses and Spain’s corruption scandals  building quickly. There’s not a bank in Europe that is worth a hill of beans.  Their leverage is 35 to 1. Greek failure would destroy most of these large Euro banks.

The trade between Japan and Europe and China and Europe will be hit very hard when Europe can’t afford goods from China and Japan.  The east will suffer badly as devaluations won’t overcome the recessions and depressions in Europe.  Consumer sentiments are dropping like rocks and have been for months and even years. The Euro GDP is nearly $18 trillion so big drops here are even more powerful in hurting imports.

These are real and dangerous tipping points that won’t hold back very long. The people in Italy, Greece and Spain are near the breaking point.  I doubt if the Fed will have enough money to bail out Europe when Benny is spending all his political capital in bailing out the US,  although I would not be surprised if the Fed doesn’t give it a try, nonetheless.   QEII slipped $600 billion under the ECB mat, not to mention the trillions is reparations sent to Europe for the fiasco of sub prime losses.  If the Fed does run to the rescue the amount of currency sloshing around could easily kick off some serious inflation on the continent.  It would certainly see FIAT mal-investments in MENA as food shortages this year will bump prices. QE II was a cause of the Arab Spring.

This whole region is exploding with Egypt on edge;  collapse possible in short order.  If we thought 2012 was the year of the epic failure, I think it was just a warmup act to 2013.

http://www.zerohedge.com/news/2013-02-13/ecb-smacks-down-euro-again-says-eur-strength-will-hurt-recovery-crisis-states

ECB Smacks Down Euro Again, Says EUR Strength Will Hurt Recovery In Crisis States

Submitted by Tyler Durden on 02/13/2013 07:54 -0500

• European Central Bank
 
• recovery
 
• Yen

Just like yesterday, it was some anonymous Yen vigilante smacking down the USDJPY saying the initial G-7 statement was misinterpreted, so today it is the ECB's turn, which just smacked down the EUR royally, for the second time in a week following last week's Mario Draghi comments, when it said that:

• THE ECB IS WORRIED EURO STRENGTH WILL HURT RECOVERY IN CRISIS STATES

And just like yesterday the refutation came via shady pathways, i.e., an anonymous leak in D.C., so today, apparently the information comes from that venerable ECB conduit: Bild. What can one say - all is fair in central bank love and currency war.

EURUSD once again slides first, asks questions next:

Unless the ECB formally denies this Bild report, it is safe to say that for Draghi 1.3500 is the key resistance level, above which GETCO's FX algos will have to find other USD carry pairs to fund their market levitation.

http://www.zerohedge.com/news/2013-02-12/usdjpy-slammed-after-g-7-official-says-statement-misinterpreted

USDJPY Slammed After G-7 Official Says Statement "Misinterpreted"

Submitted by Tyler Durden on 02/12/2013 09:05 -0500

• Japan
 
• Monetary Policy
 
• Private Jet
 
• Trade Wars
 
• Yen

First domestic fiscal policy, and now global monetary policy has become an utter circus:

• G7 OFFICIAL SAYS G7 STATEMENT WAS MISINTERPRETED, STATEMENT SIGNALED CONCERN ABOUT EXCESS MOVES IN JAPANESE YEN
• G-7 OFFICIAL: G-7 CONCERNED ABOUT UNILATERAL GUIDANCE ON YEN
• G7 OFFICIAL SAYS G7 IS CONCERNED ABOUT UNILATERAL GUIDANCE ON THE YEN, JAPAN WILL BE IN SPOTLIGHT AT G20 MEETING IN MOSCOW

We already mocked the G-7's original stupidity... and now they say it was not what they meant. Because what the G-7 clarification really means it that while the G-7 will supposedly "allow the market to set rates", the G-7 was not happy with how the market set rates following the G-7 statement. And... #Ref!

This also means that the US Treasury which officially was prodding the Yen weaker yesterday has split off from the rest of the group, or call it G-6, which it appears is quite concerned about the Yen weakness, although technically since Japan is in there too, it is more like G-5, not to be confused with the private jet that is carting all the world leaders to Moscow. In such a perfect storm of sheer communication chaos, it is only a question of time before we move into outright protectionism, aka trade wars.

The USDJPY plunges first, asks questions later:

and....

http://globaleconomicanalysis.blogspot.com/2013/02/common-plans-coordinated-lies-and-g7.html

Tuesday, February 12, 2013 1:10 PM

Common Plans, Coordinated Lies, and G7 Currency Statements

Inquiring minds are investigating an amusing set of lies from the G7. At the top of the list is Group of 7 Will Let Market Decide Currency Values. 

 Seven major developed countries including the United States and Germany pledged on Tuesday to let foreign exchange markets determine the value of their currencies. In a statement, the G-7 powers said they would consult closely to avoid moves that could hurt stability. But they restated a commitment to market-determined exchange rates

“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” the G-7 said in the statement, which was posted on the Web site of the Bank of England. 

On Monday, Pierre Moscovici, the French finance minister, said he wanted the Europeans to present a common plan later this week during a meeting of finance ministers and central bankers of the Group of 20 nations to be held in Moscow.

But the head of the German Bundesbank, Jens Weidmann, said Monday that the French initiative was a poor substitute for policy overhauls that, if implemented, would do more for growth.

On Tuesday in Brussels, following a regular monthly meeting of E.U. finance ministers, Wolfgang Schäuble, the German finance minister, said there was “no foreign exchange problem in Europe” and that such issues should be discussed at the G-20 meeting in Moscow.

Close Coordination of Lies

There is no close coordination, except in self-serving lies. Japan is doing what it wants and that is targeting the both the Yen

 and the Nikkei.

The government of Japan is not open to suggestions from anyone, not even its own central bank head who resigned before

 his term expired. That resignation allows the government to appoint someone willing to follow the prime minister Shinzo 

Abe's wish to devalue the Yen.

On Saturday, Japan’s Economic Minister Promoted a Surge 17% in the Nikkei to 13,000 by March and a Contender for Bank of Japan announced support for more easing.

Lovely. Label that direct intervention however you want, but it sure as hell has noting to do with "market forces".

Common Idiocy

French finance minister, said he wanted the Europeans to present a common plan. Common plans have nothing to do with market forces either.

Of course, all these rounds of QE in the US are blatant manipulation as well.

The central bankers hide behind statements that their policies are for other goals, and that those policies just so happen to weaken the currency.

Does it matter "why" if the end result is the same? Heck, do they even believe the nonsense they are spouting?

Mike "Mish" Shedlock