Biggest Bubble In History

 Is Growing Every Day

Redenomination Of Global Currency: Playing Monopoly With The Devil

Continents Of The World Marching Towards Reign Of The Anti-Christ

And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six (Rev. 13:16-18).

Biggest Bubble In History Is Growing Every Day

Feb. 04, 2010

Biggest Bubble in History Is Growing Every Day

by William Pesek

http://www.bloomberg.com/apps/news?pid=20601039&sid=a4mPCXeGTl4Y

     Feb. 4 (Bloomberg) -- Real estate, stocks, credit. China sure has its share of bubbles. Oddly, little attention is paid to the biggest one of all. China’s currency reserves grew by more than the gross domestic product of Norway in 2009. Its $2.4 trillion of reserves is a bubble all its own, one growing before our eyes with nary a peep out of those searching for the next big one. The reserve bubble is actually an Asia-wide phenomenon. And we should stop viewing this monetary arms race as a source of strength. Here are three reasons why it’s fast becoming a bigger liability than policy makers say publicly.

     One, it’s a massive and growing pyramid scheme. The issue has reached new levels of absurdity with traders buzzing about crisis-plagued Greece seeking a Chinese bailout. After all, if economies were for sale, China could use the $453 billion of reserves it amassed last year to buy Greece and Vietnam and have enough left over for Mongolia. Countries such as the U.S. used to woo the Bill Grosses of the world to buy their debt. Now they are wooing governments. Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., is still plenty important to officials in Washington. He’s just not as vital as the continued patronage of state asset managers in places like Beijing.

     Next Step: You have to wonder what folks at the International Monetary Fund are thinking these days. Their aid packages tend to come with messy requirements, such as “get your economy in order.” China’s are merely about scoring resources or geopolitical points. We have already seen China throw lifelines to Wall Street giants, including Morgan Stanley. Entire countries seem like the natural next step. China’s huge arsenal of reserves is increasing its global influence. The trouble is, China is trapped in an arrangement of its own making. As China and other Asian nations buy more and more U.S. Treasuries, it becomes harder to unload them without causing huge capital losses. And so they keep adding to them.

     “This is a titanically large foreign-exchange trade,” says David Simmonds, London-based analyst at Royal Bank of Scotland Group Plc. “It’s the biggest one history has ever seen and there’s nowhere for these reserves to go.” China aims to diversify out of U.S. Treasuries into other assets and commodities. The question that governments are grappling with is which markets are deep enough to absorb China’s riches? Gold? Oil? Euro-area debt? The Madoff family’s next Ponzi scheme?

     Ending Badly: The challenge for China alone is like trying to park an Airbus A-380 super-jumbo in a Volkswagen. Like all pyramid schemes, there’s no easy end in sight and things could end badly. If the dollar collapses, panicked selling by central banks looking to limit losses would shake global markets more than the U.S. credit crisis has.

     Two, reserves are dead money. The wisdom of currency stockpiling came from the chaos of 1997. Speculators sensed authorities in Thailand were sitting on few reserves, and they were right. Their attack on the Thai baht set the stage for an Asian meltdown. Governments spent the 2000s determined not to repeat the mistake. Asian economies have too much of a good thing on their hands. In July 2007, on the 10th anniversary of Thailand’s devaluation, Asian Development Bank President Haruhiko Kuroda said the accelerating accumulation of reserves was a major concern for the region. Too bad nobody listened to him. Vast Sums: These huge sums of money could be used to improve infrastructure, education, health care and reducing carbon emissions. Never before have we seen such a misallocation of such vast resources. Asia can do better with its money.

     Three, reserves add to overheating risks. When policy makers buy dollars, they need to sell local currency, increasing its availability and boosting the money supply. Next they sell bonds to mop up excess money in economies. It’s an imprecise science that often leads to accelerating inflation. The strategy works out to be an expensive one. The stakes are rising fast. The risks in Asia are skewed firmly in the direction of inflation. The focus is now on central banks to see if they will pull liquidity out of economies with higher interest rates.

     More attention should be on how reserve management is working at odds with that goal. Central banks face a difficult task. They must withdraw excess liquidity without devastating their economies and running afoul of politicians. Only now is Asia finding out how some of its economic-protection tactics are amplifying the challenge. Asia has been holding down currencies to support exports for more than a decade. It’s silly to ignore the side effects of that strategy for the region’s economies. Think about how Dubai shook the global economy, or how the mere hint that Chinese growth may dip below 8 percent inspires panic. These disappointments pale in comparison with the turbulence that may come from Asia’s biggest bubble popping.

The Fed’s U.S. Treasuries Bubble Trouble

Jan 09, 2009

The Fed’s U.S. Treasuries Bubble Trouble
by Peter Schiff
http://www.marketskeptics.com/2009/01/feds-us-treasuries-bubble-trouble.html

     A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of “buy the rumor and sell the fact.”

     If it is well known that Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even small profits can turn unto huge windfalls.

     The downside of course, is that all of the demand for Treasuries is artificial. Treasuries are now in the hands of speculators looking to sell, not investors looking to hold. These players are analogous to the mid-decade condo-flippers who flocked to new developments for quick profits. They did not intend to occupy their properties, but rather flip them to future buyers. Once these properties came back on the market, condo prices collapsed, as developers were forced to compete for new sales with their former customers.

     This is precisely what will happen with Treasuries. Just as the U.S. government issues mountains of new debt to finance the multi-trillion annual deficits planned by the Obama Administration, speculative holders of existing debt will be offering their bonds for sale as well. In order to prevent a complete collapse in the bond prices the Fed will be forced to significantly increase its buying.

     However, since the only way the Fed can buy bonds is by printing money, the more bonds they buy the more inflation they will create. As inflation diminishes the investment value of low-yielding Treasuries, such a scenario will kick off a downward spiral. But the more active the Fed becomes in their quest to prop up bond prices, the bigger the incentive to hit the Fed’s bid. The result will be that all Treasuries sold will be purchased by the Fed. But with the resulting frenzy in the Treasury market, and with inflation kicking into high gear, we can expect that demand for other debt classes that the Fed is not backstopping, such as corporate, municipal and agency debt, to fall through the floor, pushing up interest rates across the board.

     In order to “save” the economy from these high rates the Fed will then have to expand its purchases to include all forms of debt. If that happens, run-away inflation will quickly turn into hyper-inflation, and our currency will be worthless and our economy left in ruins. To avoid this nightmare scenario, the Fed should pull out of the bond market before it’s too late and let prices fall to where real buyers, those willing to hold to maturity, re-enter the market. Given how high inflation will likely be by the time this happens, my guess is that long-term Treasury yields will have to rise well into the double digits to clear the market.

     The grim reality of course is that when the real estate bubble burst the Government was able to “bail-out” private parties. However, when the bond market bubble bursts, it will be the U.S. Government itself that will be in need of the mother of all bailouts. If U.S. taxpayers or foreign creditors are unwilling or unable to pony up, and if the nightmare hyper-inflation scenario is to be avoided, default will be the only option. If misery really does love company, Bernie Madoff’s clients might finally find some comfort.

2009 Zimbabwe's hyper-inflated 100 Billion Dollar bill buys three eggs.

     Wikipedia--Hyperinflation and the currency: As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more. One way to avoid the use of large numbers is by declaring a new unit of currency (an example being, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars.")

     An example of this would be Turkey's revaluation of the Lira on 1 January 2005, when the old Turkish lira (TRL) was converted to the New Turkish lira (YTL) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen the actual value of a currency, it is called redenomination or revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

     Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful). Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded the face value. Massive amounts of coinage were melted down, usually illicitly, and exported for hard currency. Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

     Outright lying in official statistics such as money supply, inflation or reserves.

•      Suppression of publication of money supply statistics, or inflation indices.     

•  

•      Price and wage controls.

•  

•      Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be

•      described as pensions schemes, emergency funds, war funds, or something similar.

•  

•      Adjusting the components of the Consumer price index, to remove those items whose prices are

•       rising the fastest.

•  

     None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.

No Easy Fix For Canadian Loonie

Jan. 22, 2008

No easy fix for loonie

by Patrick Leblond

Financial Post

http://www.cerium.ca/No-easy-fix-for-loonie?lang=fr

     A currency board with a fixed loonie would delegate Canada’s monetary policy to the U.S. Federal Reserve. A currency board with a fixed loonie would delegate Canada’s monetary policy to the U.S. Federal Reserve. In the wake of the loonie’s rise above parity against the U.S. dollar, there has been a revival of the debate around the idea of a common currency between Canada and the United States. In one corner stand people like David Laidler who argue that it is a bad idea ; the loonie should continue to float against the greenback. In the other corner, we have the likes of Herbert Grubel, Thomas Courchene and Pierre Fortin who clamour for some form of monetary integration between Canada and the United States.

     Interestingly, this is the same debate with the same protagonists that took place a few years back when the loonie was at US65¢. For the no side (i.e. against monetary integration), the exchange rate must continue to fluctuate in order to deal with the Canadian economy’s dependence on commodities, which is not the case in the United States. For the yes side, the Canadian dollar is either too low and it hurts productivity (since Canadian companies do not import more efficient machinery and equipment) or it is too high and it hurts firms’ international competitiveness. In any case, the loonie’s exchange rate with the greenback is volatile and this is bad for the economy.

     The truth about this debate is that both sides make some valid economic arguments. This explains why the debate has not really progressed in the last 10 years. The real debate, however, should be about the shape that monetary integration with the United States should take. But even in this case, as we shall see, there is no real debate to be had because of the politics involved.

     In his article in last Friday’s National Post, Herbert Grubel offered one yes-side solution to the loonie’s exchange rate volatility : a currency board and a new Canadian dollar. The currency board would fix the exchange rate between the loonie and the greenback, while the "new" Canadian dollar would be set at parity with the U.S. dollar (instead of a US90¢ fixed exchange rate). In such a system, each new loonie issued by the Bank of Canada would require one U.S. dollar in its vaults. As a result, Grubel argues, the two dollars should be used interchangeably by the public (thereby making the greenback legal tender in Canada), potentially leading to the complete (U.S.) dollarization of the Canadian economy.

     Such a monetary arrangement would no doubt be acceptable to our American neighbour, since there is no political and public support for the creation of a new North American currency (e.g., an amero) south of the border. In fact, it is probably the only monetary integration arrangement acceptable to the United States other than Canada adopting the greenback outright.

     From a Canadian perspective, the proposed currency board would have the political advantage of keeping the loonie, which Canadians appreciate, especially when it is close to parity. The few opinion polls conducted on the issue between 1992 and 2002 show clearly that there is an inverse relationship between Canadians’ support for monetary union with the United States and the value of the Canadian dollar. According to the same polls, however, few Canadians are willing to abandon the loonie in favour of the greenback, at any level of the exchange rate.

     A currency board with the loonie fixed to the greenback implies a delegation of Canada’s monetary policy to the U.S. Federal Reserve. The issue here is whether the Fed would do a better job than the Bank of Canada at running our monetary policy. One can doubt it by looking at the mess it created with, first, the IT bubble at the end of the 1990s and, now, the subprime mortgage crisis. In any case, U.S. monetary policy has and will always be geared towards U.S. political and economic realities, not Canadian ones.

     Another aspect not discussed by the yes side is the rate at which the loonie would be fixed to the greenback. Grubel talks about fixing the exchange rate at US90¢, which he says is the current equilibrium rate as calculated by the Bank of Canada. The problem here is that back in 2001-02, the equilibrium rate was around US75¢ and this was the rate at which it was argued the exchange rate with the U.S. dollar should be fixed.

     Had Canada opted for monetary integration back then, as Grubel and Co. argued for, we would currently have an undervalued currency. Obviously, this would fuel inflation in Canada. Unfortunately, there is nothing that we could do, since monetary policy would be run by the Fed, which would now be reducing interest rates to deal with the subprime mess, rather than increasing them as Canada’s overheating economy would require. For sure, the current minority Conservative government would look to abandon the currency board in order to stay in power, assuming that Canadians are not very fond of inflation.

     Grubel mentions that a currency board would be as credible as European monetary union. He forgets to mention, however, that Argentina had such a currency board in the 1990s. And it did not prevent the country from experiencing one of its worst financial crises ever between 1999 and 2002. Eventually, political pressures forced the Argentine government to abandon the currency board and let the peso float against the U.S. Dollar.

     Only complete monetary union can nowadays achieve a sufficient level of credibility with financial markets. The problem is that only the dollarization of the Canadian economy is acceptable to Americans, whereas only the creation of a new common North American currency (a la euro) with a supranational central bank with powers shared equally between Canada and the United States (a la European Central Bank) would be acceptable to Canadians.

     In sum, the status quo is the only politically acceptable solution for Canada, even if it may not be the best economic solution (in fact, it is second best). Until this reality changes, the debate concerning the loonie and monetary integration with the United States will continue to be sterile. Let’s rather focus our energies on finding ways to make trade easier within Canada, as well as with the United States.

Playing Monopoly With The Devil

     The anti-Christ’s plan is to divide the world into ten kingdoms, all using the same monetary system and one religion (see Ten Worldwide Super States: Playing Monopoly* with the devil). The ten-king nations will be forcefully democratic with rotating presidencies;  the European Union (EU) is the model. When the time for the anti-Christ arrives, he will be one of these ten kings, according to Revelation 17:10-11. The kings only receive power to grasp control for the anti-Christ at the last hour. The rotating presidencies of these ten super-states will furnish the kings.

     How will this happen? The EU has paved the way. The super-states will be divided into ten economic and political powers. They are the 1. EU, 2. North America (Canada, America, Mexico, Central America, and outlaying islands), 3. South America, 4. Russia, 5. Central Asia (The Islamic Republics), 6. East Asia (China, Mongolia, Japan, Taiwan, Korea, etc.), 7. Oceania (Australia, Malaysia, Indonesia, New Zealand, and surrounding islands), 8. Southeast Asia (India to Viet Nam), 9. North Africa/Middle-East (Saudi Arabia to Western Sahara, etc.), and 10. Africa (Sub-Sahara, Madagascar). These divisions could be debated. For example, India would go well with Oceania since many Indians speak English and would fare well with Australia. Time will tell.

     North America has begun the process. NAFTA and CAFTA are the start. A North American Super-Highway from the mid-southwestern coast of Mexico to Winnipeg, Canada--through the heartland of America, has begun.

And the ten horns which thou sawest are ten kings, which have received no kingdom as yet; buy receive power as kings one hour with the beast. These have one mind, and shall give their power and strength unto the beast. (Rev.17:12-13)