Bernanke Bashes the Chinese (Michael Pento)

Friday, November 19, 2010
By: Michael Pento

In a speech given at the sixth European Central Bank conference in Frankfurt Germany, Chairman Benjamin S. Bernanke implied that China’s currency manipulation is leading to global instability. The Fed head blamed, “Large, systemically important countries with persistent current-account surpluses” [think China], for the current global imbalance. He declared, “Globally, both growth and trade are unbalanced.

He continued, “Because a strong expansion in the emerging-market economies will ultimately depend on a recovery in the more advanced economies, this pattern of two-speed growth might very well be resolved in favor of slow growth for everyone if the recovery in the advanced economies falls short.” In Bernanke’s mind, Chinese growth is totally dependent on the U.S., not the other way around.

But what Bernanke fails to understand is that the U.S. manipulates its currency first and foremost. In addition, he also doesn’t grasp the idea that further US dollar devaluation will only exacerbate the trade imbalance. And, to make matters even worse, if he were to get his druthers the U.S. would see soaring interest rates and rapidly rising domestic prices. In fact, a rapid rise in the value of the Renminbi verse the USD would most likely render the U.S. insolvent.

Bernanke also gave a strong clue as to just how long it will be before he decides to raise interest rates and protect the purchasing power of Americans. He said, “On its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for many years,” he said. “As a society, we should find that outcome unacceptable.” Therefore, we have many more years ahead to punish savers and reward debtors. And many more years to come of rising commodity prices and an eroding standard of living.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.

Bernanke: “All he understands is printing money.” (Jim Rogers)

By Simon Clark and Stephen Morris
11/5/10

Nov. 5 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke’s decision to pump a further $600 billion into the economy shows his grasp of economics is weak, said investor Jim Rogers, chairman of Rogers Holdings.

“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers, 68, said in a lecture at Oxford University’s Balliol College yesterday. “All he understands is printing money.”

“His whole intellectual career has been based on the study of printing money,” said Rogers, who predicted the start of the global commodities rally in 1999. “Give the guy a printing press, he’s going to run it as fast as he can.”

The Fed said on Nov. 3 it will buy an additional $600 billion of Treasuries through June, in a bid to reduce unemployment and avert deflation. While Bernanke’s near-zero rates and $1.7 trillion in asset purchases helped end the recession, the Fed said progress has been “disappointingly slow” in bringing down joblessness that is close to a 26-year high.

“Debasing your currency has never worked,” Rogers said.

David W. Skidmore, a spokesman for the central bank in Washington, didn’t respond to a message seeking comment.

Bernanke’s View

Bernanke, 56, a former Princeton University economics professor who was appointed as Fed chairman by President George Bush in 2005, is a long-term scholar of the Great Depression. He has argued that the central bank’s blunders helped worsen the financial crisis that began in 1929.

He has responded with the most-aggressive expansion of the Fed’s power in its history, cutting interest rates, making Federal Reserve loans available to investment firms for the first time since the 1930s and lowering the rates at which banks can borrow from the Fed.

Rogers said the Fed was “throwing petrol on the fire” of surging commodity prices, which rose to a two-year high today. He urged students to scrap career plans for Wall Street or the City, London’s financial district, and to study agriculture and mining instead.

“The power is shifting again from the financial centers to the producers of real goods,” he said. “The place to be is in commodities, raw materials, natural resources.”

“Don’t go to Harvard Business School,” he said. “If you want to make fortunes and come back and donate large sums of money to Balliol you’re not going to do it if you get an MBA.”

‘Horrible Disaster’

He declined to comment on the performance of his own investments in commodities. Rogers, who described the U.S. as the most indebted country in history, said quantitative easing had been a “horrible disaster.”

“It didn’t work the first time, it’s not going to work the second time,” he said in an interview with Bloomberg News. “It’s adding up staggering amounts of debt, staggering amounts of debased currencies. It’s going to cause more distortions, and we’re going to have more currency turmoil.”

The U.S. and U.K. governments’ taxpayer-sponsored bailouts of troubled banks were “unbelievable economics” and “terrible morality,” he said.

Rogers studied at Balliol in the 1960s and coxed Oxford to victory in the 1966 boat race against Cambridge University. Balliol, founded 747 years ago, educated British prime ministers including Harold Macmillan and writers such as Graham Greene.

“I’m here to sell books,” said Rogers, who lives in Singapore. “My little girls need royalties,” he added, referring to his two daughters, who are both younger than eight and were in the audience.

Rogers traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include “Adventure Capitalist” (Random House/Wiley) and “Investment Biker.”

Geithner Swears that the U. S. will not devalue the dollar

Tim Geithner: "...the United States needed to "work hard to

preserve confidence in the strong dollar."

By JimChristie and David Lawder
10/19/10

(Reuters) - Treasury Secretary Timothy Geithner vowed on Monday that the United States would not devalue the dollar for export advantage, saying no country could weaken its currency to gain economic health.

"It is not going to happen in this country." Geithner told Silicon Valley business leaders of devaluing the dollar.

Geithner broke his silence on the dollar's protracted slide ahead of this weekend's meeting of finance leaders from the Group of 20 wealthy and emerging nations in South Korea, where rising tensions over Chinese and U.S. currency valuations are expected to take center stage.

"It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive," Geithner added. "It is not a viable, feasible strategy and we will not engage in it."

Answering audience questions before the Commonwealth Club of California in Palo Alto, he said the United States needed to "work hard to preserve confidence in the strong dollar."

Geithner, normally reluctant to publicly discuss currency and market movements, has not uttered the so-called "strong dollar mantra" -- a refrain he helped create at Treasury in the 1990s -- since February.

On Friday, the dollar index hit a 10-month low against a basket of major currencies, while the greenback has been plumbing fresh 15-year lows against Japan's yen .

Many emerging market countries are complaining that Fed money creation is weakening the dollar, and causing more funds to flow into their markets, pushing up their currencies.

Talk of a "currency war" has persisted as countries take action to keep from losing export competitiveness.

Brazil on Monday moved to cool a strong rally in its currency by raising taxes for foreigners buying local bonds and trading in foreign exchange derivatives.

Finance Minister Guido Mantega said the move was aimed at reducing foreign investment into Brazil, and he urged other countries to take coordinated action against the weak dollar.

Argentina's Minister of Economy and Public Finance Amado Boudou on Monday called on developed nations to focus on creating jobs rather than actions that weaken their currencies, saying a "true currency war" was underway. Link to more on Geithner's Strong Dollar Farce

Global finance leaders fail to resolve deep differences that threaten full-blown currency war

Martin Crutsinger
AP Economics Writer
10/9/10

WASHINGTON (AP) -- Global finance leaders failed Saturday to resolve deep differences that threaten the outbreak of a full-blown currency war.

Various nations are seeking to devalue their currencies as a way to boost exports and jobs during hard economic times. The concern is that such efforts could trigger a repeat of the trade wars that contributed to the Great Depression of the 1930s as country after country raises protectionist barriers to imported goods.

The International Monetary Fund wrapped up two days of talks with a communique that pledged to "deepen" its work in the area of currency movements, including conducting studies on the issue.

The communique essentially papered-over sharp differences on currency policies between China and the United States.

The Obama administration, facing November elections where high U.S. unemployment will be a top issue, has been ratcheting up pressure on China to move more quickly to allow its currency to rise in value against the dollar.

American manufacturers contend the Chinese yuan is undervalued by as much as 40 percent and this has cost millions of U.S. manufacturing jobs by making Chinese goods cheaper in the United States and U.S. products more expensive in China.

China has allowed its currency, the yuan, to rise in value by about 2.3 percent since announcing in June that it would introduce a more flexible exchange rate. Most of that increase has come in recent weeks after the U.S. House passed tough legislation to impose economic sanctions on countries found to be manipulating their currencies.

Egyptian Finance Minister Youssef Boutros-Ghali told reporters Saturday at a concluding news conference that there were "a number of points of friction" at the meetings. But he said it was a significant achievement that all countries recognized the central role the IMF should play in trying to resolve currency conflicts.

IMF Managing Director Dominique Strauss-Kahn said he did not view the outcome of the discussions as a failure. He said they set the stage for further progress at the upcoming summit of leaders of the Group of 20 nations in November in Seoul and at future IMF meetings.

Strauss-Kahn said the G-20 countries remained committed to the goals they established a year ago of achieving more balanced global growth and that this will require changes in currency policies.

The G-20 includes traditional economic powers such as the United States and Europe along with fast-growing economies such as China, Brazil and India.

"I am not disappointed," Strauss-Kahn told reporters about the outcome of the two days of talks. "We can talk and talk and talk. What we need is real action. I don't believe this action can be done except in a cooperative way."

Strauss-Kahn acknowledged that significant differences also remained on the question of reforming the IMF by giving China and other fast-growing economic powers greater voting rights and representation on the IMF board. The G-20 leaders are supposed to endorse a deal on IMF reform at their Nov. 11-12 summit.

Treasury Secretary Timothy Geithner on Wednesday raised the possibility that awarding greater power to China in the IMF should be linked to a greater willingness of that country to reform its currency system.

Strauss-Kahn said this comment was not a form of blackmail but rather acknowledgment that as countries grow more important economically, they mush bear greater responsibility for the proper functioning of the global economy.