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The Resourceful Bear Blog

Posts tagged with "Regional Currencies"

Abu Dhabi Hopes To Become GCC Economic Capital

Nadim Kawach of Zawya reports that the UAE is expected to revive its bid to be home to the planned Gulf central bank when regional heads of state hold their annual summit in Oman in late November, official sources said yesterday.

While other GCC members would like to host the GCB headquarters, the UAE believes it has an edge in the race on the grounds it was the first member to offer to be home to the institution.

"As the Governor has stated before, the UAE was the first member state to offer to host the GCC central bank and is still sticking to its offer," a UAE Central Bank source said. "We would like the GCB to be headquartered in the UAE because the country already has the necessary infrastructure for this project."

GCC leaders, who will meet in Muscat in the last week of November, are due to decide on the location of the GCB, part of their planned monetary union. Central bankers and finance ministers endorsed the project at talks in Jeddah this week and said they would present proposals to their foreign ministers, who in turn will submit them to the Muscat summit for approval.

A Gulf monetary authority is to pave the way for the creation of the GCC central bank, which will decide on the launching of the common currency six months after it begins functioning, according to the Riyadh-based GCC Secretariat.

The currency will have a fixed exchange rate against local GCC currencies for a transitional period, during which those currencies will be gradually phased out.

In a document revealed last month, the GCC Secretariat said the central bank would enjoy full autonomy and its main objective was to guarantee currency stability in the monetary union's zone, draw up monetary policies for the single currency and manage foreign reserves in that currency.

A UAE banker said: "I think the UAE enjoys all economic and financial requirements for hosting the GCC central bank. It could be based in Abu Dhabi, which is home to the UAE Central Bank and the Arab Monetary Fund, an important Arab League institution that co-ordinates monetary policies in the whole region."

In recent statements UAE Central Bank Governor Sultan bin Nasser Al Suwaidi said the UAE was still pushing to be home to the GCC central bank. "It was not a decision but an offer from us to host the GCC central bank," said Al Suwaidi. "We were the first member state to make this offer. We in the UAE would love to see this bank based here. It will be a very important regional institution and we would like to be its base. The UAE possesses all financial, economic and logistic capabilities to host the GCC central bank."

Unwinding Yen Carry Trade To Propel Development Of A Common Currency For South America

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Introduction
The unwinding yen carry trade, the EUR/JPY, which is probably better termed the Euro carry trade, is going to stimulate the process of developing a single unified and common currency for the Union of South American Nations, UNASUR, as Brazil and Argentina move to abolish the US Dollar in Bilateral Trade.

The Euro, FXE, moved above a support line first at 141.140 and then at 142, to close at 142.38; and the Yen, FXY, fell to close at 92.43 ... FXE and FXY

The Stockcharts.com chart of the EURJPY, that is, FXE:FXY, shows the EURJPY at support. This is an abeyance, but not abatement, to the unwinding of the yen carry trade, which has started an Elliott Wave 3 Down in this currency pair which has dramatically taken down the world stocks, EFA, the emerging market stocks, EEM, the Brazil shares, EWZ, and the natural resource stocks, such as metal manufacturing, XME, the HUI indexed precious metal mining shares, GDX, steel producres, SLX, coal producers, KOL, energy producers, XME, and energy service, OIH as well as the whole commodity complex, RJI, oil, USO, and even gold, GLD ... Chart of FXE:FXY

The yen carry trade has unwound deleveraging and destabilizing Brazil's economy
Gary Dorsch wrote in Safehaven article "Maverick McCain" and the Resurrection of the US$

I recommend an investment in Mr. Gary Dorsch's Global Money Trends newsletter or call toll free to order, Sunday thru Thursday, 8 am to 9 pm EST, and on Friday 8 am to 5 pm, at 866-553-1007. Outside the US call 561-367-1007.

As soon as you think you've got the key to the stock market, they change the lock," lamented Joe Granville, who is mostly remembered for his bearish calls on the US stock market during the 1970's, 1980's, and the 1990's. Nowadays, many currency traders are scratching their heads, trying to figure out what's behind the sudden resurrection of the US-dollar, which is flexing its muscles for the first time in two-years, and defying conventional logic, by climbing sharply higher against most foreign currencies, including those that offer much higher rates of interest.

The Euro has plummeted 12% vs the US-dollar since July 15th, tumbling to as low as $1.410 today. Earlier this week, Euro-zone Finance chief Jean-Claude Juncker gave currency traders the green-light to trash the Euro. "Things are developing in the right direction, in line with the commitments of the US Treasury that it stated in recent months. The Euro is less than $1.44, and it reflects economic fundamentals better than the Euro flirting with $1.60. I still think that the Euro is overvalued, not only against the dollar, but also against other currencies," he said.

What's behind this sea-change in market psychology towards the US-dollar, where the focus has shifted away from interest rate differentials, and instead, has veered-off towards other key factors? They are several reasons that are beyond the scope of this article, but were highlighted in the August editions of the Global Money Trends newsletter.

Throughout the US-dollar's tortuous 40% slide over the past six-years, the Arab oil kingdoms in the Persian Gulf stayed loyal to their archaic US-dollar pegs, even while the Fed's indifference to the sliding US-dollar sent inflation shock waves through their dollar-linked economies. Saudi Arabia was forced to expand its M3 money supply by more than 20% in order to defend the dollar peg, which in turn, fueled inflation to +11.1% in July, it's highest in 30-years. In Abu Dhabi, the biggest member of the UAE federation, prices were 12.9% higher in June.

The Arab oil kingdoms rescued the US-dollar from the brink of collapse, by rapidly expanding the supply of Kuwaiti dinars, Saudi riyals, and UAE dirhams, and then recycled about $250 of Petro-dollars into US Treasuries over the past 12-months, through their brokers in London. In return, the US armed forces are defending the Arab Oil kingdoms from their dangerous neighbors to the north in Iran, which seeks nuclear weapons, and is closely aligned with czarist Russia, and Venezuela's mercurial kingpin Hugo Chavez, - forming the "Axis of Oil."

The recycling of Arabian Petro-dollars into US Treasuries put a floor under the US$ Index at the 70-level this summer, and persuaded bearish currency traders to cover massive short positions that had been built-up in the US$ over the past six-years. King Abdullah of Saudi Arabia upped the ante, in support of the dollar, by boosting the kingdom's oil output by 1.1 million barrels per day (bpd) from a year-ago to 9.7 million in July, which finally deflated the crude oil bubble by $45 barrel so far.

On Sept 3rd, Saudi Arabia announced that it had started pumping crude from the Khursaniyah field, which would boost the kingdom's output capacity by 500,000 bpd to around 11.8 million barrels, and aims to boost its total oil production capacity to 12.5 million bpd by the end of next year. But with crude oil experiencing its largest slide in history, (in dollars) OPEC hawks Iran and Venezuela called for production cutbacks, to put a floor under the market at $100 /barrel.

On Sept 8th, OPEC chief Chakib Khelil said he expected the oil market to be oversupplied at the end of this year. "There is plenty of oil in the market, stocks are pretty good. There will be an oversupply of one-million bpd by early next year," he predicted. Khelil also noted that oil prices were easing as the value of dollar rose. US crude fell to under $102 as the dollar hit an 11-month high against the Euro. "What we are seeing now is the inverse relationship between the US dollar and the oil price is verified. The dollar is strengthening, the oil price is going down," he added.

In a compromise, to placate the mullahs in Tehran, the Saudis agreed to a surprising cutback in oil output, in an effort to stabilize the market. OPEC is pumping roughly 790,000 bpd above target, the bulk of which comes from Saudi Arabia, the central banker of oil, which is pumping around 750,000 bpd above its official quota. "If you do your own calculations properly, OPEC will be a lowering its production by about 520,000 barrels per day," said OPEC chief Khelil.

But the Arabian monarchs also have their eyes on the US political calendar, and have driven oil prices lower, in order to help John "Maverick" McCain get elected, and become the next commander in chief of the US armed forces in the Persian Gulf. On August 31st, South Carolina Senator Lindsey Graham reminded the Arab oil kingdoms that Democratic vice-presidential nominee Joe Biden lacked the backbone to stand up to powerful foes or to fix broken governments in the Middle East.

"Biden has national security experience. But experience and judgment need to come together. Biden voted against the first Gulf War to evict Saddam Hussein from Kuwait. He opposed the surge in Iraq. He wants to partition Iraq," Graham said. As chairman of the Senate Foreign Relations Committee, Biden did oppose the recent US troop buildup to defeat al-Qaeda and has called for separating Iraq into three autonomous provinces - Shiite, Sunni, and Kurdish, which is diametrically opposed to the views of the Arab oil kingdoms in the Persian Gulf.

Between now and Nov 4th, the Saudi and Kuwaiti monarchs will attempt to put a lid the oil market, allowing US gasoline prices to trickle lower, and ease the anxieties of jittery swing voters who are worried about the economy. Soybean and corn prices have already plunged by 30% since early July, in sympathy with lower oil prices, and with a little bit of luck, Americans might see lower food prices before the November 4th election. What's likely to happen to the oil market after Nov 4th, will be presented in the upcoming Sept 12th edition of Global Money trends.

Not since the contest between Jimmy Carter and Ronald Reagan in 1980, has expectations of the outcome of a US-presidential election impacted the currency markets in a big-way. In 1980, any signal that Carter was pulling ahead in the polls, would send the dollar plummeting in the foreign exchange market. Conversely, Reagan's landslide victory, by a 51% to 41% margin in the popular tally, and a whopping 489 to 49 in electoral-college votes, set in motion a vigorous four-year bull-run for the US dollar, and lifted the greenback to 3.50 German marks.

In 1980, when Reagan defeated Carter, the British pound lost 10% vs the dollar after six-months, 22% after one-year and 47% by the end of Reagan's first term. The "Reagan Revolution" included big tax cuts, and wide swaths of working-class Democrats defected to the Republican Party, which Mr McCain hopes to attract in the weeks ahead, with his plan to stimulate the US economy by cutting the corporate tax rate 10% to 25%, and extending the Bush tax cuts beyond 2010.

There are several reasons that explain the sudden plunge in the Euro, including the unwinding of "yen carry" trades, but few traders have noticed that the dollar's resurrection is mirroring the odds of a McCain victory in November. Futures traders dealing at the on-line parlor Inntrade, based in Dublin, Ireland, have lifted their bids on "Maverick" McCain to a 47.5% probability of winning the election, up from 30% in mid-July. The perceived shift in "Maverick" McCain's" political fortunes are linked to the latest Gallup poll, putting him 5% ahead of Mr Obama, due to a huge 15% shift of independent voters and women, leaning towards Alaskan governor Sarah Palin.

Governor Sarah Palin of Alaska introduced herself to America before a roaring crowd at the Republican National Convention last week, as "just your average hockey mom" then pitched herself as a champion of government reform, sliced and diced Democratic candidate Barack Obama as an elitist, and attacked the liberal media. McCain wants to put Sarah Palin in charge of US oil and energy policy if he becomes president, to lessen American dependence on foreign sources of oil, which in turn, could have a big impact on the dollar in the years ahead.

Alongside McCain's jump in the polls, the US-Dollar Index rallied 12% towards the 80-level, gaining support from the emergence of a militaristic Russia, which invaded South Ossetia and Abkhazia, and threatened to cut-off energy supplies to Europe. Kremlin kingpin Vladimir Putin has refurbished the US-dollar's traditional status as a "safe haven" currency. Not since the end of the Cold War, has the US-dollar been treated as a "safe-haven" currency in times of dangerous geopolitical turmoil.

Nowadays, the Persian Gulf oil kingdoms regard the possibility of a nuclear armed Iran as a "dire and direct threat" to their own existence, and are flocking to the US-dollar as a safe haven. The sovereign wealth funds (SWF's) controlled by Dubai, Abu Dhabi, Kuwait and Saudi Arabia have roughly $1.7 trillion between them, dwarfing the largest private equity funds in the world. During the first half of 2008 alone, Saudi Arabia raked in $192 billion from oil exports,just $2 billion less than the kingdom's total oil export revenues in 2007.

With their enormous size, the Persian Gulf SWF's can easily move global financial markets. By 2015, the Persian Gulf SWF's could grow to $5-6 trillion. If Chinese, Russian, and Korean SWF's are taken into account, the total global SWF value could top $12 trillion, or almost equal to the output of the Euro-zone's economy. SWF's are quickly becoming the most powerful investors in the world, and account for 12% of the trading volume in commodities. Their activities will increasingly impact financial markets, and the distribution of strategic resources.

Russia holds the world's largest natural gas reserves and the eighth-largest oil reserves. It supplies one-quarter of Europe's oil supply and 30% of its natural gas. In July, deliveries to the Czech Republic through the Druzhba pipeline were cut by 40% after Prague signed an agreement with the US to install an anti-missile shield. The emergence of a militaristic Russia, under former KGB spy master Putin, in alliance with the "Axis of Oil," has tarnished the Euro's stellar image, and added an extra degree of risk in investing in European stock markets.

Putin has declared that a new Cold War with the West has already begun and is considering arming Russia's Baltic fleet with nuclear warheads and pointing them at European cities. "Of course we are returning to those times. It is clear that if a part of the US nuclear capability turns up in Europe, and, in the opinion of our military specialists will threaten us, then we are forced to take corresponding steps in response. The strategic balance in the world is being upset and in order to restore this balance, we will be creating a system of countering that anti-missile system. Naturally, we will have to have new targets in Europe," Putin warned.

Since Russia invaded South Ossetia and Abkhazia on August 7th, the Kremlin's foreign exchange reserves have declined by $16.4 billion, the biggest outflow of capital since the country's financial meltdown in 1998. Foreign investors, who hold roughly half of all Russian shares outstanding, many listed in London and New York, have sold an estimated $20 billion of Russian stocks. The Russian central bank was forced to sell US$5 billion in the foreign exchange market to stabilize the Russian rouble, after it tumbled 10% against the resurgent US$, to a one-year low.

While the Kremlin's coffers have mushroomed, the Russian corporate sector is still heavily reliant on foreign investors. The local bond market is small, with just $60 billion worth of ruble issues. Russian companies borrow funds on the world capital markets, and foreigners own half of the $1 trillion debt. But now, Russian companies are facing a liquidity crunch, since foreign lenders are balking and won't touch any Russian paper. The impact on the Russian stock market has been severe.

The Russian Trading system Index (RTS) was roiled by the exodus of foreign investors, who are on high alert for political risk. Since peaking in May, the Russian stock market plunged 40%, shaving roughly $500 billion from the value of Russian stocks. Foreigners dumped large blocks of Russian mining companies after Kremlin kingpin Putin, accused a large steel and coal mining company, Mechel, MTL.n of tax evasion, causing its share price to collapse. When Putin targets a company, there can be dire consequences, such as the demise of Yukos, a big oil company that was bankrupted on trumped-up tax charges.

Roughly half the RTS Index is comprised of energy related companies, which have also been hard hit, by the slide in crude oil prices to $102 /barrel. Soaring oil prices were behind Russia's political and economic resurgence, and help lift the RTS Index by an astounding 720% from six-years ago. But nowadays, the term "Peak Oil" is invoking images of a peak in oil prices and global demand, due to a synchronized slide in the global economy, rather than fears that the world is running out of oil.

One big surprise at this week's OPEC meeting was the presence of Russian deputy prime minister Igor Sechin, sent by Putin, who announced that "Broad cooperation with OPEC is one of Russia's top priorities. OPEC is one of Russia's key partners on the global oil market." In the past, Russia has agreed to trim production in line with OPEC output cuts to support prices, and traders must monitor Putin's next move.

Most interesting is the observation that the Euro's slide against the US$, is the near-perfect inverse image of the US-dollar's climb against the Russian rouble. The emergence of militarist Russia, ready to aim its nukes at Europe, and a stranglehold over Europe's energy supply, has triggered a mini-flight of capital from the Euro and the Russian rouble. In contrast, the US-dollar, backed by the world's most powerful military, wins by default as a safe haven.

The foreign Exodus from Brazil's Bovespa stock exchange, EWZ, and undermines the Brazilian currency The Real.

Yet there appears to be more reasons behind the US-dollar's rally against all major foreign currencies, than just its newly polished image as a "safe-haven" currency. Brazil is not under any threat of military attack from Russia or Iran, and it's self-sufficient in energy, yet it's currency, the real, has lost -14% against the US-dollar in recent weeks, even though Brazil's interest rates are +11% higher.

Foreign investors pulled money out of Brazil's stock market for a third straight month in August, triggered by the steepest plunge in commodities in five decades. Slumping commodity prices led Sao Paulo's Bovespa stock index sharply lower, to below the psychological 50,000-level, or 34% off from its May 20th all-time high. More than half of the Bovespa index is made up of natural resources companies and steel mills, whose fate largely hinges on the direction of the global economy.

The Dow Jones Commodity Index has tumbled 27% from a record high set eight weeks ago. Steel prices have plunged 30%, and soybeans are 30% lower. Brazil had posted a trade surplus of $40 billion last year on exports of $160 billion, and strong demand for commodities helped secure a 27% jump in exports, from January to July of this year, compared to the same period a year ago.

An unwinding yen carry trade unravels Brazil's trade surplus.

Latin America's largest economy enjoyed a current account surplus for the last five years, its currency rose to a nine-year high while the central bank stockpiled enough US-dollars to pay off its entire foreign debt and become a net creditor for the first time. But imports are growing at twice the rate of exports this year, due to the super-strong real, and Brazil's trade surplus plunged 42% in the first half of this year. Now the virtuous cycle is moving in reverse, as commodity prices slide, and foreigners repatriate their money, to avoid losses related to the Bovespa index.

The unwinding yen carry trade has deleveraged the top two emerging markets.

The Brazilian real has plunged 10% in the past 10-days to 1.77, its lowest level against the dollar since February. The performance of Brazil's currency and stock market, which largely hinge on the direction of commodity markets, haven't differed much from Russia's. These top-2 emerging markets are leveraged plays on the global economy, and when commodities trend lower, it has a double barreled selling effect on emerging markets.

The US Dollar has been abolished in bilateral trade between Argentina and Brazil
Toni Straka writing in SeekingAlpha article Argentina and Brazil Abolish Dollar in Bilateral Trade reports that The dollar has begun to fall out of favor in Latin America. Argentina and Brazil are the next two countries that have reduced their exposure to Federal Reserve Notes [FRNs]. According to a report by mercopress.com:

Brazilian and Argentine presidents Lula da Silva and Cristina Fernandez de Kirchner signed on Monday an agreement which officially launches the use of their countries currencies for bilateral trade instead of the US dollar.

Both sides said that bilateral trade would save forex costs, especially for smaller businesses. Bilateral trade between the two countries reached $25 billion in 2007 and is expected to soar another 20% to $30 billion this year. The agreement will be effective from October 1. Brazil sees the move as a first step towards more monetary cooperation in the Mercosur area that other countries could join as well.

"We’re giving a crucial step for a future regional monetary integration” said Lula da Silva during the official reception. "We are going to abolish the dollar as a currency in our trade" he added.

Lula da Silva pointed out that he wanted Brazil and Argentina's trade balance to be more balanced. Argentina had a 2.7 billion US dollars trade deficit with its larger neighbor Brazil in the first half of the year.

"The trade balance should be a two-way street," he said. "There has to be certain balance: one can have a small difference, one year a trade deficit and the next a surplus."

Brazil’s Central Bank said in a release that it had signed with the Argentine Central Bank an accord which establishes the rules for the Local Currencies Payments System, SML between the senior members of Mercosur.

Brazil Raises Basic Rate

On Thursday, the Brazilian Monetary Policy Committee [Copom] of the Central Bank [BC] raised the base interest rate [Selic] by 0.75 of a percentage point, from 13% to 13.75% a year. This is the fourth consecutive hike in the Selic and the highest in almost two years.

The Copom vote apparently was 5-3. Dissenters favored a half percentage point increase. In a statement, the Central Bank said it was raising rates “to promote the conversion of inflation to the target trajectory in a timely fashion.”

Even with falling commodity prices that pushed inflation lower in August to 6.17% from a three-year high of 6.37%, the orthodox central bank seems intent on insuring that demand growth does not outpace supply and keeps to the original inflation target of 4.5% for 2008. Concerns were heightened when earlier data showed the economy expanded at a 6.1% pace in the second quarter.

The Copom, after raising the Selic rate by a larger-than-expected 0.75 of a percentage point in the previous meeting on July 23, used the same language to express its goal of bringing inflation back to its target in a “timely fashion.” A central bank survey of 100 economists anticipates the Selic rate will further increase to 14.75% by year's end.

Gold Trades Up, While The Dollar, Stocks And Oil Trade Lower

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Investment report for July 31, 2008
Gold traded higher today
The chart of the gold ETF, GLD, closed up 0.63% and closed above 50 day moving average.

Gold, $gold, traded up to $913.

The US Dollar traded lower
The US Dollar, $USD, traded down to 73.23.

The USD/JPY is down from recent high above 108 to close at 107.81.

The ascending wedge pattern, which began when the Federal Reserve announced the facilities of TAF, TSLF, and PDCF, shown in this 3 month Yahoo Finance chart of USD/JPY, is about to be broken sharply lower.

World currencies traded mixed
The Australian Dollar, FXA manifested bearish engulfing ... -.15%

Stocks traded lower
Russell 2000, IWM, ... -.17%

Dow, DIA, ... -1.83

Investment bankers, KCE, ... -.69%

Banks, KBE, ... -.18%

The Brics, EEB, where many yen carry trade dollars still remain ... -2.28%

Sohu.com, SOHU, a leading edge, yen carry trade stock, as well as a leading edge, Chinese, that is FXI stock, ... -1.90%

Nasdaq leader, and 'best of breed' software provider to the banking industry, FISV, ... -3.65%

Oil traded lower
USO, traded -2.1%, to close down just under 100.

US Treasury Bonds traded up
TLT, popped up, but the pressure is still down from 92.94 on 7-15-2008, when the market sold off in response to the Federal Reserve moving to liquify and capitalize Freddie Mac and Fannie Mae ... +.99% to close up at 91.67.

The bond market place declared an interest rate hike on the 30 Year US Government Bonds, $TYX, in response to the Federal Reserve providing TAF, TSLF and PDCF assistance on March 18, 2008, and then again on July 16, in response to the Feds assistance to the GSEs. Bond market interest rates are headed higher and Treasury values and portfolios lower.

The EUR/JPY manifested bearish with a lollipop hanging man candlestick and closed lower.
EUR/JPY, the barometer of the yen carry trade, FXE:FXY, fell lower ... -.02%

Commentary
The world has passed through both 'Peak Currencies' and through 'Peak Dollar'.

Gold is rising as the world currency and means of preserving wealth.

The weekly chart of EUR/JPY, FXE:FXY weekly, shows a dramatic 0.57% fall lower, from an all time, which came in a long running ascending wedge pattern, with four weeks of rising price on falling volume.

An unwinding of the yen carry trade has commenced with interest rate differential rate investing reversing.

Investors will be buying the yen and paying back their 0.5% loans; the Bank of Japan will be foreclosing on loans not paid back, and taking whatever property was given in collateral.

Disinvestment has come out of yen carry trade favorite stocks such as the Brics, EEB, on May 19, as the TAF, TSLF, PDCF, rally ended and the EEB fell from 57.07; and then more recently on June 19 as EEB fell from 51.20, as news sources such as CEP News related the May Bank of Japan meeting minutes, which announced that inflation is an investment risk concern.

And disinvestment has also come out of world currencies, especially the commodity currencies.

The Euro, FXE, has fallen from 158.

The Australian Dollar, FXA, has fallen from an island reversal of 98 and then again fallen from 97.

The Canadian Dollar, FXC, has fallen from an island reversal and dark cloud cover of 101.5 and then again from 100.

One thing that is common to the fall of all these currencies is 'the date July 14, 2008' -- that was when the US Dollar, $USD, started to rise, as the yen carry traders and sold oil, USO, to take profit, and went long the financial sector, IYF.

Note on the chart of IFY, that "the rally is now done and over"; yesterday was a weak rise with a dragonfly candlestick; and today was a slight sell off with a gravestone doji candlestick; the chart shows bearish consolidation on falling volume. A dramatic sell off is coming within days; the yen carry traders who went long the financials will be selling; the last thing they want is to own level two asset laden, and level three asset laden stocks, that are marked to fantasy. Some type of dramatic sell off event is coming tomorrow August 1, or after the bell on August 1, or during the weekend, or next Monday August 4. The causative factor being an economic report, an announcement by the rating agencies calling debt and/or mortgage backed securities lower, or military confrontation taken by the EU US world government in response to the threat posed to global security by Iran's nuclear ambitions. One does not want to be short the oil ETF, USO, over the weekend, as it could easily gap higher on opening on Monday March 4, 2008.

Yesterday, July 30, 2007, was 'Peak Dollar'.

Now, today, July 31, 2008, gold is rising and the the dollar is falling.

The yen carry trade, EUR/JPY, FXE:FXY, will continue to unwind, causing disinvestment in both stocks and currencies. And the US dollar will be leading currencies ever downward.

The author in Calendar Yen Trading Patterns provides historical record that EUR/JPY and USD/JPY is frequently down in the month of August; this will awesomely exasperate the unwinding that is just now occurring.

US Treasury Bonds, TLT, failed on March 18, 2008 with the announcement of TAF, TSLF, and PDCF, and then again on Juiy 16 when the Federal Reserve moved to liquefy the mortgages GSEs, Freddie Mac and Fannie Mae.

In a world of increasing political tension, economic disinvestment and rising product inflation, investors are buying gold; the Resourceful Bear says: "Inflation is a stock, bond, and currency killer and a gold thriller". That is my quote, if you use it, please reference me.

The investment demand for gold is seen in the following ratios
gold relative to stocks, GLD:VTI,
gold relative to oil, GLD:USO.
gold relative to world currencies, GLD:DBV.

Gold is becoming "more dear" in terms of the important world currencies. Fresh, cup and handle patterns are starting that is going to take gold forever higher in relation to currencies. The date of May 1, 2008, was not only a World Revolution Day, but it was the day that institutional investors traded out of the high yield dividend paying stock, PEY, to go long gold with the yen carry traders, in CRB commodity futures and commodity indexed funds such as RJI, USO, and USO.
Gold in terms of the Australian Dollar: GLD:FXA
Gold in terms of the Euro: GLD:FXE
Gold in terms of the Canadian Dollar: GLD:FXC
Gold in terms of the Yen: GLD:FXY

Corey Rosenbloom provides helpful chart of gold in his article Gold’s Make or Break Zone Coming Up; it shows gold in outbreak since June 23, 2008 when the yen carry traders took heed to the May Bank of Japan meeting notes and sold out of the BRICS, EEB, and went long gold.

Geo-political analysis
Elaine Meinel Supkis relates in article Bank of Japan's 2007 Statistics relates: "The yen, representing an economy that is enjoying RECORD SURPLUSES and RECORD GROWTH, is weaker than the dollar and the euro."

However, this is just now reversing; an investment sea change is getting underway.

First, EUR/JPY is headed down; the yen is going to be getting stronger relative to the euro.

Second, USD/JPY is headed down; the US Dollar is going to win the race to the bottom, taking all currencies "right off the cliff" so as to speak.

Regional currencies may arise in South America, the Gulf oil exporting region, and in West Africa.

Investment Recommendation
While short selling may garner gains, it cannot preserve wealth, as all one has is a portfolio that is constantly depreciating in value relative to gold.

I recommend that one invest in gold with a diversified investment in gold at BullionVault.com, GoldMoney.com, and in a gold ETF such as GLD.

I also recommend that one open a Forex currency trading account and go short EUR/JPY and short USD/JPY.

Suggested Reading
How to keep your investments safe

United States Announces IV Fleet Resumes Operations Amid UNASUR's Suspicions

Matthew Flynn of the Americas Program, Center for International Policy, CIP, reports that Chief of Naval Operations Admiral Gary Roughead announced on April 24, 2008, the re-deployment of the IV Fleet.

He said that "re-establishing the Fourth Fleet recognizes the immense importance of maritime security in the southern part of the Western Hemisphere, and signals our support and interest in the civil and military maritime services in Central and South America." Effective July 1, the new command structure will have operational responsibility for U.S. Navy ships that operate in the SOUTHCOM area -- one of the six regions of the world that the Pentagon divides into unified commands.

UNASUR: The Union of South American Nations

South America's relationship with the rest of the world has changed substantially in recent years.

While the United States has been preoccupied with the War on Terrorism and focusing its attention mainly in the Middle East, South America has increased its trade relations with the rising economies of Asia. The Council on Foreign Relations recently released a report saying the United States is losing hegemony in the region and new direction is needed.5 The Council's Task Force on Latin America bluntly states this new reality: "If there was an era of U.S. hegemony in Latin America, it is over."

The latest move toward building continental unity was announced on May 23. The presidents of 12 South American nations gathered in Brasilia, the capital of Brazil, to sign on to UNASUR. This follows up on efforts begun in December 2004 when the region's countries pledged to create the South American Community of Nations. The latest gathering may seem like yet another attempt at unifying under a new name, alongside Mercosur, Andean Community, and Pacific Arc, to name a few. However, the new institution will be recognized as a formal international organization and will create a stronger forum to work toward integration among the 12 countries of South America, home to 360 million people and a gross domestic product (GDP) of US$2.5 trillion (in 2006 dollars).

UNASUR pledges to work on developing a common customs union, currency, and passport. As outlined in previous agreements, the Union plans to establish executive headquarters in Ecuador, a South American parliament in Bolivia, and the Bank of the South in Venezuela. The twist on this effort is Brazil's proposal to create a South American Defense Council comprised of the region's ministers of defense. Celso Amorin, Brazil's minister of foreign affairs, said that the purpose of the council is to provide a "space for dialogue between the militaries of the countries of the region in order to formulate policies and prevent conflicts."

the nations' leaders finally are able to breathe life into the South American Defense Council and obtain the active participation of all the member countries, it could achieve two long-desired objectives. First, while South American unity remains far removed from the degree of institutionalization of its model entity—the European Union—at least the region will have achieved what the African Union has accomplished in policing its area. Second, instead of relying on the Organization of American States (OAS), seen as dominated by the United States, the continent's leaders will have formal space to resolve internal conflicts and define a common agenda.

U.S. Strategic Posturing in South America

South America's growing political independence as a region raises the question: what is the United States' role in the area? To answer, first it is necessary to define U.S. interests. According to Lieutenant Vasquez of SouthCom, "Thirty-eight percent of U.S. global trade is with countries in the Western Hemisphere and we import 34% of our oil from the region. Two-thirds of ships that transit the Panama Canal are bound for U.S. ports." SouthCom's priorities also include counter-terrorism, counternarcotics, and engagement of the region's militaries via joint training exercises. Secondary missions are arms control and non-proliferation, humanitarian and civic assistance, search and rescue, and disaster relief.

In this scheme, re-activating the IV Fleet would seem to respond to objectives aimed at keeping sea lanes open for trade and closed to illicit trafficking. "The stature of a Fleet sends the right signal even to those that are not our greatest supporters," Admiral Jim Stevenson told a Bloggers Roundtable.

South America to Introduce Common Currency, da Silva Says

Icpress reports that Brazilian President Luiz Inacio Lula da Silva in his weekly radio program stated that South American nations will seek a common currency as part of the region’s integration efforts following the creation of the Union of South American Nations, UNASUR.

“We are proceeding so as, in the future, we have a common central bank and a common currency”, stressed Lula.

The Brazilian leader said the creation of Unasur will become the first step towards the creation of the Latin American uniform currency.

The Union’s headquarters will be located in Ecuador. The South American Parliament will be located in Bolivia, while its bank, the Bank of the South will be located in Colombia.

The heads of state of 12 South American countries signed a treaty on May 23, 2008, in Brasilia on the creation of Unasur aimed at boosting economic integration and political cohesion in the region. Unasur is predicted to evolve in a complete union like that of the EU.

GCC Urged To Reconsider Dollar Policy

Asa Fitch of TheNational writes that the Government of Abu Dhabi has called for a “rethink” of monetary policy across the GCC, including the US dollar peg, amid rising inflation, record oil prices and fading prospects for a single regional currency by 2010.


Regional Currencies May Arise As Countries Depeg From The US Dollar

Krishna Guha of Financial Times reporst that: "Overheating emerging markets are fuelling inflation around the world by pushing up commodity prices", Don Kohn, vice-chairman of the Federal Reserve, suggested ... Mr Kohn appeared to call on these nations to loosen their exchange rate pegs to the dollar and adopt more independent monetary policies - so they no longer import Fed monetary policy that is not suited to their own economic outlook.

South American Union Will Also Have Its Own Common Currency

, ,

School psychologist and born existentialist, Barbara L. Minton, writing in NaturalNews.com reports that the South American Union, UNASUR, will also have its own common currency:

Brazilian President Luiz Inacio Lula da Silva recently revealed that the South American countries are planning for a common currency as part of the integration of the individual countries into the Union of South American Nations. This integration is patterned after the formation of the European Union, and parallels the plan for the North American Union.

The union of South American nations would create a trade block designed to be competitive with the European and North American trade blocks. Central to the formation of the union is the creation of a central bank to oversee the new common currency that would replace the currencies of the individual countries in the block. In a recent broadcast, President Lula stated that he sees the implementation of this plan as not being a fast one.

In his message, the president stressed the need to help the countries of South America that are economically weak, such as Paraguay, Uruguay and Bolivia. "We have to help them because the stronger the countries in South America economically are, the more tranquility, peace, democracy, trade, companies, jobs, incomes and development".

Another unfolding feature of the South American Union similar to that of the North American Union is its dependence on newly created infrastructure. The South American alliance will promote the cross-nation construction of railroads, highways, bridges and transmission lines that will connect the entire region resulting in smooth interaction and movement within the trading block. The NAFTA and CAFTA Superhighways epitomize the infrastructural development of the North American Union trading block.

The union plan also calls for a regional defense council, apparently the beginning of the imposition of a regional government. This council would resolve regional conflicts, promote military cooperation and allow for the regional coordination of weapons production, much as the military integration of Canada and the U.S. initiates the unification of governments in the North American Countries.

The plan to establish a new common currency for the Union of South American Nations is the latest development in the initiation of common currencies representative of multi-country trading blocks. The euro was the first trade block currency, established as part of the European Union. The amero is the name of what may be the North American Union's counterpart to the euro, debuting after economic integration and homogenization of Mexico, the U.S. and Canada have been completed, at exchange rates that represent the lowered standard of living of the Americans and the Canadians.

Critics of the Union of South American Nations' efforts to establish a common currency see it as playing right into the hands of the world banking cartel. The clustering and assimilation of currencies facilitates the eventual merger into a one world currency promoted by the Council on Foreign Relations and its political puppets. They see the move toward the South American Union with its single currency as easily fitting with the European Union and current efforts to establish the North American Union. Once the formation of these major trading blocks is completed, the next step would be the unification of the blocks into a one world government.

This one world government is sometimes referred to as the New World Order. The Council on Foreign Relations, CFR, has openly stated that its intentions are to bring about the surrender of the sovereignty of the national independence of the U.S. with the aim of creating a one world government. The Council, referred to as CFR, has influence in all vital areas of American life and around the world. Members have run or are running the major media outlets including NBC, CBS, the New York Times, the Washington Post, and many other publications.

CFR members dominate the political world. U.S. presidents since Franklin Roosevelt, FDR, have been CFR members, with the exception of Ronald Reagan. CFR members also dominate the academic world, top corporations, unions and the military. They are on the board of directors of the Federal Reserve. Barack Obama and John McCain are CFR members, as well as the Bushes and the Clintons. There are many corporate members of the CFR. CFR plans are not subject to the scrutiny, debate, or vote of the people. Discussion of the plans has been conspicuously absent from the endless debating of the presidential candidates.

Related
The End Of National Currency by Benn Steil writing in Foreign Affairs.















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Yen Carry Traders Take Oil And Gold Higher ... Stocks Fall On Risk Aversion To Bank Debts And Exhaustion Of The Yen Carry Trade

, , , ...

Financial Market Report For Friday, 20. June 2008

Great Depression 2 has started
The stock market fell on risk aversion to the bank's debt and the unwinding of the yen carry trade; and the US Dollar weakened on disappointment that the Federal Reserve is unlikely to raise interest rates at its next meeting.

Concern over mortagage backed securities insured by the bond guarantors sent, MBIA, MBI, 13.3% lower, and competitor Ambac Financial Group, ABK, 1.0% higher; which Jesse relates in turn sent banks, KBE, 1.6% lower, and investment bankers, KCE, 2.4% lower.

Freddie Mac, FRE, fell 7% and Fannie Mae, FNM, fell 4%; the Financial Ninja writes that MBIA and Ambac are Dead, Fannie Mae and Freddie Mac are Next.

The session also saw "quadruple witching" -- the simultaneous expiration of four types of options contracts -- that can lead to heavy trading near the start and end of the session. It could be contributing to the steepness of the day's pullback and was adding to volume that was absent from yesterday's trading.

Commodities
The barometer of the yen carry trade, EUR/JPY, FXE:FXY daily, FXE:FXY weekly, traded up reflecting hedge fund investors and institutional investors using 0.5% Bank of Japan interest loans to take crude oil higher which jumped to $134.80 a barrel, recovering some of Thursday's drop of nearly $5 per barrel, on news of a fuel price hike of 18% in China. The oil ETF, USO, rose 2.1% manifesting a doji in the middle of a sideways consolidation pattern. Natural gas, GAZ, rose 1.4% manifesting a doji as well. Coal, KOL, fell parabolically 1.3% lower. Gold, GLD, rose 0.5%. The lollpop hanging man candlestick in oil, USO, weekly suggests that the parabolic rise in oil is over.

Jeff Wilson of Bloomberg reports that: "U.S. Midwest crop conditions deteriorated to their worst since 1996 as flooding gripped Iowa, threatening to reduce production and cause food inflation to accelerate. Some fields in Iowa, the biggest U.S. corn and soybean producer, got more than 14 inches of rain in the past two weeks ... Land devoted to corn and soybeans will drop by as much as 4 million acres, said Dan Basse, president of AgResource ... Corn rose to a record $7.915 a bushel yesterday in Chicago, and has gained 72% this year." Agriculture commodities, RJA, rose in a three white soldiers pattern, manifesting a lollipop hanging man candlestick 0.5% higher for the week, suggesting that a top for now has been put in.

Alan Bjerga of Bloomberg reports that: "Cattle futures rose to their highest in at least 22 years as the surging cost of corn renewed concern that U.S. feedlots will reduce the number of animals available for beef production... Cattle futures are up 18% since March 31 ... 'An adjustment will have to be made to the structure of the industry,' said David Kruse, a commodity trading adviser with Commstock Investments ... 'I find it hard to believe there will not be dramatic cutbacks in production.'" Livestock as a whole, COW, rose 3.4%.

Stocks
General Motors, GM, fell 6.6%, and Ford, F, 8.0% as these were placed on watch negative at Standard & Poor's. In plain English, this means they have been placed on Death Watch -- these companies are like the banks zombie corporations -- soulless, capital-eating monsters dragging the entire stock market lower. These being place on watch negative serves as America's death rattle.

Despite higher oil prices, the energy service providers, OIH, and energy producers, XLE, fell lower.

The HUI indexed precious metal mining shares, GDX, continued to disconnect from the price of gold and fell 0.5% lower.

Shares of the silver exploration mining company Silver Standard Resources Inc, SSRI, which I have continually warned investors about, fell below 1.5% lower; it is now moving below its 50 day average, while silver, SLV, is moving above its 50 day average.

Yen carry traders moved to quickly sell traditionally favored investments in basic material stocks, IYM, in the emerging markets and BRICS, such as Brazil steel manufacturer, Gerdau S.A., GGB, which fell 6.1%, and Petroleo Brasileiro, PBR, which fell 2.1% and Chinese aluminum producer, Aluminum Corp China, ACH, which fell 7.8.

And the yen carry trade investors moved to sell recent investments in the transportation sector, IYT, such as Ryder, R, which fell 2.0% and investments in the REITS, RWR, 4.0%, which includes senior care providers such as Nationwide Health Properties, NHP, which fell 2.5%.

Dow Chemical, DOW, fell 1.7% lower; it fell off the edge of a massive head and shoulders pattern.

Fertilizer manufacturer, CF Industries, CF, rose 2.8%, near to its recent all time high. Its weekly chart shows three white soldiers, in a parabolic rise documenting the awesome financial power of the former age of yen carry trade investing.

Natural gas producer, COG, fell 2.5% Its weekly chart shows two spinning top dojis.

Applied Digital Solutions, DIGA, which rose nicely during the TAF, TSLF, PDCF and yen carry trade rally, which began March 18, 2008, fell 6.25%, manifesting bearish engulfing. Recently it announced support of its approximately 49% owned subsidiary VeriChip Corporation's, CHIP, definitive agreement, to sell its wholly-owned subsidiary Xmark Corporation to The Stanley Works, SWK, for $45 million in cash as the sale will strengthen Digital Angel's core businesses of animal identification, using visual and radio frequency identification (RFID) technology for livestock, pets, horses, fish and other wildlife, and emergency identification, using global positioning system (GPS) technology for military, commercial and recreational use. And upon the closing of The Stanley Works transaction, Mr. Joseph J. Grillo will join the VeriChip Board, as Chairman, replacing Scott R. Silverman. Recently, Parke Hess was appointed as the new chief operating officer, COO, of Digital Angel. On April 30, 2002, it shares traded up to $14.20; currently it sells at $0.75.

Investing long can't work ... won't work as the profits that support investing long the stock market are not there. Paul Kasriel of Northern Trutst relates that PPI data points to profit margin squeeze: "The PPI for finished goods of all kinds was up 1.4% in May. Comparing the PPI for finished consumer goods with the CPI for consumer goods suggests that businesses are having a tough time passing-through to the consumer the higher prices they are paying for goods. … that since the late 1990s, the ratio of the CPI for core goods has been falling relative to the PPI for consumer core goods. All of this suggests that profit margins are being squeezed. Narrower profits margins in conjunction with slower growth in physical volumes are a bad combination for business profit growth."

Richard Russell of the Dow Theory Letters relates: "Lowry's statistics spell trouble, I did a double-take when I read Lowry's statistics after the close of yesterday's market. Buying Power Index at a multi-year low and Selling Pressure Index at a multi-year high. And the two Indices at about their widest (most bearish) spread in history or since the 1930s. What the devil could this mean? My guess can be summed up in one word – trouble."

Jesse provides the stock market charts for market close of week ending June 20, 2008.

The Financial Ninja reports on the bearish Hindenburg Omens that have manifested in the S&P's chart.

The top thirty fallers for the day included
Foreign
India, INP, 6.2%
China, FXI 5.1%
Brazil, EWZ, 3.1%
Japan, EWJ 3.3%
Japanese Small Companies, JSC, 2.1%
Emerging Markets EEM, 3.2%
BRICS, EEB 3.6%

Domestic
Internet, BHH 4.5%
REITS, RWR, 4.1%
Retail, XRT, 3.9%
Solar, TAN 3.7%
Homebuilders, ITB 3.4%
Consumer Discretionary, XLY, 3.3%
Semiconductors, XSD, 2.9%
Nasdaq 100, QTEC 2.9%
Internet, BDH 2.9%
Real Estate IYR, 2.5%
Steel, SLX 2.9%
Telecom, IYZ, 2.8%
Dynamic Media, 2.8%
Software PSJ, 2.7%
Active AlphaQ, 2.6%
Small Cap Value, RZV 2.3%
Alternative Energy, GEX 2.2%

Short selling the stock market, for the most part, has produced profitable returns for the last month.
Domestic stocks

SKK, Russell 2000 Growth, this has not turned profitable on a monthly basis as the red hot commodity stocks, such as Cabot Oil and Gas, COG, whose chart shows an island reversal, and Valmont Industries, VMI, which just failed, are only now starting to turn down investor Corey Rosenbloom writes, -3%
SRS, Real Estate, 11%
SSG, Semiconductor, 7%
TLL, Telecommunications, 14%

Foreign stocks and debt

EEV, Emerging markets, its rise documents the disinvestment from the BRICS, especially Inida, INP, and China, FXI, and repayment of yen carry trade loans, 18%
FXP, China, 24% It's a new upleg for UltraShort China Stocks ETF, chartist Mike Paulenoff writes
TBT, Government bonds, 4%

Bonds
The US Treasuries ETF, TLT, rose to resistance at 90 forming a dragonfly doji; its chart clearly shows that a run on the US government bonds is underway. It was on March 18, 2008, that the bond marketplace, independent of federal reserve action, declared a defacto interest rate hike, as can be seen in the chart of interest on the 30 Year US Government Bond, $TYX, which is ever moving progressively higher above the bull market breakout shown in the intersection of its 50 day and 200 day moving averages.

The run on the US Treasury bonds can also be seen in the island reversal of the zero coupon interest bond mutual fund BTTRX, and the spiked bottom of the 30 year bear market inverse government bond fund RYJUX.

There is also a run on municipal bonds as well.

Jeremy R. Cooke of Bloomberg reports that: "U.S. municipal bonds dropped, driving benchmark 30-year yields to the highest since July 2004, as local governments sought buyers for the heaviest debt calendar since October and investors sought to sell holdings."

Martin Z. Braun and William Selway of Bloomberg report that: "Rates on short-term municipal securities guaranteed by MBIA Inc.'s and Ambac Financial Group Inc.'s insurance units surged after credit rating companies downgraded the guarantors. Bonds issued by Minneapolis, Minnesota-based Allina Health System, Louisville, Kentucky-based Baptist Healthcare and Houston-based Texas Children's Hospital insured by MBIA's insurance unit surged as high as 9%, almost doubling a day after the guarantor was downgraded five levels."

Jesse comments in MBI: Dead Man Walking: "This situation with the monoline insurers is so absurd is that it would be funny were it not so serious to the real economy and so many innocent people.

What "might" save MBIA for the time being is the fact that their failure and default could trigger an extraordinary financial crisis of devaluation of private bond tranches which MBIA has insured, and might deeply impact the local government bonds market, which cuts to the heart of many concerns of US lawmakers.

All things considered, it is almost incredible that the financial system was permitted to grow into the monstrosity which it is today. Greenspan can take a huge portion of the responsibility, although Ben Bernanke is doing a great job of his short tenure so far.

Bernanke is going to have to bail out the monolines, covertly if not in the open. They are too central to the great collateralized debt ponzi scheme that is unwinding. His goal will be to keep the unwinding gracefully slow, like the 12% per year decline in the US dollar we are now experiencing, overlooked by so many to their great misfortune.

Days, weeks perhaps even a few years, its just a matter of time now. We are on the cusp of a default that will match the bubbles which spawned it.

The primary victim will be the value of the US dollar, and by extension all those who are holding it. The only question is the rate of decline."

The Dollar fell, currencies and gold rose.
I believe that the US Dollar, $USD, is going to continue to fall lower, and lead a death spiral lower in all currency values; confirmation of such comes from the fact that the rise in USD/JPY has turned down from its recent high of 108.34 to close today at 107.61.

Joseph Brusuelas, Chief Economist/VP Global strategy, Merk Investments, relates that the US Current Account is still a drag on the Dollar.

Elaine Meinel Supkis writing in Gnomes Can't Slay Inflation Genie provides this chart of Reserve Bank Credit and relates: "The Federal Reserve is hemorrhaging Treasuries. What happens when they have $0 reserves? I joked for years that the Fed is neither Federal nor has reserves. Now it will be certainly true. This is a total failure of the Fed and they want more power"?

Twin Trader asks: Are We Facing A Dollar Crisis?

We are alresdy in a dollar crisis: the Federal Reserve facilities of TAF, TSLF, and PDCF of support for the banks have only served to debase the US currency, devalue stocks and inflate the price of commodities, particulaly oil, and gold: since the first of the year oil, USO, has gone up 44%, gold, GLD, up 7%, while the DOW, DIA, and S&P, SPY, have fallen 11%.

The US Dollar, $USD, closed down this week 1.5% at $73; and gold, $GOLD, which usually trades inversely of the dollar, closed up 3.% at $904.

Currencies up this week included
the Brazilian real 1.9%,
the New Zealand dollar 1.5%,
the Australian dollar, the Aussie, FXA 1.5%,
the Euro, FXE 1.5%,
the British pound, FXB 1.5%,
the Danish krone 1.5%,
the South African rand 1.4%,
the Norwegian krone 1.4%,
the Canadian dollar, the loonie, FXC 1.3%.
the Japanese yen, FXY 1.0%
the Swiss krona, FXS 1.3%

Jesse provides the US Dollar long term charts.

Some type of dislocation or breakdown is coming to India
This last week, India shares, INP, fell 7.6%.

Kartik Goyal of Bloombberg reports that: "India's inflation accelerated to a 13-year high after record crude oil costs forced the government to raise retail fuel prices ... Wholesale prices jumped 11.05% in the week to June 7."

Anil Varma of Bloomberg reports that: "Money supply in India grew 21.4% in the two weeks ended June 6 from a year earlier, compared with 22.5% in the prior two weeks."

Something, I do not know what is going to go bang in India.

Regional economic integration is increasing in Asia
Sundeep Tucker of Financial Times reports that: "The value of mergers and acquisitions within Asia is soaring as the region's leading companies take advantage of opportunities to build scale and secure resources in fast-growing markets closer to home. The aggregate value of announced cross-border deals between Asia-Pacific companies has totalled $54bn in the year to date, according to ... Dealogic ... This compares to $25.7bn during the corresponding period last year. Bankers report that deals currently in the pipeline should mean 2008 will be a record year for intra-Asian deals."

A regional government, or formal alliance, or even a currency is likely to emerge.

In times of political duress, gold has proven to be a lifeboat of safety.
Kevin Hamlin and Nipa Piboontanasawat of Bloomberg report that: " China's monetary policy may be overwhelmed by inflows of speculative capital if it doesn't allow greater exchange-rate flexibility, the World Bank said. ' China is too large an economy not to have an independent monetary policy,' Louis Kuijs, acting chief economist for China, said ... 'To have that, you need more exchange-rate flexibility.' The World Bank today forecast inflation in the world's fourth-biggest economy of 7% this year, up from a February estimate of 4.6%. Record inflows of cash from trade, foreign direct investment and investors betting on more gains by the yuan threaten to fuel price gains. 'Excess liquidity is already a problem,' said Huang Yiping, chief Asia economist at Citigroup ... 'The expectation of significant further appreciation of the yuan is encouraging more inflows.'"

It appears that unified regulation of global banking is coming as James Politi and Gillian Tett of FT.com relate that at the onset of the June 10, 2008, EU-US 2008 Summit, held in Krajn, Slovenia, Timothy Geithner, President of the New York Branch of the Federal Reserve and Bilderberg 2008 attendee, wrote a commentary in The Financial Times, in which he called for a global financial system operating under a unified regulatory framework.

And if the US does not take military action announced under the western global governance 'Declaration of EU-US 2008', then Israel surely will as Donald Macintyre reports from Jerusalem in Israel's dry run 'attack on Iran' with 100 jet fighters; an Israeli attack on Iran is not a matter of if, but when.

Such news developments favor an investment in gold. I recommend that one be invested in gold with dollar cost averaging purchases made in a trust account, and not a brokerage account of the gold ETF, GLD, and at BullionVault.com and GoldIsMoney.com

Related Reading
The Royal Bank of Scotland issues a global stock market crash warning

Keywords
unwound yen carry trade,

Five Gulf Nations Move Closer to Common Currency

Tahani Karrar of the WSJ reports from Dubai, United Arab Emirates that the approval of a draft monetary-union treaty by central-bank governors from Saudi Arabia, Qatar, the United Arab Emirates, Bahrain and Kuwait this week marks a critical step toward creating a single currency in the Persian Gulf by 2010, Zawya Dow Jones, Nasser Al Kaud, director of monetary integration at the Gulf Cooperation Council said.