Strong Dollar And A Strong Yen Draw Money Out Of The Emerging And Developing Markets
Monday, 27. October 2008, 03:40:58
Financial market report for Friday, October 24, 2008
Introduction
Currency traders sold the yen carry trade, EUR/JPY, FXE:FXY, short, causing a massive a massive disinvestment from eastern european, GUR, emerging markets, EEM, the BRICS, EEB, and world shares, EFA. Chart of GUR, EEM, EEB, and EFA ... GUR, EEM, EEB and EFA 5 day ... GUR, EEM, EEB and EFA 12 month ... FXE:FXY
Ye Xie and Agnes Lovasz of Bloomberg report that the yen climbed to a 13-year high against the dollar as a worldwide drop in stocks encouraged investors to dump higher-yielding assets and pay back low-cost loans in Japan.
Amicus provides the monthly chart of the EUR/JPY; it's the chart of the century as it shows the Armageddon Trade unwinding ... Monthly EURJPY
Stocks fell sharply for the day and the week:
South Korea, EWY, -11%, -26%; Martin Fackler of The New York Time in article 'Trouble Without Borders' reports that rating agencies have raised conerns about the health of South Koreas Banks which have relied heavily on foreign borrowing. These are now scrambling to find dollars to repay manufacturing foreign currency loans. Woori Bank, one of Soth Korea's largest lenders, suddenly found itself unable to borrow dollars after last month's collapse of Lehman. Dealers in the bank's trading room made frantic calls to big foreign banks seeking fresh loans only to be told bluntly "no". Worse, Foreign banks refused to roll over many existing loans, forcing Woori to repay them as they came due, also in dollars. Woori has stayed liquid thanks to dollar loans from the government, which has pumped tens of billions into banks.
Former Soviet Union, GUR, -11%, -20%
BRICS, EEB, -10%, -20%
Brazil, EWZ, -9%, -20%
Russia, RSX, -12%, -20%
India, INP, -9%, -15%
China, FXI, -10%, -20%
Emerging Markets, EEM, -10%, -19%
World Shares, EFA, -5%, -11%
US Shares, VTI, -5%, -7%
Coal Producers, KOL -9%, -20%
Steel, SLX, -8%, -19%
Metal Manufacturing, XME, -7%, -13%
World Shipping SEA, -7%, -13%
Energy Sevices, OIH, -7%, -7%
Financial and real estate values fell on exposure to sythetic CDOs and settlement of Lehman Brothers credit default swaps
The Yahoo Finance ongoing five day chart of the debt suretors compared to the financial sector and the banks ABK, RDN, MBI, IYF, and KBE suggests that the marketplace is cutting value based on exposure to Synthetic CDOs and settlement of Lehman Brothers credit default swaps ... ABK, RDN, MBI, IYF, and KBE
The Yahoo Finance ongoing five day chart of the real estate investments DRW, IYR, and RWR suggests the same conclusion as with the suretors and the financial sector and the banks ... DRW, IYR and RWR
Real Estate, IYR, -7%, -17%
Financial, XLF -6%, -12%
International Real Estate, DRW, -7%, -15%
World Financial DRF, -3%, -14%
The unwinding yen carry trade sent commodities lower
The unwinding yen carry trade sent oil, USO, 4% lower on the day and 11% lower for the week.
Currency losses for the week were significant; these induced a loss of value in emerging market debt
Currency traders going short world currencies, DBV, such as Hungary's Forint and long the yen, FXY, and the US Dollar, UUP, $USD, propelled emerging market debt, EMB, PCY, and interntional government inflation protected bonds, WIP, lower. Chart of EMB, PCT and WIP ... EMB, PCY, and WIP
Doug Noland and Stockcharts.com relate world currencies, DBV, fell 12% this week;
New Zealand Dollar, BNZ, -20%,
South Africand Rand, SZR, -14%
British Pound, FXB, -8%
Mexican Peso, FXM, -6%
Caandian Dollar,FXC, -6%
Australian Dollr, FXA, -9%
Indian Rupe, ICN, -5%
Euro, FXE, -6%
Brazilian Real, BZF, -15%
Swiss Franc -3%
South Korean Won -6%,
Norwegian Krone -6%
Polish Zloty -12%
Turkish Lira -12%
Chilean Peso -8.0%
Hungarian Forint -8%,
Iceland Krona -6%.
Interest rate differential investing took a reversal beginning with the May 19, 2008, Bank of Japan meeting; at that time investors started to buy yen and repay their 0.5% carry trade loans as is seen in the six month ongoing Yahoo Finance chart of BZF compared to FXB, FXA, ICN and BNZ which illustrates the great unwind of high yielding currencies. The six month ongoing Yahoo Finance chart of TLT, UUP, and FXY, illustrates the so called "flight to safety" and the demand for US Dollars and Yen.
The euro, FXE, closed down at 125.89; its chart objective is 115.
There has been a run on Hungary's currency: Martin Fackler of The New York Time in article 'Trouble Without Borders' reports the Hungarian forint has lost 31% of its value relative to the US Dollar in the last three months.
Emerging Market bonds and inflation protected bond values fell sharply both today this week and in the last three months
EMB -3%, -10%, -28%
PCY -4%, -20%, -38%
WIP -2%, -6%, -22%
Gold has become significantly more expensive in terms of country currencies
Those who have failed to invest in gold, have been pauperized by their currencies falling in value relative to gold; in other words, their currencies have signifcantly fallen lower relative to gold: it now takes significantly more local currencies to buy true wealth.
The chart of the gold ETF, GLD shows a close up to $72 ... GLD
Gold, $GOLD, closed up at $730 ... $GOLD
Demand for US Treasuries was strong this week
US Treasuries, TLT, although turning lower for the day, stands at its second highest ever weekly close at 96.73 ... Weekly TLT
The interest rate on the 10 Year US Government Note, $TNX, closed up at 37 ... $TNX
The US Dollar closed strongly up at $86.42
The US Dollar, $USD, traded up 1.5% on the day; and 5% for the week to close at $86.42 ... $USD
The dollar bullish ETF, UUP, closed at 26.88 ... UUP
Jesse in article Charts in the Babson Style for the Week Ending 24 October 2008 provides the chart of DX Dollar ... DX Dollar
Lending eased somewhat for corporate high grade debt and worsened some for junk bond debt
The value of corporate debt, LQD, increased as the value of US Treasuries increased this week; but other forms of corporate debt lost value as is seen in the 5 day ongoing Yahoo Finance chart of TLT compared to LQD, HYG, JNK and CVY
Municipal bond debt increased in value with US Treasuries this week
The MSN Finance chart of municipal bond debt for the period of September 11, 2008 to October 24, 2008 for the debt ETFs MUB, CMF, and the mutual bond funds OROHX, ORMIX and FDMMX shows municipal bond debt increased in value with US Treasuries this week
Dollar roars back as debts are called in
Ambrose Evans Pretchard in article Dollar roars back as global debts are called in relates: "For six years the world has been borrowing dollars to bet on property, oil, metals, emerging markets, and every bubble in every corner of the globe. This has been the dollar “carry trade”, conducted on a huge scale with high leverage. Now the process has reversed abruptly as debt deflation - or “deleveraging” - engulfs world markets. The dollars must be repaid. Hedge funds are 75pc dollar-based, regardless of where they come from. Many are now having to repatriate their dollars as margin calls, client withdrawls, and the need to slash risk forces them to cut leverage. The hedge fund industry had assets of $1.9 trillion at the peak of the bubble."
Elaine Meinel Supkis writes: "The swelling of 'world wealth' coincides with this long period of free lending. Most of the money created this way was not in yen but in dollars. So the US lost control of who produces dollars. Since dollars are debt, the cranking out of epic amounts of debts meant this debased US dollars. Since this was done via Japan, this also killed the yen. So we saw, for about 6 years, the dollar and the yen BOTH in free fall vis a vis most currencies on earth".
And that inflation didn't matter. Well, we just got washed over by a tsunami of hyperinflation which has now receded. We are now in the other half of this destruction of all that Japanese/US 0% lending lunacy: equity and asset value destruction. Both the US and Japan desperately want to reinflate all the original items this flood of funny money inflated. Namely, stocks, housing, corporations, etc.
These items are 'wealth producers' because one can dump cheap debts on top of them! Commodities translate directly into inescapable inflation. But when artwork, diamonds, gold jewelry, vacation villas, yachts and custom cars rise in value as everyone eagerly bids higher and higher thanks to tons of free money, this gives the illusion of wealth. Paying more to fuel the yachts, custom cars, etc. feels like losing wealth.
Elaine Meinel Supkis writes: "This is why everything is now unwinding: the US can't take on more debt. And the debt we ARE taking on is not for buying anything. It is all vanishing down this massive Bottomless Pit where the Derivatives Beast eats every penny and belches. Nothing is being bought or created. This is creative destruction with a vengeance. Indeed, this is very much akin to the ancient Chinese practice of burning worthless paper money to bribe Celestial Guardians at the Gates of Death."
And Ms Supkis continues: "The Derivatives Beast doesn't want more Japan carry trade loans. He wants real money. And this means getting the major governments of the world to feed him real meat and potatoes: future taxes, the wealth of empires.
I say that once there is a total worldwide financial system breakdown, and currencies other than gold are totally burned out; then the mark, that is the charagma, of Revelation 13:17 will be introduced by the Seignior: "And that no man might buy or sell, save he that had the mark, or the authority of the beast, or the currency of his name."
Former soviet nations and South Africa currencies suffered huged losses: bankruptcy of eastern european countries is very possible
Laura Cochrane of Bloomberg reports: "The Polish zloty, Hungarian forint and South African rand headed for their biggest weekly declines as the global economic slump fuels concern of a worsening credit crisis in emerging markets.
The zloty fell 2.7 percent against the dollar today, taking its weekly decline to more than 16 percent, the steepest since Bloomberg began tracking the data in 1993. The forint extended its weekly loss to a record 14 percent while the rand fell almost 17 percent in its biggest five-day decline since 1975."
Martin Crutsinger and Mike Eckel of the Associated Press report that the IMF will provide Ukraine with $16.5 billion in loans and announced that emergency assistance had cleared a key hurdle.
Niall Green in GlobalResearch.ca article Eastern European Economies Face Bankruptcy
Rakesh Saxena writes in Seeking Alpha: How Will Hungary Shape Eastern European CDS Prices this Week?
Mark Scott writes on October 23 that Eastern European country Belarus has asked the International Monetary Fund, IMF, for a reported $2 billion loan to prop up the country’s dwindling capital reserves. The former Soviet satellite already has secured $2 billion in financing from Russia and the country’s finance minister, Alexei Kudrin, says he might ask Western states for additional help.
Current account deficits and high levels of external debt raise the risks of a hard [economic] landing. High dependence on foreign capital amplifies external vulnerability."
With an average current account deficit of 9% of GDP, Central and Eastern Europe definitely will feel the financial squeeze. Morgan Stanley reckons countries in the region hold approximately $1.65 trillion in foreign debt. And in Baltic states like Estonia and Latvia, which already are in recession, foreign currency-denominated debt stands at 30% and 24% respectively of total GDP.
Bulgaria and Hungary, face mounting financial problems as foreign currency loans represent more than half of the countries' entire loan book. Hungary's current account deficit in the second quarter of the year stood at roughly 6%. Bulgaria's was a staggering 24%.
Brad Setser of the Council on Foreign Relations, CFR, relates: "Some emerging market central banks have noticed that they - unlike the Bank of Japan, Bank of England, Swiss National Bank and the European Central Bank - don't have access to unlimited dollar credit through reciprocal swap lines with the Federal Reserve. "Analysts say the unlimited dollar currency swaps set up between the Federal Reserve and central banks have helped bring stability to currencies through alleviating institutions desire to purchase dollars in the spot market to satisfy overnight funding requirements. 'In contrast, the lack of currency swaps put into place between the Federal Reserve and emerging market central banks has likely helped to exacerbate the pick up in emerging market currency volatility' says Derek Halpenny, at the Bank of Tokyo Mitsubishi UFJ"
We now live in a multi-polar world: the days of US Dollar hegemony are over
Richard Russell of Dow Theory Letters relates that No nation can run an empire on borrowed money: "For months I've insisted that no nation can run an empire and fight two wars on borrowed money. Sooner or later something has to give - the nation's credit standing or its currency. Now the dreaded subject is beginning to emerge. The demise of the US's world standing".
"Today, in The Wall Street Journal of all places, we see a featured piece on the op-ed page entitled, 'The Dangers of a Diminished America'. A diminished America? How can that be? It be. The US has been getting away with it all by owning the unique advantage of printing the very money that its huge debt is denominated in. Yes, I'm talking about the reserve status of the US dollar. This is the Achilles Heel of the US. The US dollar will possess its reserve status as long as our creditors continue to accept Federal Reserve Notes, paper with nothing behind it accept the 'full faith and credit' of the United States."
European states likely to be unable to raise money despite the need to do so
David Oakley of the Financial Times reports that "Some European governments are struggling to raise money in the bond markets because of the vast financial pledges that they have made to bail out their battered banking sectors.
"Spain failed to launch a bond last week, while Belgium and Finland were having difficulty attracting investors for debt offerings after governments set aside billions to recapitalise their banks and guarantee their debt.
"Governments face problems raising money, as investors demand higher yields because of the extra credit risk resulting from the bank guarantees and the huge pipeline of sovereign debt expected over the next year, which is hanging over the market.
"The eurozone countries will have to issue an extra $263.3 billion in debt in the next year to pay for bank recapitalisations and guarantees, according to Bank of America."
Argentine bonds, stocks sink as takeover fuels default concerns
James Attwood and Drew Benson, Bloomberg report: "Argentina's bonds and stocks plunged for a second day as a planned government takeover of $29 billion of pension funds heightened concern the South American country is headed for its second default this decade.
"The benchmark Merval stock index tumbled 15.8% on speculation President Cristina Fernandez de Kirchner plans to use the funds to meet financing needs that have swelled as prices on the country's commodity exports tumbled. Argentina hasn't had access to international debt markets since its 2001 default and demand for its local bonds has dried up in the past year on concern the government is underreporting inflation.
"'It's the final of many nails in the coffin from an institutional investor perspective,' said Bill Rudman, who helps manage $3 billion of emerging-market equity at WestLB Mellon Asset Management in London. Argentina is 'disappearing into irrelevance', he said.
"The yield on the government's 8.28% bonds due in 2033 surged 6.25 percentage points to 30.94%, according to JPMorgan Chase & Co. The bonds yielded 12.16% a month ago. The benchmark Merval stock index sank to a four-year low, extending its decline this week to 27%.
"Fernandez, 55, announced her plan to take over 10 private pension funds during a speech in Buenos Aires yesterday, saying the proposal would help protect retirees from the global financial crisis. The last time Argentina sought to tap workers' savings was in 2001, just before it halted payments on $95 billion of bonds. Fernandez denied in the speech that her plan is a bid to 'grab the cash'."
Summary
When the communist union broke up, it was about the time that "free trade", how I hate that term, picked up as factories were closed in the US and production transferred to China, Vietnam, Central and South America. The US started running huge spending and trade defecits, while the former soviet states borrowed to build factories from Japanese families.
In other words, the communist nations, and the BRICS, Brazil, Russia, India and China, got industrialized by paying high interest and good profits to Japanese middle and working class workers, as well as those using carry trades.
In the heyday of interest differential investing, money flowed from 0.5% interest Japan to 5.5% Australia, Hungay, Poland and Romania.
Now as risk is perceived, liquidity evaporates; and the Japanese and those funded with the yen carry trade, and other carry trades, are selling thier developing nation stocks and emerging market bonds for whatever they can get, which is practiclly nothing, and there is no lending so factories are shutting down, as commercial paper is not being cut to fund payrolls, make purchases and roll over debt. Economies are imploding.
The only thing that will be worth anything is gold.
Powerful political elite and investment bankers, ie the Goldmanites, those of Goldman Sachs, are rising to rule mankind through bloodless political and economic coups as well as through innovaive framework agreements.
Soon there will be a global monetary authority, and unified regulation of banking globally, and a Seignior, that is a top dog investment banker to govern mankind.
Investment application
While the US Dollar is strong, and brokerage accounts and money markets insured, there seems to me, to be a risk of investment loss due to an economic seizure that could take place in either the lending market place or the stock market.
If one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.
Introduction
Currency traders sold the yen carry trade, EUR/JPY, FXE:FXY, short, causing a massive a massive disinvestment from eastern european, GUR, emerging markets, EEM, the BRICS, EEB, and world shares, EFA. Chart of GUR, EEM, EEB, and EFA ... GUR, EEM, EEB and EFA 5 day ... GUR, EEM, EEB and EFA 12 month ... FXE:FXY
Ye Xie and Agnes Lovasz of Bloomberg report that the yen climbed to a 13-year high against the dollar as a worldwide drop in stocks encouraged investors to dump higher-yielding assets and pay back low-cost loans in Japan.
Amicus provides the monthly chart of the EUR/JPY; it's the chart of the century as it shows the Armageddon Trade unwinding ... Monthly EURJPY
Stocks fell sharply for the day and the week:
South Korea, EWY, -11%, -26%; Martin Fackler of The New York Time in article 'Trouble Without Borders' reports that rating agencies have raised conerns about the health of South Koreas Banks which have relied heavily on foreign borrowing. These are now scrambling to find dollars to repay manufacturing foreign currency loans. Woori Bank, one of Soth Korea's largest lenders, suddenly found itself unable to borrow dollars after last month's collapse of Lehman. Dealers in the bank's trading room made frantic calls to big foreign banks seeking fresh loans only to be told bluntly "no". Worse, Foreign banks refused to roll over many existing loans, forcing Woori to repay them as they came due, also in dollars. Woori has stayed liquid thanks to dollar loans from the government, which has pumped tens of billions into banks.
Former Soviet Union, GUR, -11%, -20%
BRICS, EEB, -10%, -20%
Brazil, EWZ, -9%, -20%
Russia, RSX, -12%, -20%
India, INP, -9%, -15%
China, FXI, -10%, -20%
Emerging Markets, EEM, -10%, -19%
World Shares, EFA, -5%, -11%
US Shares, VTI, -5%, -7%
Coal Producers, KOL -9%, -20%
Steel, SLX, -8%, -19%
Metal Manufacturing, XME, -7%, -13%
World Shipping SEA, -7%, -13%
Energy Sevices, OIH, -7%, -7%
Financial and real estate values fell on exposure to sythetic CDOs and settlement of Lehman Brothers credit default swaps
The Yahoo Finance ongoing five day chart of the debt suretors compared to the financial sector and the banks ABK, RDN, MBI, IYF, and KBE suggests that the marketplace is cutting value based on exposure to Synthetic CDOs and settlement of Lehman Brothers credit default swaps ... ABK, RDN, MBI, IYF, and KBE
The Yahoo Finance ongoing five day chart of the real estate investments DRW, IYR, and RWR suggests the same conclusion as with the suretors and the financial sector and the banks ... DRW, IYR and RWR
Real Estate, IYR, -7%, -17%
Financial, XLF -6%, -12%
International Real Estate, DRW, -7%, -15%
World Financial DRF, -3%, -14%
The unwinding yen carry trade sent commodities lower
The unwinding yen carry trade sent oil, USO, 4% lower on the day and 11% lower for the week.
Currency losses for the week were significant; these induced a loss of value in emerging market debt
Currency traders going short world currencies, DBV, such as Hungary's Forint and long the yen, FXY, and the US Dollar, UUP, $USD, propelled emerging market debt, EMB, PCY, and interntional government inflation protected bonds, WIP, lower. Chart of EMB, PCT and WIP ... EMB, PCY, and WIP
Doug Noland and Stockcharts.com relate world currencies, DBV, fell 12% this week;
New Zealand Dollar, BNZ, -20%,
South Africand Rand, SZR, -14%
British Pound, FXB, -8%
Mexican Peso, FXM, -6%
Caandian Dollar,FXC, -6%
Australian Dollr, FXA, -9%
Indian Rupe, ICN, -5%
Euro, FXE, -6%
Brazilian Real, BZF, -15%
Swiss Franc -3%
South Korean Won -6%,
Norwegian Krone -6%
Polish Zloty -12%
Turkish Lira -12%
Chilean Peso -8.0%
Hungarian Forint -8%,
Iceland Krona -6%.
Interest rate differential investing took a reversal beginning with the May 19, 2008, Bank of Japan meeting; at that time investors started to buy yen and repay their 0.5% carry trade loans as is seen in the six month ongoing Yahoo Finance chart of BZF compared to FXB, FXA, ICN and BNZ which illustrates the great unwind of high yielding currencies. The six month ongoing Yahoo Finance chart of TLT, UUP, and FXY, illustrates the so called "flight to safety" and the demand for US Dollars and Yen.
The euro, FXE, closed down at 125.89; its chart objective is 115.
There has been a run on Hungary's currency: Martin Fackler of The New York Time in article 'Trouble Without Borders' reports the Hungarian forint has lost 31% of its value relative to the US Dollar in the last three months.
Emerging Market bonds and inflation protected bond values fell sharply both today this week and in the last three months
EMB -3%, -10%, -28%
PCY -4%, -20%, -38%
WIP -2%, -6%, -22%
Gold has become significantly more expensive in terms of country currencies
Those who have failed to invest in gold, have been pauperized by their currencies falling in value relative to gold; in other words, their currencies have signifcantly fallen lower relative to gold: it now takes significantly more local currencies to buy true wealth.
The chart of the gold ETF, GLD shows a close up to $72 ... GLD
Gold, $GOLD, closed up at $730 ... $GOLD
Demand for US Treasuries was strong this week
US Treasuries, TLT, although turning lower for the day, stands at its second highest ever weekly close at 96.73 ... Weekly TLT
The interest rate on the 10 Year US Government Note, $TNX, closed up at 37 ... $TNX
The US Dollar closed strongly up at $86.42
The US Dollar, $USD, traded up 1.5% on the day; and 5% for the week to close at $86.42 ... $USD
The dollar bullish ETF, UUP, closed at 26.88 ... UUP
Jesse in article Charts in the Babson Style for the Week Ending 24 October 2008 provides the chart of DX Dollar ... DX Dollar
Lending eased somewhat for corporate high grade debt and worsened some for junk bond debt
The value of corporate debt, LQD, increased as the value of US Treasuries increased this week; but other forms of corporate debt lost value as is seen in the 5 day ongoing Yahoo Finance chart of TLT compared to LQD, HYG, JNK and CVY
Municipal bond debt increased in value with US Treasuries this week
The MSN Finance chart of municipal bond debt for the period of September 11, 2008 to October 24, 2008 for the debt ETFs MUB, CMF, and the mutual bond funds OROHX, ORMIX and FDMMX shows municipal bond debt increased in value with US Treasuries this week
Dollar roars back as debts are called in
Ambrose Evans Pretchard in article Dollar roars back as global debts are called in relates: "For six years the world has been borrowing dollars to bet on property, oil, metals, emerging markets, and every bubble in every corner of the globe. This has been the dollar “carry trade”, conducted on a huge scale with high leverage. Now the process has reversed abruptly as debt deflation - or “deleveraging” - engulfs world markets. The dollars must be repaid. Hedge funds are 75pc dollar-based, regardless of where they come from. Many are now having to repatriate their dollars as margin calls, client withdrawls, and the need to slash risk forces them to cut leverage. The hedge fund industry had assets of $1.9 trillion at the peak of the bubble."
Elaine Meinel Supkis writes: "The swelling of 'world wealth' coincides with this long period of free lending. Most of the money created this way was not in yen but in dollars. So the US lost control of who produces dollars. Since dollars are debt, the cranking out of epic amounts of debts meant this debased US dollars. Since this was done via Japan, this also killed the yen. So we saw, for about 6 years, the dollar and the yen BOTH in free fall vis a vis most currencies on earth".
And that inflation didn't matter. Well, we just got washed over by a tsunami of hyperinflation which has now receded. We are now in the other half of this destruction of all that Japanese/US 0% lending lunacy: equity and asset value destruction. Both the US and Japan desperately want to reinflate all the original items this flood of funny money inflated. Namely, stocks, housing, corporations, etc.
These items are 'wealth producers' because one can dump cheap debts on top of them! Commodities translate directly into inescapable inflation. But when artwork, diamonds, gold jewelry, vacation villas, yachts and custom cars rise in value as everyone eagerly bids higher and higher thanks to tons of free money, this gives the illusion of wealth. Paying more to fuel the yachts, custom cars, etc. feels like losing wealth.
Elaine Meinel Supkis writes: "This is why everything is now unwinding: the US can't take on more debt. And the debt we ARE taking on is not for buying anything. It is all vanishing down this massive Bottomless Pit where the Derivatives Beast eats every penny and belches. Nothing is being bought or created. This is creative destruction with a vengeance. Indeed, this is very much akin to the ancient Chinese practice of burning worthless paper money to bribe Celestial Guardians at the Gates of Death."
And Ms Supkis continues: "The Derivatives Beast doesn't want more Japan carry trade loans. He wants real money. And this means getting the major governments of the world to feed him real meat and potatoes: future taxes, the wealth of empires.
I say that once there is a total worldwide financial system breakdown, and currencies other than gold are totally burned out; then the mark, that is the charagma, of Revelation 13:17 will be introduced by the Seignior: "And that no man might buy or sell, save he that had the mark, or the authority of the beast, or the currency of his name."
Former soviet nations and South Africa currencies suffered huged losses: bankruptcy of eastern european countries is very possible
Laura Cochrane of Bloomberg reports: "The Polish zloty, Hungarian forint and South African rand headed for their biggest weekly declines as the global economic slump fuels concern of a worsening credit crisis in emerging markets.
The zloty fell 2.7 percent against the dollar today, taking its weekly decline to more than 16 percent, the steepest since Bloomberg began tracking the data in 1993. The forint extended its weekly loss to a record 14 percent while the rand fell almost 17 percent in its biggest five-day decline since 1975."
Martin Crutsinger and Mike Eckel of the Associated Press report that the IMF will provide Ukraine with $16.5 billion in loans and announced that emergency assistance had cleared a key hurdle.
Niall Green in GlobalResearch.ca article Eastern European Economies Face Bankruptcy
Rakesh Saxena writes in Seeking Alpha: How Will Hungary Shape Eastern European CDS Prices this Week?
Mark Scott writes on October 23 that Eastern European country Belarus has asked the International Monetary Fund, IMF, for a reported $2 billion loan to prop up the country’s dwindling capital reserves. The former Soviet satellite already has secured $2 billion in financing from Russia and the country’s finance minister, Alexei Kudrin, says he might ask Western states for additional help.
Current account deficits and high levels of external debt raise the risks of a hard [economic] landing. High dependence on foreign capital amplifies external vulnerability."
With an average current account deficit of 9% of GDP, Central and Eastern Europe definitely will feel the financial squeeze. Morgan Stanley reckons countries in the region hold approximately $1.65 trillion in foreign debt. And in Baltic states like Estonia and Latvia, which already are in recession, foreign currency-denominated debt stands at 30% and 24% respectively of total GDP.
Bulgaria and Hungary, face mounting financial problems as foreign currency loans represent more than half of the countries' entire loan book. Hungary's current account deficit in the second quarter of the year stood at roughly 6%. Bulgaria's was a staggering 24%.
Brad Setser of the Council on Foreign Relations, CFR, relates: "Some emerging market central banks have noticed that they - unlike the Bank of Japan, Bank of England, Swiss National Bank and the European Central Bank - don't have access to unlimited dollar credit through reciprocal swap lines with the Federal Reserve. "Analysts say the unlimited dollar currency swaps set up between the Federal Reserve and central banks have helped bring stability to currencies through alleviating institutions desire to purchase dollars in the spot market to satisfy overnight funding requirements. 'In contrast, the lack of currency swaps put into place between the Federal Reserve and emerging market central banks has likely helped to exacerbate the pick up in emerging market currency volatility' says Derek Halpenny, at the Bank of Tokyo Mitsubishi UFJ"
We now live in a multi-polar world: the days of US Dollar hegemony are over
Richard Russell of Dow Theory Letters relates that No nation can run an empire on borrowed money: "For months I've insisted that no nation can run an empire and fight two wars on borrowed money. Sooner or later something has to give - the nation's credit standing or its currency. Now the dreaded subject is beginning to emerge. The demise of the US's world standing".
"Today, in The Wall Street Journal of all places, we see a featured piece on the op-ed page entitled, 'The Dangers of a Diminished America'. A diminished America? How can that be? It be. The US has been getting away with it all by owning the unique advantage of printing the very money that its huge debt is denominated in. Yes, I'm talking about the reserve status of the US dollar. This is the Achilles Heel of the US. The US dollar will possess its reserve status as long as our creditors continue to accept Federal Reserve Notes, paper with nothing behind it accept the 'full faith and credit' of the United States."
European states likely to be unable to raise money despite the need to do so
David Oakley of the Financial Times reports that "Some European governments are struggling to raise money in the bond markets because of the vast financial pledges that they have made to bail out their battered banking sectors.
"Spain failed to launch a bond last week, while Belgium and Finland were having difficulty attracting investors for debt offerings after governments set aside billions to recapitalise their banks and guarantee their debt.
"Governments face problems raising money, as investors demand higher yields because of the extra credit risk resulting from the bank guarantees and the huge pipeline of sovereign debt expected over the next year, which is hanging over the market.
"The eurozone countries will have to issue an extra $263.3 billion in debt in the next year to pay for bank recapitalisations and guarantees, according to Bank of America."
Argentine bonds, stocks sink as takeover fuels default concerns
James Attwood and Drew Benson, Bloomberg report: "Argentina's bonds and stocks plunged for a second day as a planned government takeover of $29 billion of pension funds heightened concern the South American country is headed for its second default this decade.
"The benchmark Merval stock index tumbled 15.8% on speculation President Cristina Fernandez de Kirchner plans to use the funds to meet financing needs that have swelled as prices on the country's commodity exports tumbled. Argentina hasn't had access to international debt markets since its 2001 default and demand for its local bonds has dried up in the past year on concern the government is underreporting inflation.
"'It's the final of many nails in the coffin from an institutional investor perspective,' said Bill Rudman, who helps manage $3 billion of emerging-market equity at WestLB Mellon Asset Management in London. Argentina is 'disappearing into irrelevance', he said.
"The yield on the government's 8.28% bonds due in 2033 surged 6.25 percentage points to 30.94%, according to JPMorgan Chase & Co. The bonds yielded 12.16% a month ago. The benchmark Merval stock index sank to a four-year low, extending its decline this week to 27%.
"Fernandez, 55, announced her plan to take over 10 private pension funds during a speech in Buenos Aires yesterday, saying the proposal would help protect retirees from the global financial crisis. The last time Argentina sought to tap workers' savings was in 2001, just before it halted payments on $95 billion of bonds. Fernandez denied in the speech that her plan is a bid to 'grab the cash'."
Summary
When the communist union broke up, it was about the time that "free trade", how I hate that term, picked up as factories were closed in the US and production transferred to China, Vietnam, Central and South America. The US started running huge spending and trade defecits, while the former soviet states borrowed to build factories from Japanese families.
In other words, the communist nations, and the BRICS, Brazil, Russia, India and China, got industrialized by paying high interest and good profits to Japanese middle and working class workers, as well as those using carry trades.
In the heyday of interest differential investing, money flowed from 0.5% interest Japan to 5.5% Australia, Hungay, Poland and Romania.
Now as risk is perceived, liquidity evaporates; and the Japanese and those funded with the yen carry trade, and other carry trades, are selling thier developing nation stocks and emerging market bonds for whatever they can get, which is practiclly nothing, and there is no lending so factories are shutting down, as commercial paper is not being cut to fund payrolls, make purchases and roll over debt. Economies are imploding.
The only thing that will be worth anything is gold.
Powerful political elite and investment bankers, ie the Goldmanites, those of Goldman Sachs, are rising to rule mankind through bloodless political and economic coups as well as through innovaive framework agreements.
Soon there will be a global monetary authority, and unified regulation of banking globally, and a Seignior, that is a top dog investment banker to govern mankind.
Investment application
While the US Dollar is strong, and brokerage accounts and money markets insured, there seems to me, to be a risk of investment loss due to an economic seizure that could take place in either the lending market place or the stock market.
If one has wealth, it is best to put it far, far away from the current financial system, safe and sound in a guarded vault, like BullionVault and GoldMoney, with an account personally at streetTracks Gold Trust, and in physical possession of gold coins.
WIDGETIZE