Dollar Hegemony Under Attack By Export-Superpowers Germany And China - By Testosterone Pit (31/3/14) PDF Print E-mail
Testosterone Pit   
Monday, 31 March 2014 07:46

The word dollar didn’t even come up. “The volume of transactions that can be carried out in the Chinese currency in international and German financial centers is not commensurate with China’s importance in the global economy,” the Bundesbank explained in its dry manner on Friday in Berlin, after signing a memorandum of understanding with the People’s Bank of China. President Xi Jinping and Chancellor Angela Merkel were looking on. It was serious business. Everyone knew what this was about. No one had to say it.

The agreement spelled out how the two central banks would cooperate on the clearing and settlement of payments denominated in renminbi – to get away from the dollar’s hegemony as payments currency and as reserve currency.

This wasn’t an agreement between China and a paper-shuffling financial center like Luxembourg or London, which are working on similar deals, but between two of the world’s largest exporters with a bilateral trade of nearly $200 billion in 2013. German corporations have invested heavily in China over the last 15 years. And recently, Chinese corporations, many of them at least partially state-owned, have started plowing their new money into Germany.



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Fund Manager Blasts The Fed - By Staff Report (31/3/14) PDF Print E-mail
Staff Report   
Monday, 31 March 2014 07:42

The Daily Bell

Jeremy Grantham: The Fed is killing the recovery ... If you hate the Federal Reserve, you have a new hero. A few weeks ago, Jeremy Grantham, the co-founder of money management firm GMO, called newly appointed Federal Reserve chairman Janet Yellen "ignorant" in the New York Times. He also said the reason for the slow recovery was not the severe financial crisis, continued high unemployment, or the many standoffs in Washington. Instead, he blamed the Fed for ruining the recovery it was supposed to stimulate. To someone who believes in the laws of economics, it's hard to overstate how odd that claim is. It's positively bonkers. – Fortune

Dominant Social Theme:
There is no central bank better than the Fed. It's absolutely necessary.

Free-Market Analysis:
Fund manager Jeremy Grantham has put the blame for the US's endlessly degrading economy where it belongs – with the Federal Reserve. The Fortune interview, as we can see, finds some of Grantham's conclusions to be bonkers. The biggest problem that Fortune has, apparently, is with the idea that Fed actions, and especially low interest rates, have had a negative effect.



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Keynesian Myths, Monetary Central Planning And The Triumph Of The Warfare State - By David Stockman (31/3/14) PDF Print E-mail
David Stockman   
Monday, 31 March 2014 07:41

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The Keynesian Cargo Cult: Dancing Around A Fire Waving Dead Chickens - By Charles Hugh Smith (31/3/14) PDF Print E-mail
Charles Hugh Smith   
Monday, 31 March 2014 07:40

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Japan’s Been All Keynes, All The Time: Debt Debacle Coming Soon - By Michael Pento (31/3/14) PDF Print E-mail
Michael Pento   
Monday, 31 March 2014 07:37

Contra Corner

I first warned about the impending bust of Japanese Government Bonds (JGBs) when I wrote “Abe Pulls Pin on JGBs” back in January of 2013. In that commentary I laid out the math behind a collapse of the Japanese bond market and economy stemming from the nation’s massive amount of government debt, combined with the Bank of Japan’s (BOJ’s) folly of pursuing an inflation target.

It was my prediction back then that a spike in interest rates was virtually guaranteed in the not-too-distant future. I also predicted that debt service payments would soon reach 50% of all government revenue, which would be the catalyst behind the rejection of JGB’s on the part of the entire global investment community. Sadly, that prediction should come into fruition during the next few months.

The Japanese Finance Ministry recently predicted that debt service payments would reach $257 billion (25.3 trillion Yen) during this fiscal year; up 13.7% from fiscal 2013. Also, revenue for this year is projected to be 45.4 trillion Yen. This means interest expenses as a percentage of total government revenue will reach 56%.

Therefore, it should now be abundantly clear to all holders of JGBs that since over half of all national income must soon go to pay interest on the debt, the chances of the principal being repaid in anything close to real terms is zero. A massive default in explicit or implicit terms on the quadrillion yen ($10 trillion), which amounts to 242% of GDP, is now assured to happen shortly.



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