Friday, September 10, 2010

Yuan Trading Against Russian Ruble Said to Start Within Weeks in Shanghai

From Bloomberg News: China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.

China may start trading its currency against the ruble within weeks, three bankers with knowledge of the matter told Bloomberg, and sent out a document last week allowing lenders to apply for ruble trading licenses, one of them said. Russia’s Micex Stock Exchange is making preparations to trade the ruble against the yuan in an initiative that has the backing of the country’s central bank, Ruben Aganbegyan, the head of the bourse, told reporters at a conference in Moscow today.

“Given the risk to the dollar and U.S. assets from their fiscal position they want to reduce their dependence on the dollar as an invoicing currency,” Bhanu Baweja, global head of emerging markets fixed income, currency and credit research at UBS AG, said in a phone interview from London. “It makes sense for two large economies to exclude a third, overly dominant economy from their trading equation.” on

Embrace The Coming Hyperinflation!

By John Soltez: Hyperinflation, or just a bunch of hype? That is the hot debate among economist types these days. On one side are the alarmists, sounding their warning sirens, flashing us pictures of Weimar-era Germans using wheelbarrows for wallets. On the other side are the skeptics and the pooh-poohers, such as Fortune magazine, which recently ran an article headed with the comment "irrational fears of hyperinflation won't die."

Right now, it's hard to argue with the doubters, particularly at a time when the Fed is doing all it can to fight deflation - whether it's buying up credit-card debt, or swelling up the money supply like a pregnant elephant. Unlike the Weimar folks, the thinking goes, we hold the world's reserve currency; theoretically we could inflate to kingdom come, and someone will still have to buy our debt. Hyperinflation threat? Stick it in the panic shelter along with the tuna fish and the shotgun shells.

The skeptics may be missing the point, though. Inflation, as Friedman famously remarked, is a monetary phenomenon. Hyperinflation, however, is a different animal altogether; despite common belief, it's not simply inflation on steroids. No, it stems from a different seed, one that involves politics rather than on

Deflation Never Had A Chance

By Toby Conner: Lately we've been hearing a lot of talk about Kondratieff cycles, Elliot Wave super cycle, end of the world, deflation, deflation, deflation.

What the deflationists fail to acknowledge is that in a purely fiat monetary system deflation is a choice not an inevitability. To put it in simple terms, if a government is willing to sacrifice its currency there is absolutely no way deflation can take hold in a modern monetary system.

It doesn't matter how large the debt contraction is, 10 trillion, 100 or 1000 trillion, any government with a purely fiat currency can, with the stroke of a computer key, print enough money to wipe out the debt. Granted they will destroy the currency by doing so, but at some point we are going to be faced with the choice of print or deflate. I have little doubt Bernanke will choose to throw the dollar on the sacrificial on

Gold & Silver On Verge Of Dramatic Break Out

By Rolf Nef: Currently the silver charts are more bullish commented than gold, but gold looks as explosive as silver. The first graph shows gold since the beginning of the current bull market in August of 1999, eleven years ago, on a linear scale. Both trend lines form a wedge, in which the price swings are getting smaller and smaller and the tension is rising like a depressed spring, ready to jump. If the price would be the one of a stock, it probably would go to the downside, as it is typical for shares. For commodities and precious metals, the contrary is the most likely case.

The second graph looks pretty much the same, only that it spans a much longer period: the tops of 1869 and 1980 form the upper trendline, the bottoms of 1968 and 1999 the lower ones. The interpretation is the same as of the above shorter one.

But the graph contains more interesting information: on the one hand side the comparisons of the bulls in 1869 and in the 1970s, which multiplied by a Fibonacci figure and deliver a projection for the current bull.

A parallel line to the connection of 1968 with 1999 drawn through the top of 1934 delivers a trend channel, which shows also the overshoot of 1980. The upper trendline confirms the projection of $7,280.

There is one more important information that this chart delivers: the current bull move is part of a move that started in 1934. If it will top out between 7 and 8'000, the price drop will only be a correction, followed by an even larger on

Helicopter Ben needs to drop some money on Main Street

By Ellen Brown: The Fed is proposing another round of “quantitative easing,” although the first round failed to reverse deflation. It failed because the money went into the coffers of banks, which failed to lend it on. To reverse deflation, the money needs to be funneled directly to state and local economies.

In 2002, in a speech that earned him the nickname “Helicopter Ben,” then-Fed Governor Bernanke famously said that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” You could cure a deflation, said Professor Friedman, simply by dropping money from on

Global economic recovery slowing: OECD

From the SMH: Global economic recovery is slowing at a greater rate than expected and extra stimulus from governments may be needed, although another recession remains "unlikely", the Organisation for Economic Cooperation and Development said on Thursday.

Treasurer Wayne Swan warned the assessment showed recovery would be an ongoing challenge, but added Australia had fared well through the economic crisis.

Growth in the Group of Seven leading industrialised economies could slow to an annual rate of 1.5 per cent in the second half of the year, the OECD said in an interim assessment, lowering a projection in May of 1.75 per cent.

"Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated," the OECD on

IMF sells 10 tonnes of gold to Bangladesh

By Glenn Somerville/Reuters: The International Monetary Fund said on Thursday it sold 10 tonnes of gold to the central bank of Bangladesh this week, its first sale after a 10-month hiatus, as a volatile US currency draws holders to bullion.

An uncertain outlook for two of the world’s major reserve currencies—the dollar and the euro—is seen providing a spur for central banks to buy gold, which has gained as much as 15% this year.

The IMF transaction, at Tuesday’s market prices, raised $403 million by disposing of gold that was part of 403.3 tonnes approved for sale by the IMF’s executive board in September 2009.

Gold rose to a two-month high on 7 Sept—within sight of a lifetime high around $1,264 an ounce struck in June.

“The US dollar doesn’t look so good in the long term. The Chinese and everbody else want to diversify their portfolio,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. “I think the central banks on our side and the Middle East would like to buy some gold.”

The sales are part of plans adopted last year to diversify the fund’s sources of income and boost low-cost lending to poor countries by up to $17 billion through 2014. The Fund is the world’s third-largest holder of bullion after the United States and Germany.

The IMF has already sold 212 tons of gold to the Reserve Bank of India, the Bank of Mauritius and the central bank of Sri Lanka, all in November last year. The IMF also said that at the end of July, a further 88.3 tonnes had been sold through on-market sales that it announced in February.

Sale Draws Market Attention

While Thursday’s sale was modest in size, it drew the attention of markets. “It’s only 321,000 ounces, the equivalent of 3,000 COMEX contracts,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC in Chicago.

“But it can, in general, indicate that the Asian central banks continue to buy and add gold into their reserves, which over the long term is a very healthy thing (for gold).”

More than 120,000 contracts traded on Thursday, making the IMF sale less than 3% of a relatively light trading day on the COMEX exchange in New York.

Earlier this year there were reports China was prepared to buy bullion from the IMF, though those reports were disavowed as the country, which is also the world’s top gold producer, was likely to turn to domestic supply.

“They will only buy if the price is really really attractive. I don’t think China will enter the market. If they are in the market, the price will jump,” said Leung of Lee Cheong.

But dealers said Asian banks’ interest in having gold holdings in their reserves will support gold prices and increase as the region’s economic might grows.

“They prefer to buy on a break lower, but as the power continues to shift east, they continue to buy it and gold continues to head up over the long term,” said McGhee of Integrated Brokerage Services LLC.

In September 2009, IMF member countries formally endorsed a plan for strictly limited sales of 403.3 tonnes of gold from the fund’s stockpile and said any on-market sales would be made in a way that did not disrupt gold markets.

The 19 signatories of the Central Bank Gold Agreement—largely European central banks—also pledged last year to cap their gold sales at 400 tonnes a year over the next five years.

Chinese Diplomat tells it as it is

From the UK Telegraph: The outburst by Sha Zukang at a retreat for top UN officials in the Austrian ski resort of Alpbach left senior UN officials cringing in embarrassment as others tried to convince him to put down the microphone, according to Washington-based Foreign Policy magazine.

"I know you never liked me Mr. Secretary-General – well, I never liked you, either," said Mr Sha as Mr Ban looked on, smiling and nodding awkwardly during the 15-minute toast attended by the UN's top brass.
Mr Sha, who was appointed the UN undersecretary general for Economic and Social Affairs in 2007, also made no secret of his fractious relationship with Mr Ban, although did say he'd grown to respect the South Korean.

"You've been trying to get rid of me," said 62-year-old Mr Sha according to the senior UN official present, "You can fire me anytime, you can fire me today."

Later in his impromptu speech Mr Sha turned to an American colleague, singling out Bob Orr, from the executive office of the secretary-general.

"I really don't like him: he's an American and I really don't like Americans," he on