This weekend, Timmy took a big doo doo on the rest of the World as he pressed fellow Finance Ministers into (in theory) setting mechanisms to address trade balances (which means export countries need to strengthen their currencies against the dollar) while importing countries (like US) should not try to manipulate their own currency. Well, that sounds reasonable EXCEPT, before the ink is even dry on the G20 release, Timmy flies off to China to get them to commit to revalue the Yuan, which is pegged to the Dollar and effectively DE-values the dollar in an entirely manipulative manner.
No, WE didn’t manipulate the Dollar, China did. We only told them to manipulate their currency which is tied to the dollar, so it’s not the same thing at all as us manipulating the dollar and —- oh my God Tim, how can you sleep at night???
So good morning, America, how are ya? I’ll tell you how you are, you are 1% poorer than you were on Friday as the Yen rises to 80 to the Dollar and the Euro rises to $1.41 and the Pound hits $1.58. That drive oil back over $82.50 and gold back to $1,350 and copper hit $3.89, up from $3.75 on Friday - that’s 3.5% inflation of a basic material OVER THE WEEKEND! That annualizes out to about 1,000% but let’s be fair and say this only happens on weekends and call it 52 x 3.5% for 182% - hyperinflation accomplished! Of course, we don’t need 182% increases in commodities to achieve hyperinflation, hyperinflation is anything over 26% and our Dollar is down 15% since May and that’s 5 months so we’re heading for 36% over 12 months already.
|Different directions: Tim Geithner of the US (above centre), with Christine Lagarde of France (left) and the European Central Bank’s Jean-Claude Trichet (behind) line up with fellow G20 central bankers and finance ministers in Gyeongiu, South Korea|
But in the run-up to this week’s meeting in South Korea of finance ministers and central bankers from the 20 leading nations, it was revealed that senior representatives from Brazil, one of the biggest beasts of the emerging market world, would not be turning up. In a savage irony, given the G20’s aim to head off a global currency war and strengthen the global economy, finance minister Guido Mantega was too busy working on his country’s own exchange rate problems to attend. Even more poignantly, a month ago he was the first G20 minister to warn of a currency war.
More worrying than a single act of truancy – from a minister whose country is, to be fair, in the throes of an election campaign – is the disillusionment apparently creeping through the very emerging market governments the G20 was meant to empower.