Currency Controls Return as Central Banks Fight Dollar Freefall

[Purveyor]

Source: Bloomberg News

Nov. 12 (Bloomberg) -- Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won, now at a 10-year high.

Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth. The U.S. currency slumped 10 percent this year against its biggest trading partners, the steepest decline since 2003, while Treasury Secretary Henry Paulson has reiterated that the U.S. supports a ``strong'' dollar.

``Central banks are struggling to find new ways to intervene against their currencies and some of the proposals simply can't work,'' said Mirza Baig, an analyst in Singapore at Deutsche Bank AG, the world's biggest currency trader. Some plans are ``truly bizarre,'' he wrote in a report.

The U.S. hasn't attempted to stop the decline as the worst housing slump in 16 years forced the Federal Reserve to lower interest rates. The dollar has weakened 19 percent against the Canadian currency this year to a record 90.58 cents, and fell 18 percent versus Brazil's real.



Read more: http://www.bloomberg.com/apps/news?pid=20601080&sid=ad3SyUGo78L0&refer=news

[Hekate]

1. "The US hasn't attempted to stop the decline..." ?? Shipwrecked economy: LIHOP or MIHOP?

Who does it serve?

On a related note, I went out to Costco yesterday to buy a birthday present for my grandson (age 3) and ended up with his Christmas present too. As I tried to locate country of origin labels on items I couldn't help thinking: "When did we, the US, stop making stuff? This is nuts."

Hekate

[Mrspeeker]

2. we make war!

and when war is as profitable for a few as it has been the last 7 years..we are going to see lots more of it!

[Gman]

6. How much money trading does the Carlysle Group do?

Who in Bushco does money trading?

The answer to that will shock the world.

[Anarcho-Socialist]

8. Laissez-faire ideology at work

The US has held back from intervention because it always felt that the market would do the work for them, since the stability of the Dollar as the main reserve currency was in the market's interest. In the past two years, the market has changed its mind on the Dollar and is no longer content to sit with their Dollar holdings and hope for a Bullish Dollar. Higher growth and interest rates in China and the Eurozone make the Renminbi and the Euro more profitable holdings than Dollar investment.

I feel that the market is seeing the Dollar as overvalued still, leaving further room to fall. The market can afford to do this to the world's largest economy since China has overtaken the US as the main engine of global economic growth.

[JDPriestly]

25. Read Naomi Klein's book The Shock Doctrine

I posted the following (more or less) on another thread, but I am going to post it again because it says what I feel eeds to be said.

This economic crisis is about greed and maximizing profits and power for the Bushie Chicago Schoolers. Please read the book. It is just amazing. The most incredible chapter I have read yet is the one on South Africa. Long before they rid their country of apartheid, the leaders of the ANC committed to a Freedom Charter which promised a fair economic policy. When the opportunity to negotiate the end of apartheid finally arrived, most of the ANC leaders focused on gaining political freedom and participation -- and left the negotiation of agreements concerning the economy up to "technicians."

As a result, while it appeared that the ANC had rid their country of apartheid, the post-apartheid government inherited the economic system including the obligation to pay the debts of the former government. Under what Naomi Klein refers to as "Chicago School orthodoxy," the same corporate interests that controlled the economy under apartheid continue to dominate post-apartheid. Here are the sad results per Naomi Klein (page 215 of The Shock Doctrine):

"Since 1994, the year the ANC took power, the number of people living on less than $1 a day has doubled, from 2 million to 4 million in 2006.
Between 1991 and 2002, the unemployment rate for black South Africans more than doubled, from 23 percent to 48 percent.
Of South Africa's 35 million black citizens, only five thousand earn more than $60,000 per year. The number of whites in that income bracket is twenty times higher, and many earn far more than that amount.
The ANC government has built 1.8 million homes, but in the meantime 2 million people have lost their homes.
Close to 1 million people have been evicted from farms in the first decade of democracy.
Such evictions have meant that the number of shack dwellers has grown by 50 percent. In 2006, more than one in four South Africans lived in shacks located in informal shantytowns, many without running water or electricity."

Klein's book is fully footnoted, but I have not had a chance to look at her secondary sources.

As I read the book (have not finished it), I gain a different understanding of the motives behind the Bush administration's allowing the outsourcing of our corporations and the middle class jobs (a trend started under Reagan and continued by Bill Clinton), driving America into debt and permitting the dollar to decline so precipitously. Bush knows that the next president will be bound by the trade and loan agreements of the current administration. The only way to rescue our ruined economy, to save the precious stock market, we will be told, is to sell off federal assets --- our national parks -- our technology -- our natural resources -- everything we have. It will all be up for sale. Although the prices will be low, the only buyers will be the mega-corporations and the extremely wealthy who have benefited from the Bush tax cuts for the rich and who therefore have large fortunes ready to "invest" in a good opportunity. This is not incompetence. This is the plan, the well structured strategy of the Bushies.

Remember how the S&L crisis was brought into being and how it ended in big banks buying out the relatively small S&Ls at fire-sale prices. Well, that was nothing compared to the crisis that we will face when Bush leaves office. The worse the failures of the Bush administration, the higher the profits of his friends once the next president has to sell the nation's way out of the inevitable economic catastrophe.

This is why I am so opposed to a Hillary Clinton candidacy for our party. She may not admit it, or even realize it, but she will be the perfect corporate tool. Bill was easily manipulated by Greenspan. But his cooperation with the right on economic issues was nothing compared to how Hillary will cave when faced with the financial chaos after she is sworn in.

That is why I support Edwards. He is the only candidate who sees through the game the right-wing corporate crew are playing. He has watched their moves for many years -- in courtrooms and in the secret settlement negotiations that follow the courtroom drama. He knows how to read the small print, how to anticipate and counter each corporate tactic. We really need Edwards for president.

It's Edwards or misery in my view. Edwards, ironically, is the only candidate who can save the free enterprise system that our Founding Father intended us to enjoy -- the free enterprise that protects the existence of the farmers, the craftsmen, the inventors, the small businesses, the ordinary workers, the elderly, the children, the hospitals, the schools, the churches. He is the only candidate who has the wisdom of a Roosevelt and who will navigate us through the difficult economic and political seas that await us when Bush leaves office.

Sorry to be so aggressive and "fanatical" about this. But even if we "win" with one of the other candidates, say Hillary, we will lose the economic battle, because no candidate other than Edwards knows how the mega-corporations play their games. I firmly believe, based on his plans and message, that Edwards is the only one who "gets it."

[sorrywrongemail]

26. such a great post

btw, one can find most of Naomi Klein's references here: http://www.naomiklein.org/shock-doctrine/resources

I agree that the chapter about the ANC is really disturbing.

[cliss]

35. Great post.

I agree with you about J. Edwards. He's the only one that can clean up this mess.

[defendandprotect]

18. Too late now . . .. EVERYTHING is made in China --- !!! Or Thailand . . .

Ten, fifteen years ago we could have stopped this by not buying it ---
now . . . impossible, I'd say.

[DBoon]

3. We are so screwed

Things are going to get really really bad here in the USA

[mrgerbik]

4. To some...

things are going as planned.

[Mr_Jefferson_24]

16. Indeed -- and here's the template they're using...

http://www.crisispapers.org/Editorials/germany-1933.htm

It is said that history repeats itself -- that's because it does.

[mrgerbik]

22. great paper

I especially liked this paragraph from The Big Lie Technique:

And how did Haffner deal for so long with this menacing force in front of him? "What saved me was... my nose. I have a fairly well developed figurative sense of smell, or to put it differently, a sense of the worth (or worthlessness!) of human, moral, political views and attitudes. Most Germans unfortunately lack this sense almost completely. The cleverest of them are capable of discussing themselves stupid with their abstractions and deductions, when just using their noses would tell them that something stinks

I think herein lies most people's form of denial as it stands today... that form of denial that says: "Life cannot be any better without our current system of rule. So suck it up and take it like a man, or please get out of the way."

People are taught to seek power first and foremost, regardless of the implications. So its easy to keep feeding them lies and teaching denial techniques to help numb the pain that is inflicted upon them daily through propaganda, fear and their own (now) subconscious guilt. After many years of this general conditioning, "the man" makes grand proclamations, laws and revisions of laws to "help" lead the people from THEIR OWN moral indecision and incompetence. All of this under the subversive guise of choice.

[TheBaldyMan]

5. Printing money + no war tax = economic disaster

Bush is the world's biggest fuckwit.

[Anarcho-Socialist]

7. It has been a run on the Dollar, but in slow-motion

The US will have to choose between a recession due to housing slump and a fall in capital investment; or an inflationary period as interest rates are cut further, with maintaining a level of borrowing, and a fall in the Dollar value making imports more expensive, thereby increasing inflation. Either way it will entail a fall in the standard of living for many people.

[upi402]

9. Foxes running the henhouse

duh!

Anyone but Kucinich talking about the REAL SHIT heading down the pipe?

[ben_meyers]

10. The U.S. sneezes

And the rest of the world gets pneumonia.

[appleannie]

11. Not anymore...Brazil, India, China aren't even sniffling

The US no longer influences the rest of the world the way it did. A few countries like Japan will be hard hit as the US heads into recession, but other countries, especially those with strong commodity resources, have moved on without us.

This time it will be our currency, AND our problem. Things have changed

[Jackpine Radical]

13. You're fast, Annie.

And welcome to DU.

[NewJeffCT]

17. The whole world will be hurt if we head into recession

If the dollar drops even more, China will lose value on their $1 trillion+ is US dollar holdings, which is a good 25% of the entire GDP. And, their banking system is in worse shape than our banks were in the 1920s in terms of bad loans & debts. And, those US companies that have created millions of jobs in China will pack up shop & leave to the next low cost country...

Japan & Korea will also suffer as well.

[AlphaCentauri]

20. In a short term yes but may be not in the long run

If money starts moving to other countries that need invesments to create jobs insted of exporting immigrants it will help the global economy.

[Art_from_Ark]

28. The US is China's largest trading partner

The totals for Japan, China's next-largest trading partner, are only half those of the US.

So, no, China will not be immune from catching a US cold

[Jackpine Radical]

12. Not so much anymore.

The US sneezes and the rest of the world raises their price on cold remedies.

[Bozita]

14. If China sneezes, The US dollar gets lung cancer.

Wishing it isn't true is too much to hope for.

[appleannie]

15. LOL! Now that's more like it...

[defendandprotect]

19. Cheney converted his $ to Euros? Was that just a rumor?

Meanwhile, what does the ordinary citizen do?

Wait for Democrats to do something --- !!! IMPEACH . . . .

Bankrutping our Treasury is what they people are in office to do -- !!!

[BREMPRO]

21. this is a hidden tax...

the administration and the fed are basically saying "screw you" to the world (what else is new) buy our dollars and we'll pretend to be for a "strong dollar" while we enact policy (interest rate cuts) that deflates it so your holdings are worth less, inflation is a hidden tax on investors. They got us into this mess by deregulation and loose money policy, mortgage free-for-all, currency trading madness, nafta, poor trade policies, and they are trying to get out of it by devaluing the currency. not working very well. 90% of all financial transaction in the market today are CURRENCY trading. This is gambling, not investment. fukin capitalist greed and fascist govt. complicity sinks us again.

[lovuian]

23. They want the dollar to die so they can bring in the Amero

http://youtube.com/watch?v=fIEP7jreJ-Y

think about it they can redo their debt and steal more

[Mark D.]

24. The Money Masters

Search that on Google Videos. Put aside 3 1/2 hours to watch it if you honestly think the forces trying to 'fix' this and 'save the dollar'
aren't behind this actual roller coaster. This is to anyone who reads this. It appears the others who posted before me are also aware.
Oh. And also behind every depression/recession. And behind every assasination and war. For a shorter take, search 'Zeitgeist Part 3'.
Those folks 'helping' with the dollar crisis is like Godzilla 'helping' repair fallen power lines. It's ridiculous, once you understand all of it.

[Trajan]

27. The Republicans have ALWAYS claimed to be Economic 'Superiors' to Democrats ....

Yet it has always been a lie .....

GOP government has ALWAYS precipitated one economic disaster or another ....

Just one of their many big lies .....

[Judi Lynn]

29. Currency Controls Return as Central Banks Fight Gains (Update1)

Source: Bloomberg

Currency Controls Return as Central Banks Fight Gains (Update1)

By Gavin Finch and Ye Xie

Nov. 12 (Bloomberg) -- Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won, now at a 10-year high.

Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth. The U.S. currency slumped 10 percent this year against its biggest trading partners, the steepest decline since 2003, while Treasury Secretary Henry Paulson has reiterated that the U.S. supports a ``strong'' dollar.

``Central banks are struggling to find new ways to intervene against their currencies and some of the proposals simply can't work,'' said Mirza Baig, an analyst in Singapore at Deutsche Bank AG, the world's biggest currency trader. Some plans are ``truly bizarre,'' he wrote in a report.





Read more: http://www.bloomberg.com/apps/news?pid=20601014&sid=aXbLLszchloc&refer=funds

[alfredo]

30. So what does this mean for us. It doesn't look good.

[AlphaCentauri]

31. we are not going to be able to buy imports.... n/t

[alfredo]

32. If we still had a manufacturing base, it would be good then.

Looks like the Asia markets are sucking air too.

updated 0531 GMT
Nikkei 225 15032 -551.51 (-3.54%)
Hang Seng 27501 -1,282.45 (-4.46%)
All Ordinaries 6523 -84.70 (-1.28%)
all markets »

[AlphaCentauri]

33. well actually we can not compete with a 99 cents store n/t

[alfredo]

34. Yeah, I know. I was commenting on how fucked we are.

[Mark D.]

36. As you pointed out

The rest of the markets are hurting because the world IS their oyster.
They control all major currencies and therefor all markets based on a
currency under their control. I can't say it enough. Until a reform's
done to monetary policy (see Money Masters for more on that) there'll
never be and end to this. Debt based money creating endless debt we'd
never be able to repay as people or as nations. In debt to those who
hoard it all, start depressions/booms so they can hoard more, start
wars they finance both sides in to create more debt, and kill any
president who stand against them (JFK was the last one to try it,
RFK would've picked up where JFK left off so they offed him too.)

[alfredo]

37. There's no hope for mankind if that is the case.

[LeftHander]

38. Our debt is becoming worthless.....

As we continue to spend on war and military...investors are divesting in the dollar because it is clear that Bush only wishes to spent this "debt" on war that enriches his historically profiteering friends and family.

Why would any nation invest in our wars?

No wonder the dollar is falling.

If we were spending money on important things to make this nation and the world better the dollar would be singing a different tune.

[fascisthunter]

39. I Am Convinced this is Deliberate

Bankrupt government and replace it with a corporate friendly entity. Remove "We the People" and our civil liberties.

Grover Norquist said it:
"My goal is to cut government in half in twenty-five years," he says, "to get it down to the size where we can drown it in the bathtub."

The man is a traitor.

[Supersedeas]

40. think the U.S. media advertising and GoP establishment care? Britney sells and diverts