No End in Sight for Global “Currency Wars”!

• No End in Sight for Global “Currency Wars”! 
  by Gary Dorsch, Editor, Global Money Trends  
  With frigid temperatures expected to hover between 15-degree and 23-degree Fahrenheit this weekend in Moscow, it’s a wonder why the world’s most powerful finance chiefs and central bankers would schedule their Feb 15-16^th meeting in Vladimir Putin’s backyard. Instead, a better venue for the Group-of-20 would’ve been the Cayman Islands. The Islands are warm year-round, with average highs holding steady in the 80’s. January and February are the coolest months with lows averaging in the lower 70’s. However, Russia holds the presidency of the G-20 this year, – so finance chiefs will have to endure the frozen tundra.
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  A January 16^th warning issued by Russia’s central banker Alexei Ulyukayev has also set the narrative for the G-20 meeting. “The world is on the brink of a fresh “currency war.” Japan is weakening the yen and other countries may follow. If Japan continues to pursue a softer currency, reciprocal devaluations would hurt the global economy,” Ulyukayev warned. “We’re on a threshold of very serious and confrontational actions. The new government of Japan is a course towards a very protectionist monetary policy through a sharp depreciation of the yen. Other colleagues from respected central banks and governments already pursue this policy. This is not a path towards global coordination but rather a separation,” Ulyukayev declared.
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  Guido Mantega, Brazil’s finance minister, quickly chimed in, warning that the Federal Reserve’s “protectionist” gambit to roll out more quantitative easing (QE) would reignite “currency wars” with drastic consequences for the rest of the world. “It has to be understood that there are consequences. The Fed’s QE-program ($85-billion per month of money printing) will “only have a marginal benefit in the US as there is already no lack of liquidity. And that liquidityis not going into production. Furthermore, Japan’s decision to expand its own QE, coming on the heels of the Fed’s decision (to expand QE to $85-billion per month), is evidence of growing global tensions. That’s a currency war,” he declared.
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  Yi Gang, a deputy governor of the People’s Bank of China (PBoC), and chief of the State Administration of Foreign Exchange, said he’s worried about the fallout from QE and the Zero Interest Rate Policy (ZIRP), in the G-7 economies.“QE for developed economies is generating volatility in financial markets in terms of capital flows. Competitive currency devaluation is one aspect of it. If everyone is doing super QE, which currency will depreciate?” he asked.
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  As the European, Japanese, and US-governments sink deeper into a morass of debt, the ruling politicians are pressuring their central bankers to print more money, in order to finance their budget deficits. So far, five central banks, – the Federal Reserve, the European Central Bank, Bank of England, the Bank of Japan and the Swiss National Bank have effectively created more than $6-trillion of new currency over the past four years, and have flooded the world money markets with excess liquidity. The size of their balance sheets has now reached a combined $9.5-trillion, compared with $3.5-trillion six years ago.
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  In turn, the tsunami of ultra-cheap cash is inflating bubbles in the world’s bond and stock markets. On Feb 13^th, hedge fund trader Jim Rogers commented, “The US-stock market is near its all-time highs because the Federal Reserve is printing staggering amounts of money. This is very artificial,’’ Rogers warns. And the willingness of the political puppets at the Fed and other central banks to keep buying hundreds of billions of dollars’ worth of government bonds makes it easier for the ruling political elite to sustain the massive deficit spending that’s running up a record-breaking national debt. Rogers adds, “It’s a vicious cycle and it’s all insanity. No sound person in his sound mind would say, this is the way to run things. Of course, it’s going to lead to more inflation. But the government says we don’t have inflation. If you shop, you know that there’s inflation.’’
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