At maalamalama, we started talking about developing global currency wars and the negative affects it would have on the global population well before it became fashionable to call them “global currency wars”. For example, I discussed in this article, In the REAL World Series of Poker, the Stakes are Sovereign Default, that I wrote in March of 2010 more than five years ago, the Chinese view about US Central Banker tactics of strong arming the rest of the world into destroying their currencies to support their destruction of the USD through Quantitative Easing. Back then, appropriately named Luo Yuan, a researcher for the Chinese Academy of Military Sciences, stated that China’s response to US Central Banker qualitative easing and USD destruction measures “should not be restricted to merely military matters, and [China] should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease.”
Back then, I also stated, “There is little doubt in my mind that China wishes to ‘win the world’ and assume the mantle as the world’s number one economic power” and I warned “don’t forget the dark horse of the Middle Eastern Sovereign Wealth Funds that I mentioned earlier.” I still believe the first statement, and the fact that Middle Eastern Sovereign Wealth Funds are a critical component of the currency World Series of Poker (WSOP) is apparent in how bankers are managing the price of oil downward in paper derivative markets. Yes, slowing global economic growth has been a factor in the collapse of oil prices recently, but only the most naïve of people would believe that it is the singular factor in oil price collapse, as this narrative is the most widespread one that has been presented in the mainstream media. Manipulating oil prices lower is a geopolitical weapon against all OPEC nations, and especially Russia, in this ongoing global currency WSOP game. Just refer to Mr. Yuan’s comments above and you will understand this.
Furthermore, China strategically is a long-term planner and they think in terms of decades, not fiscal quarters. Thus, they have yet to make their move in gold and silver as of yet. However, they are undoubtedly holding the strongest hand in the global currency WSOP game due to their massive accumulation of physical gold an physical silver since 2007. Just as you would not immediately go all in if you held a royal flush and cause every other player to immediately fold, despite China holding the strongest hand in the precious metals arena, they are content for now to wait and allow others to continue to ante up before they show their hand and cause other players to fold. In the meantime, when they don’t receive the concessions they want, Beijing will continue to ““attack by oblique means and stealthy feints” as Luo Yuan clearly stated more than five years ago. We all seem to have forgotten how hostile the rhetoric between China and the US was in 2010 over the currency WSOP when US Congressman sent a letter to President Obama that stated, “The impact of China’s currency manipulation on the U.S. economy cannot be overstated. U.S. exports to the country cannot compete with the low-priced Chinese equivalents, and domestic American producers are similarly disadvantaged in the face of subsidized Chinese imports.” In the period since then, the negotiations between US Central Bankers and PBOC bankers resulted in Chinese concessions in which Chinese Central Bankers agreed to strengthen the Yuan. However, that was a long time ago when China held a pair of fives instead of a Royal Flush. Now that they hold a Royal Flush, we are starting to see more aggressive moves from China were they are not folding as they had to do when they only held a pair of fives. Yesterday, the PBOC (People’s Bank of China) devalued the Yuan by 1.9% overnight to help support a flailing export market. This move would not have been possible five years ago were China’s export market flailing back then as well. Though the PBOC stated this was a “one time event” and will not happen again, this move clearly has the strong potential to be a recurring event and not just a one-time move as China has gone from holding a pair of fives to holding a royal flush in the past five years in this global currency WSOP (at least until China is finally ready to show its hand in the WSOP game and officially make gold a part of their national currency system) . So what will be the domino effect of this “one-time event”?
Recall that the July 1997 Asian Financial crisis started in Thailand as a currency crisis. Thailand’s economy was at the time considered way too small to cause a larger crisis, but this belief was proven wrong in short time as the Thai baht currency crisis quickly spread at first to Malaysia, Indonesia and the Philippines, and in a few months, spread to Hong Kong, S. Korea, and China as well, a contagion that eventually spread to the US as well, when on October 27th of that same year, the US DJIA plummeted 554 points on one day, causing a closure of US stock markets to stop the panic selling. There is little doubt that with the Chinese Central Bankers so drastically weakening their Yuan over night, that other players in Asia will have to follow, so look for continuing devaluations in the Singapore dollar, the Hong Kong dollar, the Indian rupee, the Thai baht and the Korean won. If you remember the factors that instigated the 1997 Asian financial crisis, these forced devaluations of other Asian currencies led by Chinese Central Bankers in the global currency WSOP will have terrible consequences in the future for many SE Asian economies, as the fuse has now been lit on ticking time bomb that is the SE Asian real estate bubble. Of course, for anyone that connect the dots, no matter even if gold and silver prices head lower before they finally bottom this year, all of these factors necessitate the ownership of physical gold (and silver) to protect one’s assets from the final stages of the global currency wars.
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