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Ref: 09-038A of 14.Dec.2009 Author: Anil Selarka(Kalidas)DownloadPDFFile fromBox.net onsidebar orScribd Somecountriesdoanythingtoget their aim achieved. Theygotoanylength. Thedifficulty withthemilitarily powerful countrylikeUnitedStatesisthatthey abusetheirpower, become arrogant and destroyrest ofthe worldwithselfcenteredpolicies. They alsoconceal theirreal intention asif they arefighting astrategic war.Thereis absolutely nodoubtthatUnited States isinextremelytightcornerfinancially, politicallyonhomefrontandmilitarilyinAfghanistan and Iraq. Itsmajorconcern on ForeignExchangefront is severe pressure ondollar. At themoment, itistryingtokeeptheinterest ratelow by printingitsway out. Thequestionis– Howlong? Sooner orlater,itwillhavetocometothe market forborrowing trillions of dollars soprintedduring last 16months.If ChinaandJapandonot buytheTreasury bonds or notes, therates will shoot uptoglaringheights, placing enormous pressure onhousing market. Therecent visit of PresidentObama andTimothyGeithner (Treasury Secretary) wasnot for climate change or greentechnology. BothChina andJapanhaveservedthem feelersthat they will notlonger be buying TNotes orBondsinUSD duetoextremelyhighrisk of devaluationand extremelylowyield. This iswhybothPresident andTreasury Secretary have visitedthosecreditorcountriestopacifythem.Otherwise, what Treasury Secretary has todowithcarbon emission or climatechange? Heisfacing worst climatebackhome.So, instead of convincingthe other countries, notably China andJapan, it istrying anotherstrategyused duringAsianCrisis. Rating and Matinggame. Instead oftellingChina orJapantobuyUS$, it willforce downgrades of strategic and vulnerablecountries,andindirectlytellingthemajor Forexowners not tobuytheir currencies, in factsell them. Iftheysellthosecurrencies, what wouldtheybuy?Oneis sellingsomething againstsomething. Hereit isUSdollar. In other words, bycausingdowngrades of thosecountries belowinvestment grade, themajorcreditor countries willbeindirectly persuadedtobuyUS dollar evenif it isnot desirable, almost bankrupt, yields almost nothing andyet it will bemade the only alternative.For instance, Greece considered one of the tiniest andyet corruptscountrywhere onecaninfluencethegovernmentpolicies bycontrollingthe pockets of finance ministersand othercabinetministers.After Iceland,itwasDubai, now Greece, SpainandUnitedKingdom. Further,thedollarispushedupinpapertrades– bycausingsome affiliated orTARP recipientbankstobuythe
 
$Index whichissetup against6currencies– Euro, GBP, Can$, Aus$, YenandSwedishKroner. (Istilldonot understand why SKR is thereintheindex.Therearebigger currencieslike RMB, INR,and SouthAfricanRand, whichrepresentnearly60%ofworld economies.Therating agencieslike Standard andPoor and Moodywould neverdowngradeUScorporations soeasily. InspiteofUS incurring hugetrilliondollars of deficits, its statuswillberetained at AAAlevel. Whynot?UShasincurreddebtinits own currencyUS$–if thereis demand, it willsimply print outthedollars and hand overtothecountriescreditors.
No country in the world has incurred default ondebt denominated in its own domestic currency, becausethey can print their way out.
If any non-UScountryincurs moredebt intoits owncurrency, theserating agencies actincollusion andthreatentodowngradethatcountry. As recentlyas now,India, whoholds almost $300 billions ofForexreserve,bought200tons of gold fromIMF, recordednobanking orfinancial problems, havingfastest economicgrowth of 7.9%and healthypropertysector, was threatened withthedowngradeeven below investmentgradeduetorisingbudget deficits.How aboutJapanwhich hashighestlevel of nationaldebt –almost 170%of itsGDP –couldstill beratedInvestment gradeAA+? Only becauseJapanisappeasingUnitedStatesby buyingUStreasury ondemand.Of latetherelationsbetweenBritain andUSAarenot thatcordial. Britainis nursingthefeelingthatit was wrongly goadedintowar. It alsofeels thatthepresent banking problems at homearemainly duetoUnited States. Itis almost certain, despitepronouncement tothe contrary, that BritainandUnited States aredriftingapart. Thisis whyUK is soughttobedowngraded bytheUSbasedrating agencies likeS&P andMoody’s.Themessageis “ifyou donot meet out political objectives, wewill downgradeyou andforceyoubearhigher interestcost anddevalueyourcurrencies.” Your weakness ismystrength–is what theyconvey.If thepeoplesell dollars, theybuy gold aslastresort or buy otherEnglishspeakingcountriescurrencies likeBritishPound. Instead oflosing“reserve currency”statustoeitherEuroorGBP, USis indirectlyinfluencing rating agenciestodowngradeUK sothat peopledonot buyGBP, infact sell it, instead ofholding ontoit. Thehistoryshowsthatonlytwocurrenciesintheworld–GBPandUS$- haveplayed alternateroleof globalreservecurrency.Thereis a precedenttoo. During Asiancrisis, everythingwas pushed down–currencies, bonds,equities, propertiesand evenGold(becauseAsianshaveaffinityforgold). TheonlycurrencyrisingwasUS$. Ifyoucausefire,closedownall doors and windows except onewindow–that isUS$ -thepeoplewill rushintothatwindow.
Whatwesaidtwoweeksagoisbeingtoldonlynow…
NEWYORK:
30 Dec 2009, 0102hrs IST, REUTERS
MorganStanleyhasbeen sued byaVirginIslandspensionfund that accused the Wall Street bank of defraudinginvestorsby marketing$1.2 billionofrisky mortgage-relatednotesthat it expected tofail.The lawsuit filed Dec 24 inManhattan federal court said“
Morgan Stanleycollaborated withcredit ratingagenciesMoody'sInvestorsService andStandard &Poor'stoobtain "triple-A"ratings for notesmarketedin 2007aspart of acollateralizeddebt obligation(CDO)known as Libertas.” 
 
Look atthefull list of Countries’rated by S&P. Almost all countries almost bankrupt running intowithgiantlosses intrillions of dollars arelisted AAA or AA, the highest investment grade.Thedollar blockcountries whohavetheircurrencies tiedtoUS$, are also ratedAA+ becausethey areloyal toUSA.1. ThecreditorcountrylikeChinais ratedjustA+inspite of having $2.3trillionsinForexreserve. Canyoubelievethat? US with giant black hole of $2trillionsisstill ratedAAA andChinafully dressedup with $2.3trillions of surplus parkedin Forex, israted 5 notchbelow toA+.2. Indiaisrated at BBB- ,slightly aboveinvestment grade, inspite ofhaving7.9%growth inGDP and $300billions of Forex reserve.3. RussianFederationisratedBBB+inspite of having huge Forex and GoldReserve.4. South Africaisalso ratedlower atA+.5. Almost allcommoditycountries(exceptCanada andAustralia) are ratedlowerinvestment grades.The westerncountrieswant cheaper commodities, They ratethesecountriesdownwards, so thattheirInterest costgoes higher, capital marketsgo lower, and as result currencies golowerto maketheir buying of commodities cheaperinUSD terms.Almost allfundsandpension fundshaveincharter a provision nottoinvest into belowinvestment gradecountries. ThemomentcountrylikeIndiaisdowngraded below investment grade; there willbehugesell off byfundsthatwill bring down IndianRupee and also entirecapital market. Theinterest rates are alsoforcedup as consequence.GDP isalsounderstated inrespect of commodity countries. Forinstance,inIndia 50Milliontonsof potato will be valued at Rs 4per pound orjust10Cents perpound. The samepotato will be valuedinUSA at $2 perpound or nearly20times intrinsicvalue. TheUS GDP looksbetter and India’smuch smaller. Then, theseratingagencies use grossly understatedGDP numbers tocompare withtheir budget or trade deficits. Obviously, they willlooktaller, because baseis verysmallcomparedtowesterncountries.It ishigh timethe developingcountriesunderstandthis “Rating and Mating” game andtakeactionsto protect themselves– one of them willbetoimpose blanket banfor 5to15years onthosemischievous ratingagencies. Once they arekicked out while playing dirty war games, theywill be put on notice not tocausetroublesinthose fast developingcountries. The world willbea betterplacetolive in.Kalidas(Anil Selarka)HongKong,Ref: 09-038A of 2009.12.10Blog:http://anilselarka.comBook Web:http://www.subprimeresolved.comAuthor of this ArticleAnilSelarkaisalsothe author ofthehighlyacclaimed book“SubPrime Resolved” which is a bibleforthecompleteeconomicrecovery of theUnitedStates ofAmerica.While everyoneisscratchinghisheadfor solutiontothepresent financial crisis, this authorhasprovidedtotal solutionto allproblems tothe nutandbolt. Thereis simply no other bookintheworldthatmatches the quality, content and canvass ofthis
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