War Games
“We live in a global economy, so you yourself cannot dosomething alone. You have to cooperate with your partners.” –
Kim Choong-soo, Governor of the Bank of Korea
“
David Lightman:
What is the primary goal?
Joshua:
To win the game.” –
Dialogue,
War Games
“I generally don’t know how far things go, but I can see whichway they are going.” –
George Soros
“The fact is, currency wars are fought globally in all
major nancial centers at once, twenty-four hours per
day, by bankers, traders, politicians and automatedsystems
—
and the fate of economies and their affectedcitizens hang in the balance” –
Jim Rickards,
Currency Wars
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THINGS THAT MAKE YOU GO
Hmmm...
A walk around the fringes of nance
By Grant Williams
29 JANUARY 2013
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THINGS THAT MAKE YOU GO
Hmmm...
29 JANUARY 2013
Contents
THINGS THAT MAKE YOU GO HMMM.......................................................3
Pop Quiz, Hotshot!....................................................................................19Carney to Put Growth Top of List...................................................................19A Mountain of Risk.....................................................................................20Snakes And Ladders: Investment Banking on the Brink..........................................21Too Early to Celebrate ECB's Balance Sheet Reduction..........................................22George Osborne's Austerity Plan 'Risks Lost Decade' for UK Economy.........................23How a $91 Million Loan on the Marlins Ballpark Will Cost Miami-Dade $1.2 Billion.........24Cleaning Up China's Secret Police Sleuthing.......................................................25
CHARTS THAT MAKE YOU GO HMMM.....................................................28WORDS THAT MAKE YOU GO HMMM......................................................32AND FINALLY................................................................................33
3
THINGS THAT MAKE YOU GO
Hmmm...
29 JANUARY 2013
ThingsThat Make You Go Hmmm...
“One, two, three, four, I declare a thumb war!”I was late to the sport of Thumb Wrestling, having spent my childhood playing such gamesas British Bulldog (sadly, a game deemed too violent for today’s less hardy progeny); but mychildren, prevented from engaging in any kind ofphysical contact on the school playground for fearof potentially life-ending knee-scrapes (or, morelikely, school-ending legal action) were ardent thumbwrestlers; and I found myself engaged in what to mewere rather pointless exercises during which new ruleswere arbitrarily added to the game, which seemeddesigned solely to ensure that Dad never won. (I amstill not 100% certain what the rules are surroundingthe ‘sneak round-the-back-attack’, but that strategydid result in my losing handily to my daughter, Brontë,whenever combat ensued). No matter. Whenever the rhyming gauntlet was thrown down, it wason like Donkey Kong — though the need to explain that particular reference to Brontë meant
that I tended to enter the battle feeling rather old and decidedly unt for combat. My run of
defeats was truly epic.Nobody ever really wins at Thumb Wars, which makes the whole thing rather pointless; and,as it turns out, the same can be said about the subject of today’s discussion — Currency Wars— which seem to be erupting across the globe; and, as they gain in intensity, these monetary
conicts are threatening to throw a major spanner in the works of a world that, until recently,
seemed to have been operating under the assumption that it was possible for multiple countries
to all devalue their currencies simultaneously in order to inate their massive debts away.
Poor, misguided fools.
There are many parts of the current nancial equation that puzzle me, from investors who are
happy to accept guaranteed losses in their government-bond portfolios to governments thatgenuinely seem to think that increasing their spending by a tiny bit less than they had intendedcounts as a 'spending cut'; from yield-starved souls who feel that the appropriate return fordipping one’s toe into the junk bond market is sub-6% to business owners who, in a worldsloshing in trillions of freshly printed funny money, are forced to pay double-digit interest ratesfor access to some of the magical bounty.But beneath it all, at the wellspring of all the disconnects and false price signals that aremaking investing in today’s supposedly free markets an impossible task, lies the source of mygreatest consternation: central banks.
I have one simple question for those august institutions, and it is this:
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