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When Money Dies
I didn’t come up with the phrase, “when money dies,” though I like it a lot. The phrase captures an important idea. It is that money – I refer to that paper kind issued by governments – has a finite life. At some point, it becomes worthless, or dies.
The death of a currency is often a protracted affair. It often takes decades. And as it unfolds, the people who experience it hardly believe it. That is the tale told by Adam Fergusson in his book When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany.
First published in 1975, it had been out-of-print for years and much sought after. A used copy on Amazon cost $300 recently.
The book is a history of the death of the German mark in the 1920s. It is also a scary reminder of the devastating ...
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GCI Financial Daily Market Commentary: 02/22/2011
USD
Risk appetite declined sharply during the Asia session as tensions in Libya increased, New Zealand was struck by another powerful earthquake, and Moody's lowered the outlook on Japan's sovereign rating from stable to negative. Sentiment was not helped by a sudden (but brief) 30-pip spike in USDJPY as the Asia session got underway. EURUSD has traded 1.3563-1.3685, and USDJPY 82.84-83.54. Asian stocks are down about 1-2%, and US stock futures are also pointing lower. After first breaking above $1410/oz, gold slipped as the risk-averse mood took hold, and is trading back below $1400/oz at the time of writing. Signs of growing unrest in the Middle East kept the price of crude elevated, despite the risk-off backdrop. In the US, Minneapolis Fed President Kocherlakota, often seen as a ...
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Q+A: What steps might the euro zone take on its debt crisis?
(Reuters) - Euro zone countries are working on what they call a comprehensive package of measures to resolve their year-long debt crisis, aiming for a deal by the end of March.
An EU summit on February 4 produced no breakthrough, with Berlin and Paris introducing new proposals for boosting competitiveness across the region, prompting disagreement among states.
Another summit is due on March 11 to sustain momentum toward a deal, with the complete package expected to be finalized at another summit on March 24-25 in Brussels.
Below are ideas that have been discussed formally or informally and could be included. Some measures face strong opposition from Germany and appear unlikely to make it.
INCREASING THE EFFECTIVE LENDING CAPACITY OF THE EFSF
There is a strong chance of this step being ...
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Today’s Best Investment…Rhymes With Pickles
A huge opportunity to hedge against both inflation and deflation is lying out there in the open. There are no transaction costs and right now there’s even a built-in discount. But most people will never realize any of this.
In 1933 President Franklin Delano Roosevelt signed Executive Order 6102, which made it illegal for US citizens to hold gold bullion.
Prior to that order, the $20 bill was essentially a warehouse receipt for a one-ounce gold coin. Prior to the Federal Reserve Act of 1914, the $20 bill actually told you this.
After Executive Order 6102, $20 notes weren’t allowed to be exchanged for gold anymore. Americans couldn’t legally own or trade gold as money and savings, only as jewelry or collectible coins.
A year after making monetary gold ownership illegal, FDR revalued ...
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Special report: China flexed its muscles using U.S. Treasuries
(Reuters) - Confidential diplomatic cables from the U.S. embassies in Beijing and Hong Kong lay bare China's growing influence as America's largest creditor.
As the U.S. Federal Reserve grappled with the aftershocks of financial crisis, the Chinese, like many others, suffered huge losses from their investments in American financial firms -- from Lehman Brothers to the Primary Reserve Fund, the money market fund that broke the buck.
The cables, obtained by WikiLeaks, show that escalating Chinese pressure prompted a procession of soothing visits from the U.S.Treasury Department. In one striking instance, a top Chinese money manager directly asked U.S. Treasury Secretary Timothy Geithner for a favor.
In June, 2009, the head of China's powerful sovereign wealth fund met with Geithner and ...
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GCI Financial Daily Market Commentary: 02/17/2011
USD
A lack of news flow ensured a relatively subdued Asia session, although the dollar still weakened against most of its G10 peers. EURUSD traded 1.3536-1.3609, USDJPY 83.50-83.86. Asian stocks continue to make gains, as risk appetite firmed despite further tensions in the Middle East. Earlier, the S&P 500 closed +0.63% ahead, and has now doubled since the mid-crisis intra-day low of March 2009. US data was mixed. Housing starts surprised to the upside despite bad weather, though building permits dropped as expected. Industrial production unexpectedly fell -0.1%, and PPI and core PPI both rose more than anticipated, though our US economists caution on any extrapolation as January has usually shown exaggerated swings.
The FOMC minutes showed diminishing downside risks, however, the " ...
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China launches yuan options to support FX flexibility
(Reuters) - China will launch yuan options trading, the government said on Wednesday, a market that will help pave the way for a more flexible exchange rate but will be limited in scope at first.
The move is Beijing's boldest attempt yet to give firms more hedging tools to cope with steady yuan appreciation as well as uncertainties in global currency rates.
"This marks an important step in the development of the yuan derivatives market," said Zhao Xijun, senior economist at Renmin University in Beijing. "The exchange rate regime will become more market-oriented and the yuan will be more flexible."
The foreign exchange regulator said that onshore options trading will be restricted to firms and banks using it for hedging purposes rather than for speculation about currency fluctuations.
...
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Hectic and busy day in Europe with growth, and inflation under spotlight
A new obstacle emerged in the path of European recovery where inflation now joined forces with the debt bubble in attempt to cripple recovery and force another contraction just like the one witnessed in UK.
Recent inflation data showed that prices accelerated last month beyond control, where UK’s inflation levels spiked at 3.7%, while Euro-Zone’s inflation levels jumped to 2.4 percent. Both are NOT consistent with ECB and BoE’s price stability target on the long-run.
UK released its PPI reports last week, showing further incline in inflation in January, meanwhile, today’s CPI and RPI data from the Royal country may add more worries to investors where analysts project a 4.0 percent rise in prices in January, from December’s 3.7 percent increase.
The Core CPI is forecast to reach 3.1 ...
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EUR - That Sinking Feeling
The Week Ahead
Highlights
* EUR - That sinking feeling
* All eyes on Mervyn King
* The outlook for USD/JPY looks promising
* RBA expectations driving the Aussie
* Technicals suggest a short term bottom for the buck
* Key data and events to watch next week
EUR - That sinking feeling
European peripheral debt concerns are back front and center, with Portuguese bond yields hitting new Euro-era all-time highs and CDS rising again. Yet there doesn't seem to be any single development behind the renewed tensions. If we were to suggest the primary cause, it would be our view of a slow-developing sense of disappointment over EU negotiations on strengthening the EFSF (the current stabilization fund for peripheral bailouts, to be replaced by the so-called permanent crisis ...
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