Tag Archives: yuan devaluation

SoT – Jeff Brown (in Beijing): China Confronts Western Thieves Led By Soros

In 1979 the European Exchange Rate Mechanism (ERM) – a precursor to the euro – was established.  The ERM created a semi-fixed currency exchange rate mechanism among the European members of the system which was anchored to the Deutsche Mark.    By 1992, less than two years after England joined the ERM,  it was obvious to interested observers that the British pound had become significantly overvalued relative to the Deutsche Mark.

At the time, England had a large current account deficit and was experiencing a nasty recession. Although he British Government was committed to maintaining the BP’s peg to the Deutsche Mark, George Soros, in what became billed as “the trade of the century,” began to accumulate a large bet against the pound.  After wasting billions in taxpayer funds trying to support the pound, the British Government eventually capitulated by exiting the ERM and the market forced a nasty revaluation of the pound.   Soros ended up netting over a billion dollars in profits.  (For the record,  it has been speculated with valid source documentation that the Rothschild family was behind Soros’ attack on the British Government/Bank of England).

Let this be a lesson in price-fixing, as the only thing accomplished by the British Government’s endeavor was a massive transfer of wealth from taxpayers to George Soros & Co. and likely even more to the Rothschild family.  Price fixing markets always fails eventually.

Fast-forward to the present and we find Soros now attempting to profit from what looks like a methodical, strategic devaluation of the Chinese renminbi (yuan) by the Chinese Government.

But there’s a big difference between England circa 1992 and China 2016.  China is running a massive trade surplus, it’s the world’s largest importer/exporter and likely sports the world’s biggest GDP.  It’s financial condition is reinforced by $3.3 trillion in foreign currency reserves.   It can be argued that China is on the ascent to become the next world superpower.

Perhaps the most interesting “wild card” held by China is its Central Bank hoard of gold. The $3.3 trillion in forex reserves does not include the market value of the China’s State-owned gold.  Alasdair Macleod has produced compelling arguments which suggest that China could hold well in excess of 20,000 tonnes of gold, nothwithstanding the current amount to which China publicly admits.

Most analysts who have been observing China for at least over a decade have been wondering how it would be able to unload its massive Treasury holdings, which at one point were around $1.4 trillion.   The market turmoil surrounding China’s intermittent currency devaluations has stirred up a flight to safety bid for Treasuries in the global markets into which China has already unloaded a couple hundred billion dollars worth of Treasuries.  Is China selling dollars to support its currency or is there a more clever strategy at work?

China likely is not going to wait around to be a bagholder of a trillion dollars in eventually worthless Treasuries.  Enter George Soros who announced recently with much bravado that he was betting big against the yuan.  The Chinese Government, via the State-owned People’s Daily newspaper issued a frank warning to those who are openly speculating against the yuan.  Clear it was a shot across the bow back at Soros.

The Shadow of Truth hosted Jeff Brown (China Rising blog) – who has been living in Beijing for the 5 years and is working on Xi Jinping’s diaries – for an interesting discussion about China’s current affairs as they relate to the attack on its currency by Soros.  At the very least there is a lot more going on behind the scenes with China’s moves in the markets than meets the eye and Jeff helps shine a light some of China’s motives.

The Ongoing Global Financial Markets Collapse

Video courtesy of Eric Dubin’s The News Doctors

Remember the economic catch phrase, “when the U.S. sneezes, the world catches a cold?” The idea being that the U.S. is the economic engine of the world and if the U.S. economy tanks, the global economy tanks.   The current “vogue” in the financial media is to blame the incipient  melt-down in global stock markets on China’s move to devalue its currency.

But nothing could be further from the real truth.  China’s devaluation process may well be the proverbial “straw breaking the camel’s back.” However the real causation of the global economic meltdown is a result of the world’s fiat-currency-based Central Banking system losing the ability to control the natural market forces which are acting to destroy the financial market bubbles and economic excesses that have been allowed to breed since the dollar became the global reserve currency.

The reasons that the U.S. stock market looks like it may be starting to collapse are both simple and complicated.  Craig “Turd Ferguson” Hemke of the TF Metals Report and I discussed some of the real factors which have conflated to “prick” the global financial/economic bubble:  stocks, bonds, real estate, derivatives, paper currencies – anything connected catastrophically to the global paper fiat currency “Frankenstein” that was born with the Bretton Woods Agreement in 1947.

You can listen to our conversation here:   TF Metals Report or by clicking below:

This graph is part of our conversation in which we discuss why the sell-off in the U.S. stock and credit markets may be attributable to  an unwinding of the yen/yuan carry trade – Untitledwhich no one on Wall Street/CNBC/Bloomberg/etc has mentioned:

Note that the yen has appreciated significantly more than the dollar vs. the yuan since China’s currency deval began.  How come no one on Wall Street is discussing this?

My latest issue of the Short Seller’s Journal will be released Sunday evening.  You can subscribe by clicking here:  Short Seller’s Journal   This week will feature a section which outlines a strategy and the pros/cons for using put options to replicated shorting a stock.

Red Swan At Night Is The Short Seller’s Delight

UPDATE:   My “Quick Hit” pick for the week is killing it.  The stock is down 12.7% outright from its December 31 close.  My put option pick on this stock is now up 50% based on where it could have been bought Monday morning and the last point of trade today.

China seems intent on popping the global fiat currency and debt bubble.  It seems that China’s moves to devalue the yuan are causing a bit of a stir in the global markets so far this week. This could be the “Red Dragon” version of the infamous Black Swan for which everyone has had their eyes peeled.

The S&P 500 dumped 26 points today (1.3%) after China’s yuan deval triggered a 7% limit-down drop in the Shanghai Stock Exchange and China pulled the plug on the electricity to the exchange.  Ditto tonight.

I love the way the financial media wants to blame the U.S. stock market woes on China. The truth is that the U.S. economy is collapsing on its own merits.  Macy’s did not announce dismal holiday sales and 4,000 more job cuts today because China’s economy is slowing down.  The price of oil is the “tell” on the world economy, including and especially the U.S. economy.

UntitledThe price of oil has now crashed below its low from the 2008-2009 recession.  It’s at its lowest price since before Bush Government invaded Iraq.  The plummeting price of oil is not China’s bad.  The U.S. is, by far (18mm barrels/day vs. 10mm for China),  the largest consumer of oil in the world.  The plunging price of oil is due to the plummeting demand from the world’s largest buyers of oil.

Subscribers to my Short Seller Journal who took advantage of the two ideas in this week’s weekly report are up 5.6% and 7.8% on each idea vs. their close on December 31.  One of the ideas should eventually be a home run and is a great way to play Wall Street’s demise. The idea that’s up 7.8% was a “Quick Hit” idea which I thought would sell-off this week with just a little weakness in the market because it had run up on nonsense the week before. The put option play I recommended is up about 30% based on where it could have been purchased Monday morning and the closing bid side today.

Click here to subscribe: SubscriptonGraphic SHORT SELLER’S JOURNAL.  It’s a weekly report delivered to your email on Sunday evenings.  I present two ideas per week and include some commentary that you find on my blog.

SoT – Jeff Brown From Beijing: The Rise Of China And The Collapse Of The West

“The Americans are very good at using future money – the Chinese are good at saving.”  – Alibaba founder, Jack Ma at a UN meeting led by Chinese President, Xi Jinping

In China gold is money.  Every bank in China sells gold and silver right at the teller window. The savings rate of the Chinese population is 50% and the favored store of wealth is gold held in bank safety deposit boxes.  In fact, Jeff Brown quickly discovered after his first gold purchase that every safety deposit in Beijing was taken.

When you go into a bank here they hand out brochures that explain the Shanghai Gold Exchange to the people.  If you buy your gold through the Shanghai Gold Exchange you are exempt from the value-added tax.  –  Jeff Brown in Beijing, Shadow of Truth

The western media propaganda machine has inundated the airwaves with countless misleading and false reports about the Chinese economy.

It’s so surreal to hear about Armageddon and implosion [in China] because of the stock market.  That affects maybe 6% of the population that is invested in the stock market here…outside of the stock market correction things are just thriving over here…the manufacturing economy is down but the service economy booming here  – Jeff Brown, Shadow of Truth

Although the manufacturing sector of the economy in China has slowed down considerably, it’s still producing economy growth.  However, the service economy is exploding in ways that is not reported at all by the western media.  Furthermore, the manufacturing output slowdown has been caused by a dramatic decline in exports, which reflects the extent of the economic contraction occurring in Europe and the United States, China’s two largest export markets.

With regard to China unloading $200 billion recently in U.S. Treasuries, the western media has once again promoted highly misleading reports that China was dumping to raise liquidity in order to support the yuan.  But conveniently overlooked by everyone in the west is the fact that China committed and recently funded $150 billion for the Asian Infrastructure Investment bank ($50 billion) and $100 billion for the new BRICS bank.

And lets put this in perspective.   China is sitting on approximately $3.4 trillion in foreign exchange reserves, $1 trillion of which is Treasuries.  It was only a matter of time before China decided to diversify away from the U.S. dollar component of its FX reserves. Furthermore, contrast this the paltry $30 billion in foreign exchange reserves of the United States.

They were very upset when the United States snuffed China from putting the RMB into the IMF Special Drawing Rights you could just “feel” the anger over here among the leadership.  That’s when they announced that bogus amount of PBoC gold holdings and then a week later they came out and devalued the Renminbi.  – Jeff Brown, Shadow of Truth

Jeff Brown in Beijing provided us with an absolutely fascinating, must-hear perspective of the incredible proliferation of the middle class in China and the booming local economies all throughout the country.

“There’s so much going on that is not reported in the west that it’s unreal” – Jeff Brown, Shadow of Truth

Please visit Jeff’s website 44days.net and find his articles on the link to his blog: LINK

SoT #56 – Craig Hemke: The Existing Global Financial System Is A Ticking Time Bomb

Market history tells us that regardless of the Central Banks’ intentions to drive the market higher, the overall market can overwhelm the Central Banks. Last Monday [August 24th Dow 1,000 point intra-day crash] is an example of that.  – Craig “Turd Ferguson” Hemke on Shadow of Truth

The Plunge Protection Team’s (Fed + the Treasury’s Working Group On Financial Markets) repeated attempts to keep the massive U.S. asset bubbles pumped have created an extreme degree of moral hazard in the form an unprecedented degree of capital misallocation.  The poster child of this is the U.S. stock market.

However, an even more horrifyingly extreme misallocation of capital is the private equity financings of Silicon Valley “unicorns.”  Snapchat, for instance, was recently capitalized at $16 billion despite having a estimated annualized revenue of $1 million.  That’s 16,000 times revenue.

When this insanity implodes, the collateral damage will rip huge holes in pensions funds, which having been tripping over themselves to shovel money at the big private equity firms.   To call what these sleazy NYC financiers are doing  with your retirement money a “moral hazard” is misuse of that term.  It’s more like a flagrant disregard for morality and ethics.

The Chinese recognize that the debt-based, dollar-based global reserve system wasn’t going to go on forever…as the Central Banks have tried to prop up the existing system, which is just a dead man walking, the Chinese have been, for the last seven years, preparing an alternative system for when the existing debt-based system finally collapses.  – Craig Hemke

The Wall Street propagandists, via their mainstream financial media hand puppets, are casting the blame on the recent volatility in the global equity markets on the Chinese.  It has nothing to with the inevitable unwinding of the global asset bubbles which have been inflated primarily with western Central Bank money printing, the amount of which has been multiplied many times over through a jungle-gym apparatus known as carry-trades and OTC derivatives.

Rory Hall of The Daily Coin and I hosted Craig Hemke of the TFMetalsReport on the Shadow of Truth to hear his thoughts and analysis on the key issues affecting the global financial system,  eventual collapse of the U.S. dollar, and the transition of economic and geopolitical hegemony from the west to the east.

China Is Headed For The Exits

A few years ago, we opined that Bernanke and his ilk created a stock market Frankenstein with their desire to generate ‘the wealth effect.’ We also regularly stated that eventually, markets stage violent revolts against central planning and command control. The revolt has only just begun.  – The King Report, Thursday, August 27

I have maintained that part of China’s “hidden” agenda in devaluing its currency is to let the air out of its bubbles ahead of every other asset bubble-infested system – the U.S. assets bubbles being the biggest (ignore the western propaganda slamming China).

It was revealed yesterday that China is now unloading its massive U.S. Treasury bond holdings.  The entire astute segment of the financial has been wondering for years when and how this would occur.  China has even given the U.S. Government a “courtesy call:”  China Selling Treasuries.

Rather than re-invent the wheel on my analysis, here’s some comments I made in an email exchange with Jay Taylor, who asked me if yesterday’s and today’s stock market action was a sign that the criminals running our system had “won:”

I’m trying to figure out why everyone is pegging Sept 23 as a key date.  If you go to Google maps and type in 09/23/2015, the map zeroes in on CERN – the European nuclear research facility.  I didn’t even know you could type dates in to Google maps. I’m wondering if that’s Google screwing around with the conspiracy crowd.

No, history tells us that the bad guys eventually always lose.  It’s just that they keep reappearing over time – it’s the human condition.  I personally think that China is letting the air out of its bubbles ahead of the crowd.  Now we see they are starting to really unload their Treasuries. I believe part of the reason that China is devaluing is to use this as “cover” for its desire to unload as much of their massive Treasury holdings as possible without trashing the market or losing the Fed’s “bid” for Treasury paper.

You won’t see this analysis in any of the mainstream media, or even a lot of the alternative media, because most of these “information purveyors” just regurgitate the script Wall Street puts in front of them or drool out the obvious explanations.  But we know that China never puts a plan into motion without a lot of planning and forethought.  There’s a lot more going on than the obvious.  Most “analysts” and commentators either have a very rudimentary understanding of economics and how markets really operate or they knowingly prefer to spoon-feed the public their snake-oil propaganda.

China was the first to “jump out of its seat in the crowded theatre” and head for exits, before the crowd see the inferno that’s been ignited.  It’s classic “prisoner’s dilemma” behavior.  Their doing this will likely mean that they suffer the least when the real brown stuff hits the fan blades.  The U.S. keeps trying to inflate its bubbles.  Look at yesterday/today.  Look at that absurd GDP “revision.”  The U.S. is interminably pumping money into the asset bubbles and churning out Orwellian propaganda.  It will end a lot worse for the United States than for China.

I think the market action starting last Friday is the beginning of the end for this era.  Just a question of how long the U.S. criminals can keep kicking that can.

SoT #55 – Peter Schiff: When The Dollar Collapses China Won’t Be There To Catch It

Paper money eventually returns to its intrinsic value – zero. – Voltaire

The value of fiat currencies is based on faith – faith in the entity that is issuing the currency. In the case of the dollar, it’s issued by the Treasury and backed by the “full and faith and credit of the U.S. Government.”

In reality the dollar is simply a debt instrument which the Government issues to the public. There is no real objective measure of the dollar’s value.   But let’s examine the “credit” of the U.S. Government.  The Government has issued $18 trillion in Treasury debt.  When the debt ceiling limit eventually is raised, that number will likely quickly jump north of $19 trillion.  It also guarantees about $7 trillion Fannie Mae and Freddie Mac debt.  It also backstops about $1.3 trillion in student debt.

These are just the “funded” liabilities issued to the parties who loaned this money to the Government.  There’s also an estimated $200 trillion of “unfunded” liabilities in the form of promises to make payments associated with Government pensions, entitlement programs, Social Security, etc.

Ultimately headed for a dollar crisis – next time when the dollar falls it will fall vs. the yuan. The next currency crisis will be much worse because when the dollar falls, China won’t be there to catch it.  – Peter Schiff on Shadow of Truth

The average lifespan of a fiat currency over history is 27 years.  The British pound sterling has lasted 300 years but it was originally backed by 12 ounces of silver per unit.  The pound is now worth .5% of its original value.  The U.S. dollar as a fiat currency has lasted, so far, 44 years since Nixon removed entirely the gold-backing.  Since the Fed was founded in 1913, the dollar has lost over 97% of its value.  (Note: the value of fiat currencies are measured vs. gold).

The Shadow of Truth hosted Peter Schiff today.  One of the primary topics was China’s move to begin devaluing currency and to “de-peg” it from the dollar.   Historically, when the dollar plummeted – see 2002 – 2009, for instance – China had to buy dollars and sell yuan in order to maintain the $/yuan peg.  Over the years this cost China a lot of money but it enabled China to continue building its export economy.

The purpose of de-pegging is part of a process that has been initiated by China to prepare the world for a post-U.S. global economy, as we discussed in our China Braces For Impact SoT Market Update.  The next time the dollar starts to head lower, China will let the dollar fall…

…This will also mean that the biggest foreign buyer of Treasury bonds will likely be sitting on its hands when deteriorating U.S. finances force the Treasury to begin issuing trillions of new bonds annually. So when the U.S. needs China’s help the most, it will be unwilling to provide it.

SoT – Market Update – Special Guest Kim McAvoy: Vox Populi

What’s happening now is all just fluff compared to what’s going to happen.  – Kim McAvoy, voice of the people on Shadow of Truth

It’s beginning to look like the beginning of the end.  Some sort of motivation beyond what’s obvious prompted China to start devaluing the yuan and further remove the yuan’s peg to the dollar.  This seems to be the end of the long road that has been traveled by the proverbial “kicked” can.

In turn the yuan devaluation event seems to have undermined the Fed’s ability to keep the S&P 500 propped and bubbly.  After the last three days of selling on the NYSE it looks like real fear may have finally gripped the system.  Today (Thursday, August 20) looked particularly ugly, as the Fed was unable to keep the S&P 500 from falling hard despite several attempts to jump start a rally.

Similarly, gold has had an impressive 11-day run in which it’s rallied over 6%.   Not too bad for something Rupert Murdoch’s “Wall Street Journal” referenced as being analogous to a Pet Rock.  While the mainstream media apologists and analytic charlatans will attribute gold’s move to “short covering,”  we believe the fundamental driver of this rally has the unmistakable odor of “flight to safety.”

We hosted a special guest on the latest Shadow of Truth “Market Update.”  After exchanging a series of emails with her, we got to know Kim and wanted to host someone who could represent “the man on the street” voice.  As Rory stated:

I think it’s important for people – in particular people that are new [to the world of truthseeking[ to hear what real live people are doing; not just from you and I – everybody can hear what you and I are doing. Let’s hear from somebody who nobody knows and is out there making it happen [seeking facts and preparing for what’s coming].

SoT #52 John Embry: The Public Has Been Set Up For Slaughter – It Doesn’t Have A Chance

One of the things that has bothered me a lot is the cognitive dissonance amongst – not the public, the public doesn’t have a chance, they’re being lied to constantly by the media – but what I find distressing is the cognitive dissonance amongst financial professionals. – John Embry on Shadow of Truth

The precious metals sector has been under violent manipulative attack since gold and silver peaked in price in 2011. The western Governments and Central Banks had no choice but to attack real money because it would be the only way that they could continue implementing their ultimately catastrophic monetary policies in order to prevent systemic collapse.

But as Ayn Rand asserted a long time ago, you can ignore reality but you can’t ignore the consequences of ignoring reality. It is likely that the move by the Chinese to begin devaluing their currency is an acknowledgement of this reality and it represents China’s attempt to get a head start on the rest of the world in order to minimize the consequences it will suffer relative everyone else.

The surprise move by the Chinese to devalue the yuan is a “signal event” because basically it’s going to lead to currency debasement everywhere – it’s going to expose everyone else. What could be a better advertisement for gold and silver?…When this finally explodes [gold] it’s not going to go up $50 or $100 bucks it’s going go up massively because the whole paper Ponzi scheme will be exposed. – John Embry

We have never in history witnessed extreme systemic imbalances in the world financial economic system to the extent that they are now occurring.  As an example, Mr. Embry referenced the fact that, “The U.S., Japan and Canada have 52% of the Federal funded debt in world and they have only 7% of the population base.”

One of the things that has bothered me a lot is the cognitive dissonance amongst – not the public, the public doesn’t have a chance, they’re being lied to constantly by the media – but what I find distressing is the cognitive dissonance amongst financial professionals. – John Embry

Finally, there’s a massive trade to be had in the gold and silver stocks, assuming our worse scenario does not play out. That is to say that the mining stocks have never been cheaper relative the price of gold and silver than they are now.  In fact, I would venture to say that it might be the most undervalued market sector in history right now.

Of course, the “worst scenario” is the scenario that hits our system in which you wished you were watching the collapse from another planet…

How Much Longer Can Fascist Monetary Fraud Continue?

Jay Taylor invited me back on his “Turning Hard Times Into Good Times” internet radio show on VoiceAmerica.com.  The topics covered include the China’s currency devaluation and what it means, the proliferation of U.S.-originated media propaganda false flags and the growing shortage of physical silver.

One thing is certain China has placed a lot more forethought and planning into this move than has been put into the analysis being regurgitated ad nauseum by the Sesame Street characters who masquerade as Wall Street economist and financial media analysts.  Jay and I try dig beneath the obvious and discuss what might be going on.