Bankers' Trillion-Dollar Crime Scene

U.S. is Currency War's "Tomb Maker": China Economist

October 14, 2010

Reuters - The United States fired the first shot in the currency war and the rest of the world must be on guard for its deliberate strategy to devalue the dollar, a Chinese economist said in an official newspaper on Thursday.

In a front-page commentary in the overseas edition of the People's Daily, Li Xiangyang described the United States as the conflict's "first maker of tomb figures," a Chinese idiom that means someone who creates a bad precedent.

Li, head of the Asia department at the Chinese Academy of Social Sciences, a top government think tank, said continued intervention in currency markets by developed economies would deal a blow to global economic recovery.

Chinese leaders have warned before that loose monetary policies in the United States pose a serious challenge for emerging markets, but rarely in such strident language, a window onto the rising anger in Beijing.

"The dollar's depreciation may appear to be market-driven. In reality, it is a depreciation colored by very strong, deliberate actions," Li said in the paper, which serves as the chief mouthpiece of China's ruling Communist Party.

The overseas edition of the People's Daily is a smaller offshoot of the domestic edition.

Li said the Federal Reserve's announcement that it might soon launch another round of quantitative easing by buying bonds and other financial assets had been the key factor pulling down the dollar.

The motives were plain enough, he said.

Without a weaker dollar, the United States would have no hope of meeting President Barack Obama's goal to double exports in five years, Li said.

Dollar depreciation will also serve longer-term interests by generating inflation and easing the debt burden that the financial crisis dumped on the U.S. government.

"If the global financial crisis was about nationalizing private debt, then in the post-crisis period the urgent need of the United States is to internationalize its national debt," he said.

Gold Hits Record Highs as Dollar Wilts

October 14, 2010

Reuters - Gold rallied to fresh record highs in Europe on Thursday as the dollar slid to its lowest this year versus a basket of major currencies, boosting interest in the metal as a haven from currency market volatility.

Gold retreated as the dollar index lifted from lows, but remains firmly underpinned, analysts said.

Spot gold hit a high of $1,387.10 an ounce and was bid at $1,377.50 an ounce at 1435 GMT, against $1,370.90 late on Wednesday. U.S. gold futures for December delivery were up $7.90 at $1,378.40, having peaked at $1,388.10 an ounce.

Gold prices have risen more than 25 percent this year as the dollar has been battered by expectations that U.S. policymakers will pursue an increasingly loose monetary policy involving quantitative easing to stimulate economic growth.

Standard Chartered analyst Daniel Smith said dollar weakness had been a major driver of the recent run higher in gold.

"In the last day or so we've seen evidence that we are going to see more weakness in the dollar in the next week or two," he said. "We are breaking down through some key levels."

Silver prices also rode higher on gold's coat-tails, reaching a fresh 30-year high at $24.90 an ounce before easing back to $24.53 an ounce against $23.89.

The dollar index -- which measures the dollar's performance against a basket of six major currencies -- hit the year's low on Thursday after Singapore widened its currency's trading band, piling more pressure onto the struggling greenback.

Investors are continuing to dump the U.S. currency on expectations the Federal Reserve will start further money-printing next month, and as tensions rise over the increasing volatility of the foreign exchange markets.

"Although QE expectations are an important element of the rally, currency disputes are also a prime driver of gold prices," said HSBC's Jim Steel in a note. "The recent IMF meeting saw the public airing of sharp disagreements between China and the United States on currency policy."

"The EU has seconded U.S. calls for China to liberalize its exchange rate polices," he added. "Additionally, emerging market nations including Brazil, India, and Thailand have imposed taxes on capital inflows or sought to limit inflows, in an effort to stem currency appreciation."

While these tensions persist, gold is likely to be well supported, he said ...