The Name of The Game III - Redux
Pre QE and still prescient...
Effects of Lowering Rates
In the short term, a temporary increase in exports for the debaucher occurs, but that advantage is short lived. In the long term, global imbalances cannot be addressed this way.
In the long term, higher public debt levels, higher business trade and government budget deficits, division of labor, reduction of the manufacturing base, financial speculation (money shuffling), and asset hyperinflation, all result. These occur over several phases of the game, which are detailed in Part 4.
Over time, when the Fed lowers rates and debauches the dollar, the following occurs in foreign economies: Foreign currencies rise against the dollar. The cost of all commodities based on the dollar and inputs (labor and materials) rise. Countries with rising currencies and costs experience a decrease in exports. Foreign production slows, and eventually the economies weaken.
In this age of global interdependency, this can happen to many countries in unison, and is referred to as, a global economic slowdown. As we will revisit this fact, bear in mind that, economic slowdowns are well anticipated and planned events.
In a global market, based on floating currencies, large domestic or multi national producer’s are subject to Forex arbitrage (currency and bond). Central banks and hedge funds can manipulate Forex arbitrage to the producer’s detriment.
How powerful is Forex arbitrage? By manipulation or by miscalculation of Forex arbitrage, a large producer benefiting from global labor arbitrage, can easily be run into the ground. Case in point, Ford and GM.
In fact, the same fate can occur to a centrally controlled non-capitalist country that pegs it currency to the fiat currency. Especially so, if this country does not behave properly and participate in the Forex arbitrage necessary to fund the game. A short list of recent victims of Forex arbitrage: Chile, Brazil, Mexico, Argentina, Thailand and Japan. We will revisit Forex arbitrage in Part 5.
When the Fed lowers rates, money becomes cheap and plentiful. The dollar has been debauched, prices have risen, and it takes more dollars to maintain purchasing power.
As explained in Part 2, the Treasury prints up more dollars. This is often referred to as “stoking” the economy through liquidity. The Fed sells the new money to the member banks. This profits the players (financial institutions, central banks and large investor pools) engaged in Forex arbitrage. Money supply and interest rates are two of the tools that the players utilize.
The stage is set and the Game is on. In Part Four we will discuss what happens in the phases of the Game.
Effects of Lowering Rates
In the short term, a temporary increase in exports for the debaucher occurs, but that advantage is short lived. In the long term, global imbalances cannot be addressed this way.
In the long term, higher public debt levels, higher business trade and government budget deficits, division of labor, reduction of the manufacturing base, financial speculation (money shuffling), and asset hyperinflation, all result. These occur over several phases of the game, which are detailed in Part 4.
Over time, when the Fed lowers rates and debauches the dollar, the following occurs in foreign economies: Foreign currencies rise against the dollar. The cost of all commodities based on the dollar and inputs (labor and materials) rise. Countries with rising currencies and costs experience a decrease in exports. Foreign production slows, and eventually the economies weaken.
In this age of global interdependency, this can happen to many countries in unison, and is referred to as, a global economic slowdown. As we will revisit this fact, bear in mind that, economic slowdowns are well anticipated and planned events.
In a global market, based on floating currencies, large domestic or multi national producer’s are subject to Forex arbitrage (currency and bond). Central banks and hedge funds can manipulate Forex arbitrage to the producer’s detriment.
How powerful is Forex arbitrage? By manipulation or by miscalculation of Forex arbitrage, a large producer benefiting from global labor arbitrage, can easily be run into the ground. Case in point, Ford and GM.
In fact, the same fate can occur to a centrally controlled non-capitalist country that pegs it currency to the fiat currency. Especially so, if this country does not behave properly and participate in the Forex arbitrage necessary to fund the game. A short list of recent victims of Forex arbitrage: Chile, Brazil, Mexico, Argentina, Thailand and Japan. We will revisit Forex arbitrage in Part 5.
When the Fed lowers rates, money becomes cheap and plentiful. The dollar has been debauched, prices have risen, and it takes more dollars to maintain purchasing power.
As explained in Part 2, the Treasury prints up more dollars. This is often referred to as “stoking” the economy through liquidity. The Fed sells the new money to the member banks. This profits the players (financial institutions, central banks and large investor pools) engaged in Forex arbitrage. Money supply and interest rates are two of the tools that the players utilize.
The stage is set and the Game is on. In Part Four we will discuss what happens in the phases of the Game.
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