Currency Crimes And Dollar Debasement

When the pipeline problems go away and Europe dodges another credit
crisis bullet, the oil market once again will focus on the dollar and
the euro. You should not be surprise because all along the dramatic
moves in the price of oil has been, in large part, a currency game.

Oil prices have been pushed up and down as the risk trade has come on
and the risk trade has come off. It has tanked as worries in Europe
raise fears of demand destruction and a flight to safety in the dollar
and then soared when some bankrupt European nation gets its latest
printed cash infusion. Oil has found new life on quantitative easing
and renewed vigor as the global infusions of cash have improved
economic numbers and oil demand expectations. The dollar, the global
currency of all commodities that really matter, has been quite the
center of conversation especially as President Obama welcomes
China's Hu Jintao, leader of China and proud manipulator of its
local currency the yuan or renminbi. Mr. Hu Jintao was proud to say
that the global currency system was a thing of the past. The Chinese
who were aghast that our Federal Reserve would print more money
without their approval because as they say it weakens dollars at the
expense of other countries' exports has no qualms against manipulating
its own currency, sucking the lifeblood out of the global economy. Mr.
Hu Jintao says that, "The monetary policy of the United States has a
major impact on global liquidity and capital flows and therefore, the
liquidity of the US dollar should be kept at a reasonable and stable
level." Well if our currency system is such a thing of the past then
why does it upset him so? When China wants to manipulate their
currency it is ok because when they do it they say they are developing
nation. Yet the USA is developed and therefore we should allow the
Chinese to steal from us and the rest of the world I guess. Hu Jintao
tells us that China has made important contribution to the world
economy in terms of total economic output and trade, and the RMB has
played a role in the world economic development, but making the RMB an
international currency will be a fairly long process. Like until they
stifle all competition. But what makes him really angry is how QE2 and
Ben Bernanke one upped him on his quest to manipulate his currency to
economic nirvana. QE2 was the answer sending a strong message to the
currency manipulative Chinese that 2 can play the currency
manipulation game. QE2 exported inflation to China and helped
rebalance a post recovery global economy that was tilted decidedly in
China's favor. The Chinese now must focus internally on cooling down
its overheating economy and that may mean more dramatic steps to raise
interest rates or even allow their caged RMB tiger to float. The
Chinese at this time lack the courage to be a real economic leader by
allowing the market to determine the real value of their currency. Hu
Jintao can bash the dollar (or should I say debase it) all he wants
but it was his country's peg to the dollar that allowed it to emerge
from the economic dark ages.

Source: Fxstreet.com