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Europe’s Top Financial Cop: White House Not Doing Enough To Curb Banker Bonuses

by Shahien Nasiripour on June 1, 2011

Huffington Post…

WASHINGTON — The U.S. isn’t doing enough to curtail excessive banker bonuses, Europe’s top financial regulator told the Obama administration in a recently-disclosed letter. “I think you agree with me that ‘bankers’ bonuses’ is a matter that continues to cause public outrage,” Michel Barnier, the European commissioner overseeing finance, wrote to Treasury Secretary Timothy Geithner. “Getting this matter right is key to restoring our citizens’ confidence in the financial system — and ultimately — their confidence in the public authorities regulating the financial institutions.” Lavish compensation paid to traders and bankers during the housing-driven bubble fueled risk-taking at the nation’s largest financial firms, experts have said. Those risks eventually led to the collapse of storied firms, the near-collapse of the financial system and the most punishing economic downturn since the Great Depression. Yet bonuses were never recouped. Individual traders made off with tens of millions of dollars, and chief executives of failed firms and those rescued by taxpayers left with hundreds of millions. To prevent further occurrences, the European Union moved to restrict cash bonuses for executives and risk-takers at banks and other financial institutions. The U.S., however, has been loathe to do so, and is moving slowly in implementing the resulting rules enacted into law last year, charged Barnier, as the Financial Times first reported. U.S. regulators are leaving “too much latitude” to financial firms, which allows them to potentially “circumvent globally-agreed principles,” Barnier wrote to Geithner. Two years ago, leaders of the 20 leading industrialized nations agreed to curb bonus-fueled risk-taking during a summit in Pittsburgh. But while Europe charged ahead with creating hard rules restricting specific pay packages, the U.S. approach gives bank regulators great latitude in determining what’s appropriate — a power such organizations have held since 1995. Regulators have also lumbered along in creating rules designed to rein in risk-taking, having yet to formally implement pay rules lawmakers called for in passing the financial reform bill known as Dodd-Frank. U.S. bank and securities regulators proposed a rule earlier this year that calls for firms to defer at least 50 percent of executive officers’ annual incentive-based pay (commonly known as bonuses) for at least three years. It also seeks to prohibit pay schemes that lead to “excessive” compensation and packages that “could lead to material financial loss.” Regulators will scrutinize the overall design of those packages, rather than individual packages themselves. But since 1995, bank regulators have had the ability to prohibit risky compensation schemes based on the premise that such packages could be an “unsafe and unsound” practice. It’s unclear whether bank overseers at the Federal Reserve, which oversaw institutions like Countrywide; the Office of the Comptroller of the Currency, which regulated banks like Citibank; and the Office of Thrift Supervision, which was responsible for AIG and Washington Mutual, ever used that authority to rein in excessive bonuses geared towards short-term profit at the expense of long-term risks. In the new proposed rules, excessive pay won’t necessarily be determined by the dollar amount. Dodd-Frank doesn’t require firms to report “the actual compensation of particular individuals as part of this requirement,” regulators wrote in their proposed rule. However, cash bonuses on Wall Street are down 39 percent since their peak in 2006, according to data compiled by New York’s Office of the State Comptroller. In Europe, banks are restricted by law when doling out cash bonuses, and as much as 60 percent of bonus payouts for “risk takers” and other senior employees must be deferred for at least three years. About half of the pay must be in the form of shares. No such requirement exists in the U.S. “Up front cash bonuses that are based on expected rather than actual performance are a key driver of excessive risk taking,” the European Parliament argues on a page of its website devoted to explaining the new rules. “Staggering payments over time and linking them to the bank’s health and actual performance should ensure that these risks are tackled.” Spokeswomen for Barnier didn’t respond to emailed requests for comment. A Treasury spokeswoman declined to comment. ************************* Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 917-267-2335.

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Europe’s Top Financial Cop: White House Not Doing Enough To Curb Banker Bonuses

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SEC Probing Whether Banks Overcharged Customers For Trades

May 24, 2011

The Securities and Exchange Commission (SEC) is probing whether two major banks made proper representations to pension-fund clients about how their currency trades would be handled and priced, the Wall Street Journal reported, citing a person familiar with the matter. The Journal said the probe is examining the currency trading activities of the two of the world’s largest custody banks, State Street Corp and Bank of New York Mellon, and whether the banks misrepresented how they intended to carry out the foreign exchange trades. Foreign exchange traditionally has been a rich source of revenue for U.S. banks, particularly custodial banks, which not only profit from buying international stocks and bonds for pension funds and other investors, but also on trading dollars into other currencies. Foreign exchange overall is a huge business, with average daily volume of $4 trillion. Earlier in May, State Street revealed in a quarterly filing it was under investigation by the SEC and also disclosed that two clients began litigation against it seeking unspecified damages, on behalf of all custodial clients that executed foreign exchange transactions through State Street. However, the regulatory authority’s investigation of BNY Mellon wasn’t previously known. Both the banks were not immediately available for comment. (Reporting by Siddharth Cavale in Bangalore; Editing by Kim Coghill) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Bipartisan Group Of Senators Targets Mortgage Servicers

May 13, 2011

WASHINGTON — Unimpressed by the recent efforts of state and federal regulators to rein in the mortgage servicing industry, a bipartisan group of senators led by Jeff Merkley (D-Ore.) and Olympia Snowe (R-Maine) introduced legislation Thursday to make it easier for struggling homeowners to negotiate with their banks. The Regulation of Mortgage Servicing Act would give homeowners seeking mortgage modifications a single point of contact at their bank, end the “dual track” process that lets banks pursue modifications and foreclosures simultaneously and require third-party review before a bank can send a family to foreclosure. In April, federal bank regulators led by the Office of the Comptroller of the Currency required the biggest banks to enact reforms nearly identical to those in the Merkley-Snowe bill. Yet Merkley told HuffPost that the OCC’s enforcement action would fail — just like the Obama administration’s voluntary Home Affordable Modification Program, which has so far resulted in more canceled than successful modifications. “Doing this with Olympia is a recognition that neither the reforms pushed by the administration in terms of encouraging the servicers to change habits, nor the settlement with OCC or the [Office of Thrift Supervision] are going to get the job done,” Merkley said. “And so we need to push hard, to say — we need teeth –- ‘You can’t proceed with foreclosure if you have not embraced single point of contact, dual track and third party review.’” Merkley said banks can disobey the regulators with impunity. Of the OCC’s order, he said, “It’s essentially voluntary. It essentially says, ‘Please do these things.’ And the servicer can hire their own person to check on how they’re doing. It hardly hardly constitutes a strong step forward.” The OCC begs to differ. “These orders are not voluntary,” a spokesman said. “They are enforceable through federal district courts, and we can impose penalties of more than $1 million a day for each day the bank is in violation of the order. The orders were signed by all of the directors of each bank, and they are individually subject to these penalties for violations.” As evidence the banks are taking the orders seriously, the spokesman pointed out that one bank — JPMorgan Chase — said it would hire some 3,000 employees to comply. And he said the OCC gets to approve the third-party consultant. Since the housing market collapsed several years ago, banks have made a habit out of repeatedly losing paperwork from desperate homeowners trying to modify their mortgages to avoid foreclosure. And homeowners who successfully start trial modifications are frequently confused and horrified to discover their banks are pursuing foreclosure while the modification process is pending. In some cases , banks even tell homeowners who’ve been making reduced payments as part of trial modification that the reduced payments are causing the foreclosure. “In terms of families calling my office, it’s the exactly the same stories we’ve been hearing for the last two years,” Merkley said. The widely reported abuses have led a coalition of all 50 state attorneys general to launch an ongoing probe that is expected to result in a settlement of some kind. Merkley’s not banking on it. “That is a mirage at this point,” he said, adding that he hoped his bill would put pressure on the state attorneys general. “Until it is signed and delivered, it is a hope.” This story was first reported in HuffPost Hill .

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Euro Extends Plunge as Rumors of Greece Abandoning the Currency Circulate

May 6, 2011

Euro Extends Plunge as Rumors of Greece Abandoning the Currency Circulate

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FOREX: Dollar Faces a Heavy Week of Event Risk, But Can GDP and a FOMC Decision Revive the Currency?

April 23, 2011

FOREX: Dollar Faces a Heavy Week of Event Risk, But Can GDP and a FOMC Decision Revive the Currency?

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Eric Ehrmann: Brazil Doubles Down on China Trade

April 20, 2011

With food and fuel prices causing inflation and strikes, President Dilma Rousseff has returned from China with over $30 billion in deals that will create some high value jobs and help steady the economy. But while the BRIC nations want to do business in local currencies, most of the government and private sector deals linked to the Dilma visit are dollar plays. Further declines in the US currency will require new intervention, complicating efforts to shift the image of Dilma’s government from the left to the center, a move that is key to attracting global capital in today’s currency war environment. The Dilma in China show was low-fi in contrast with the media circus orchestrated for President Obama’s stopover in Brazil last month. But while American consumer culture drives Brazil’s young, wired and affluent, the China deals — a mix of high tech ventures, defense and security moves and agricultural exports — are reminders of why Beijing has pulled ahead of Washington as Brazil’s top trade partner. To help solidify the foundation of the new Sino-Brazilian relationship, the governments have agreed to increase cultural programs and create what will become Brazil’s largest Chinese language training facility under the aegis of the Federal University of Porto Alegre. Although a study by Estado de São Paulo indicates that the boom under former president Lula brought 20 million citizens into Brazil’s middle class and put computers into 100 million households, team Dilma faces a tough challenge keeping up the momentum. CIA Factbook statistics indicate that income distribution actually worsened during Lula’s eight years in office, with less real wealth trickling down to working Brazilians like those in the northeast who need it most. Brazil’s income distribution, which is the worst among the BRICs, rating a GINI index of 56.7, is also the worst in South America after Colombia. For its part, Beijing has agreed to invest in Dilma’s accelerated growth programs that stabilize the lives of the majority of the population who are on the bubble of marginalization, many earning just the minimum wage of $340 a month (540 Reais). In a move that some in Spanish speaking Latin America might call vendepatria (selling the national patrimony), China now controls and buys most of soybean production in Goias State, an agricultural region the size of Germany. Beijing will invest in processing plants in neighboring Bahia State and help develop transport infrastructure to carry soy product to port. In a nation where politicians of all stripes have a quaint fondness of building highways to nowhere, it costs more to get a cargo of soy product from the Mato Grosso to the port in Parnanagua than it does to ship the same quantity from Brazil to China. China is also helping power Brazil’s growth by investing in the power grid technology for the huge Belo Monte hydroelectric project, which when completed will be the world’s third largest generation facility. Belo Monte has been a newsmaker, drawing criticism from US environmental groups and former US president Bill Clinton, among others. Ironically, International Monetary Fund chairman Dominique Strauss-Kahn, a socialist who wants to become the next president of France, has called for Brazil and China to cool down their relationship and focus on reforms, suggesting that the partnership is fueling the currency wars and unfair to other emerging economies, creating global instability among those who haven’t completely recovered from the ongoing crisis. Meanwhile, finance minister Guido Mantega has announced that Brazil will post a healthy 4 percent growth rate for the first trimester of this year. But while Stauss-Kahn evangelizes against economic nationalism from his bully pulpit, the globalist dimensions of the Sino-Brazilian gambit offer new reminders that to get more money into the hands of those who need it, it may be time to start reforming economics and stop talking about economic reform. Offering China the opportunity to lock in price stability that helps avoid food inflation, the $10 billion soybean deal does not create the value added jobs Brazil needs, masking a low-wage peasant economy stuffed in an agribusiness wrapper. And the $12 billion deal to produce and assemble components for Apple and other mobile items is heavily concentrated in the Amazon high tech free trade zone where unions have little leverage to help workers get higher wages; to help win this deal Dilma recently extended by decree the law establishing the zone for 50 years, citing strategic reasons. Foxconn, the company behind the Apple deal, while the largest exporter of mobile components and devices from the Peoples Republic of China, is actually based in Taiwan. While China-friendly, its key board members have been closely identified with US business and communications intelligence interests including Dan Mehan , a former ATT/ Bell Labs cybersecurity expert. With Dilma playing her cards in the fog of the currency wars and global equity packagers recycling weak dollars into Brazil’s inflation prone economy, one wonders whether if the big deals are trade or aid.

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Investors Wait the PPI and Jobless Claims, While BRICS Call for New International Reserve Currency System

April 14, 2011

Investors Wait the PPI and Jobless Claims, While BRICS Call for New International Reserve Currency System

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FX Headlines: Yen Gains as Currency Markets Shift to ‘Risk-Off’ Phase

April 14, 2011

FX Headlines: Yen Gains as Currency Markets Shift to ‘Risk-Off’ Phase

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US Dollar: Why is the Currency at 2009 Lows With Risk Aversion Rising?

March 19, 2011

US Dollar: Why is the Currency at 2009 Lows With Risk Aversion Rising?

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Yen Intervention Resolves Immediate Crisis, But Japan’s Economy Still Threatened

March 18, 2011

The yen eased off its all-time high Friday as the world’s major central banks lent their support, but Japan’s economic troubles are far from over, experts say. Intervention by the Group of Seven industrial countries has curbed the recent spike in Japan’s currency, and it has, for the moment, shielded the nation against what could have been a devastating blow to trade, economists say. Still, fundamental challenges remain: last Friday’s 9.0-magnitude earthquake has crippled Japan’s economy through the coming months, economists say, as factories, roads and ports lie in ruins. Currency intervention did, however, prevent a bad situation from growing worse, according to analysts. “This is exactly what Japan needed,” said Nariman Behravesh, chief economist for the financial analysis firm IHS Global Insight. “If the yen had continued to rise, the contraction might have been even bigger.” The yen hit its highest value since World War II Thursday, raising fresh concerns about Japan’s economic prospects. Investors contributed to the yen’s rise by buying the currency, expecting an expensive rebuilding process in Japan, experts said. The likely thinking behind such trades was that Japanese institutions would convert foreign assets into yen to pay for damage claims and construction expenses, a process that would strengthen the currency. In anticipation, investors piled into yen, helping drive up its value. That development posed a serious threat to Japan’s economy . Already, with factories and infrastructure destroyed, trade disruptions had prompted economists to downgrade their forecasts for the nation’s output over the coming months. With the yen strengthening, prospects seemed even worse: The goods that Japan did manage to export would be more expensive and thus less attractive to foreign buyers. Toyota , for instance, estimated that each one-yen gain that Japan’s currency makes against the dollar tears about 30 billion yen from the company’s earnings, according to Bloomberg News. Amid concerns that these trade disruptions could affect economies worldwide, international powers took action. For the first time in over a decade, leaders from the G7 nations joined together to intervene in currency markets Friday, buying dollars and selling yen in an effort to tame the yen’s rise. Immediately, investors responded. Stock markets cut recent losses, and the yen fell from its high level, hitting its lowest value against the dollar since 2008. “It’s certainly what they needed to do. We were seeing a slow economic train wreck starting to develop, with the yen appreciating as it was,” said Scott Anderson, a senior economist at Wells Fargo. “The only economic engine Japan has right now — they’re like an airplane with its last engine running — is its exports.” But it’s unclear how lasting the relief will be, economists say. The last time such a coordinated effort took place was in 2000, when central banks attempted to stop the newly created euro from falling in value. The effects, back then, were temporary. The euro ticked upward after the intervention began in late September, but then fell through much of October. After a rise late in the year, it fell again in January 2001, beginning a sustained rise only in 2002. Such interventions can change investor sentiment, but they don’t necessarily have the ability to change fundamentals, said Mark McCormick, a currency strategist at the financial services firm Brown Brothers Harriman. Central banks don’t wield nearly as much money as the foreign exchange market, he noted. “They can’t overpower the market. They don’t have the ammunition to do so,” McCormick said. “But if they’re stealthy and they do it in an intelligent way, they can out-craft the market.” In this case, that may be what’s needed. The yen’s rise wasn’t being driven by fundamental changes, experts say. Rather, investors were anticipating developments that hadn’t yet occurred. In order for the effects of the central banks’ actions to last, investors will likely have to believe that any rise in the yen stemming from the reconstruction process will be offset by monetary stimulus. In essence, if the intervention is widely perceived to be working, then it will be working. But even if the central bank intervention succeeds, challenges for Japan’s economy will remain. Leading economists maintain a bleak outlook for Japan’s next several months. This week, Wells Fargo cut its forecast for Japan’s second quarter economic output, now predicting the economy will slip into recession until the second half of the year. That view still holds, Anderson said. Similarly, Friday’s currency intervention didn’t prompt Moody’s Analytics to change its anemic forecast. The prediction of 1 percent growth for 2011, down from the pre-earthquake forecast of 1.4 percent, still stands, according to Gus Faucher, director of macroeconomics for Moody’s Analytics. That outlook includes a recession that doesn’t let up until the second half of the year. The currency intervention, moreover, “may turn out to be a wash,” said Bernard Baumohl, chief economist of the Economic Outlook Group. “In the short run, the intervention has been a success, but a lot of Japanese companies are going to have to repatriate foreign investments,” Baumohl said. “There’s so much that’s unprecedented about this, it’s hard to figure out where, ultimately, the currency is going to go.”

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Michael Pento: Taps for the Dollar

March 2, 2011

It now appears that the United States has finally succeeded in its efforts to destroy confidence in the U.S. dollar. Given the currency’s reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task. However, to get the job done Washington chose the right man: Fed Chairman Ben Bernanke. Thanks to Bernanke’s herculean efforts, investors across the globe have now been fully weaned from their infantile belief that the U.S. dollar will remain the ultimate safe haven currency. The proof of Ben’s success can be seen in comparing how the foreign exchange markets reacted to the recent crisis in the Middle East with how they reacted to the financial crisis of 2008. Back then, investors looking for safety abandoned their foreign currency positions and piled into the U.S. dollar (the market for U.S. Treasury Bonds in particular). As a result of these fund flows, the U.S. dollar surged 20% from August to November 2008. However, during this latest round of global destabilization the dollar experienced no such rally. In fact, the greenback shed about 5% of its value since the Tunisia revolution began in December of 2010. The reason should be clear; the Fed has placed international investors on notice that it will unleash even greater doses of dollar debasement at the first whiff of additional economic weakness, deflation threat, or dollar appreciation. Just this week, Bernanke once again made clear that despite what he considers to be a better growth outlook at home and abroad, and spreading global inflation, the United States will not pull back from monetary accommodation, even as other nations conspicuously do so. The architect of U.S. monetary policy has stated explicitly that dollar debasement will continue for the indefinite future. Knowing this, why would any international investor seeking a “safe haven” choose to park assets in U.S. sovereign debt? If Bernanke is to be believed, continued economic weakness in the U.S. will cause low-yielding Treasuries to lose value due to inflation while the weakening dollar erodes the underlying value of the bond in real terms. This is a one-two punch that sane investors will seek to avoid. It is no coincidence that a record percentage of U.S. Treasury auctions are now being bought by central banks, for whom sanity is a lowly consideration. But in reality, the Fed has about as much influence over the dollar’s value as do central bankers in Beijing. There is little disagreement among economists that without Chinese support, the dollar would be a dead duck. But for the last twenty years or so the monetary arrangement that pegged the yuan against the dollar served the interests of both countries. The U.S. enjoyed a flood of cheap imports, the benefits of ultra-low interest rates, and a strong currency. The Chinese received a booming export economy, which accounted for about a third of the country’s GDP, and the ownership of a significant portion of the future of the United States. To maintain this peg, the People’s Bank of China had to print trillions of yuan and perpetually hold more than $1 trillion U.S. dollars in reserve. But recently, having led to rampant money supply growth and inflation in China, the peg has become more trouble than it’s worth, particularly from the Chinese perspective. The latest reading on YOY money supply growth has China’s M2 increasing by 17.2%; which has helped send their reported CPI up 4.9% YOY. Inflation in China is pushing up the prices of its exports. According to the latest survey released February 14th from Global Sources (a primary facilitator of trade with Greater China), export prices of various China products are likely to increase in the months ahead, especially if the cost of major materials and components continues to soar. The survey of 232 Chinese exporters revealed that 74% of respondents said they boosted export prices in 2010. The U.S. Bureau of Labor Statistics reported in early January that its China import price index rose 0.9% in the fourth quarter after holding steady for the previous 18 months. And Guangdong, the biggest exporting province, said recently that it would increase minimum wages by around 19% this March. But here is the rub; China maintains its peg in order to keep export prices from rising in dollar terms. But the peg is now causing export prices to rise anyway. As a result, the policy is a dead letter. The simple fact is that the threat to China’s exports will exist whether they let their currency appreciate or not. But a strong currency offers the benefit of greater domestic consumption, while a weaker currency offers nothing. The Chinese government will take the path that preserves and balances their economy while enriching their entire population, rather than go down the road to never ending inflation. For China the realistic hope is that the greater purchasing power of a strong currency will enable their growing middle class to supplant U.S. consumers as the end market for China’s own manufacturing efforts. However, for the U.S. the challenge will be to develop a diversified manufacturing base in an expeditious manner before surging interest rates, a plummeting dollar and soaring inflation overwhelm the economy. The dollar’s recent reaction to the turmoil in the Middle East and China’s inflation problem illustrate that we have come to a watershed moment in American history. The decade beginning in 2010 should prove to be the decade in which the U.S. dollar loses its status as the world’s reserve currency. As bad as that blow may be, the loss may provide the shock needed to get our economy back on a sustainable path. The real danger lies in refusing to adapt to the changing environment. Our current economic stewards are acting as if the dollar’s status is written in stone, when in fact it’s hanging by a thread. Michael Pento is the Senior Economist for Euro Pacific Capital

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Daniel M. Cofall: Peak Debt

March 1, 2011

From our friends at the Wall Street Journal Sunday night, “In 2011, Social Security, Medicare and other entitlement programs will consume 60% of all federal spending, not counting interest on the debt, or $2T.” I just wish that they had noted that in 2010, all tax receipts were $2T. This seems to be a notable juxtaposition. Now every financial writer worth their salt has noted that as the economy improves, tax revenues will increase. Let’s stipulate, for the moment, that there is an economic improvement in place (stimulus and QE driven or not). Shouldn’t we add that as the economy improves, interest rates will necessarily increase lest we stoke the already red hot fires of inflation? And if, right now, our tax revenues equal only our entitlement spending, what happens to the discretionary spending and interest costs? Our current interest expense is about $400B and that is at historically low interest rate levels. Add to that our Treasury’s proclivity toward short-term note bias and you have an extraordinarily vulnerable capital structure. We must issue trillions more in debt each year even if we make the “hard choices” regarding spending cuts. If current interest costs are $400B and our national debt is $14.2T, our average cost of debt is about 3%. Should that 3% increase by only 3%, which would bring it in line with historical averages, our interest expense would increase to $800B per year, not counting the increased interest on the increased debt. That amount will add 6% of the estimated $1.5T in deficits for 2011 or about $90B… in one year! This is the horror of compounding. As our national debt increases by $2T or so each year, our interest expense increases by about $120B (using the 6% average cost of debt). This $120B is added to our annual deficit and to our total debt. Each year, we will pay more interest on more debt, regardless of what we do to reduce the deficit. This is the reason we should be very concerned about ” Peak Debt “. We must be concerned when the world financial community declares that we have reached Peak Debt. This game is so far out of hand, it has become a game of perception. And let’s note here that we must be concerned with worldwide Peak Debt, not just our sovereign America Peak Debt. But, for the moment, the American example will suffice. Peak Debt is very much like Peak Oil. It is the point at which the system instantly becomes unstable. With Peak Oil, when we reach a point where maximum capacity is exceeded by maximum consumption, wars will be fought for that one incremental gallon. This is not hyperbole. This is precisely accurate. We await only the official declaration that there is a systematic supply shortage and then the game is on. Peak Debt is no different except that we can manufacture currency and debt in relatively unlimited amounts and with very little fuss if the world financial community is willing to suspend disbelief and accept the fact that paper and digital currency, in unlimited amounts, retain their marginal values. I contend that anything that can and is created in unlimited amounts cannot possibly retain value. If that were true, then just print trillion dollar notes, give one to every man, woman and child on the planet and make us all infinitely wealthy. Peak Debt comes into play only if sanity surfaces somewhere in the world financial community. Some will say that this sanity should never be allowed to see the light of day and that we need only print our way out of this debt purgatory. If we never ask how much money has been created, and by that I mean all forms of currency and debt, paper or digital, and implied sovereign guarantees, we will never have the numerator for the currency to asset formula that sets the true value of all currencies. As currency supply increases and assets remain relatively constant, the currencies are debased and inflation is created concurrently. Now one might think that if no one truly knows how much currency exists, nearly 7B people on this planet will continue to live in a delusional bliss thinking their currency has and retains value. If that only were true. But that currency does get into circulation and prices are bid up and real inflation does occur. Additionally, many worldly financial types smarter than I know not only this formula but also both the numerator and denominator. They have already placed their bets and they await the Peak Debt proclamation. At such time, our financial system will necessarily fail and there must be a system that is ready to be immediately implemented when the 7B people say “Save us!” A new financial order is waiting in the wings with just such a system. This system must include a world central bank and a new currency. Trillions will be made and lost instantly as “old” currencies are exchanged for the “new” currency. Oil, gold and all commodities will be priced in this new currency. The most massive redistribution of wealth in all of history will occur when these new conversion ratios are foisted upon us. Debts will be repudiated, the financial markets will be reset and the only winners will be bankers, their preferred clients and those countries judged to in need of the redistributed wealth. Being a nuclear power will be an important “ante”. Surprisingly, much, if not all, of this system is already in place. The International Monetary Fund (“IMF”), the International Bank of Settlements (“IBS”) and very pro one world financial system legislation (already passed by all meaningful countries) is here now. Oh, there may be bits and pieces still to go but the real trip wire will be a major world event such as a sovereign default or a string of defaults. This default scenario is entirely dependent upon the proclamation of Peak Debt. I have no crystal ball but I know that our time to plan and act is here, the assets are in place and the financial freedom of our world is in play. Default is the trigger and a one-world financial order is the end game. The rest is up to us to put our financial houses in order. Each of you, hopefully, has reached this point in your life with a certain amount of financial freedom. What choices we make today and the days in the near future will determine our ability to cope with the changes we will face. We may never have a better day than today to make the changes necessary. Certainly not all is doom and gloom and many of us may prosper for months or more to come, with some divine intervention. But for those who neglect to plan or fail to recognize the warning signs or fail to see tops coming, there will be fiscal challenges beyond our imaginations.

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Megabank Warns It May Be Punished Over Foreclosure Practices

February 28, 2011

HSBC North America Holdings, the nation’s ninth-largest bank by assets, warned investors Monday of impending fines after receiving notice from federal bank regulators admonishing the lender for improper foreclosure practices. The bank is the latest in a string of large financial companies that have used recent securities filings to prep investors for fines and a significant increase in costs associated with processing mortgages and repossessing homes, after being cited by regulators for deficient and sometimes illegal operations. On Friday, Ally Financial , Wells Fargo & Co. , and SunTrust Banks — three of the nation’s 10 largest handlers of home mortgages — said in regulatory documents that they expect to be sanctioned by the U.S. government for their foreclosure practices. The penalties follow months-long criminal and civil probes by federal and state regulators into lenders’ mortgage practices. Officials said they found significant shortcomings and violations of various state laws. A “small number” of foreclosures should not have occurred, John Walsh, the interim head of the Office of the Comptroller of the Currency, the federal regulator of national banks, told a Senate committee earlier this month after his agency surveyed less than 3,000 out of millions of loan files. The lender’s two mortgage subsidiaries, HSBC Finance Corp. and HSBC Bank USA , both received letters from regulators. The Federal Reserve noted “deficiencies” in how the consumer finance arm and the holding company processed foreclosure documents, how it monitored for such issues and the lack of resources they devoted to evicting borrowers from their homes, according to the firm’s annual reports filed with the Securities and Exchange Commission. Its subsidiary bank received a similar letter from the OCC. Combined, HSBC handles about $110 billion in home loans, making it the 12th-largest mortgage servicer in the country, according to Inside Mortgage Finance , a trade publication and data provider. The firm has suspended home repossessions since identifying improper foreclosure practices. In regulatory filings filed with the SEC in November, the bank said it had not suspended foreclosures due to the so-called robo-signing controversy, which forced many of its competitors to halt home repossessions after evidence revealed improper foreclosure practices. But in its most recent filings, HSBC indicated that it had suspended home repossessions. This occurred sometime between Nov. 5 and today. HSBC expects to be subject to a regulatory order banning certain mortgage and foreclosure practices, according to its SEC filings, joining other large firms. The lender is currently in discussions with the Fed and the OCC over the terms of the cease and desist orders, which will require HSBC to fix various deficiencies identified by bank regulators, it said. The orders will be finalized “shortly after” the lender filed its annual reports with the SEC, it said. The orders may subject the firm to more lawsuits, it added. They also may hurt the firm’s reputation and drive up costs associated with implementing proper foreclosure practices. Mortgage companies have long neglected how they handle home loans, regulators have said, skimping on basic practices in order to save money. Perhaps most significantly, the regulators’ various orders will not preclude further action against HSBC, including fines and other monetary penalties, the firm said. The financial services giant, one of the largest banks in the world by assets, could not predict how all of this would impact its bottom line, it said. On Friday, SunTrust outlined a settlement agreement it expects the bank, as well as other large firms, to adhere to based on demands from regulators. The company will likely have to acknowledge they improperly handled documents when trying to foreclose on homeowners, failed to devote sufficient resources when handling mortgages and failed to develop systems to prevent such problems, SunTrust told investors in its annual report. HSBC is among the lenders being targeted for improper and at times illegal foreclosure practices that have led to delays in home repossessions and a decrease in foreclosures, roiling the housing market and depressing home prices. About a dozen federal regulators, along with attorneys general in all 50 states, are conducting the investigations. The Huffington Post reported Thursday that federal regulators could demand as much as $30 billion in penalties from the 14 largest mortgage firms. State regulators, who at present are only examining the five largest servicers, are looking to exact even heftier fines from the targeted companies. ************************* Shahien Nasiripour is a business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455.

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Video: HSBC’s Kwok Says Yuan Will Reach `Critical Mass’ by 2015

February 18, 2011

Feb. 18 (Bloomberg) — Donna Kwok, an economist at HSBC Holdings Plc, talks about the outlook for the yuan as the currency of choice in global trade. She speaks with Linzie Janis on Bloomberg Television’s “Global Connection.”

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Germany, France Reveal Plan To Boost Euro

February 4, 2011

BRUSSELS — Initiating a bold effort to strengthen the euro, Germany and France on Friday laid down far-reaching plans to deepen integration among the 17 nations that use the currency. The move prompted immediate opposition, but could lead to embryonic economic government for Europe.

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EURUSD and GBPUSD Top Currency Trades for a Volatile NFPs

February 4, 2011

EURUSD and GBPUSD Top Currency Trades for a Volatile NFPs

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FX Headlines: Euro-Zone Retail Sales Disappoints, But Currency Markets Show No Reaction as Traders Countdown to the ECB Rate Decision

February 3, 2011

FX Headlines: Euro-Zone Retail Sales Disappoints, But Currency Markets Show No Reaction as Traders Countdown to the ECB Rate Decision

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Will the RBA Surprise the Currency Markets With an Upbeat Tone At Its Rate Decision Meeting?

January 31, 2011

Will the RBA Surprise the Currency Markets With an Upbeat Tone At Its Rate Decision Meeting?

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Soros Warns Euro Crisis Could Divide Europe

January 26, 2011

DAVOS, Switzerland — Billionaire financier George Soros warned Wednesday that Europe could potentially fall apart because of the “two-speed Europe” of haves and have-nots that is being perpetuated by the reform of the embattled euro. He told a news briefing on the sidelines of the World Economic Forum that the currency used by 17 EU nations is in the process of reform following concerns over the debt crisis that enveloped Greece and Ireland and is threatening others. Its flaw, he said, of having a common central bank but no common treasury was being addressed with the creation of a permanent European Financial Stability Facility, which was created to bail out debt-ridden countries. But Soros said the reforms are not addressing the euro’s real problem – that the currency has divided the richer EU countries from the poorer ones. “The euro was supposed to bring about convergence, and effectively it created divergence and that is now being perpetuated,” he said. “So you are going forward with this new structure. You’re going to have a two-speed Europe, and that is going to be politically very disruptive.” “That is the unsolved problem that I think needs to be recognized and some solution found because otherwise I think the euro is clearly here to stay. There’s a clear commitment to the euro. But it could put into motion this very divisive political force of two Europes,” Soros warned. “Europe potentially could fall apart because of this two-speed Europe so it needs a solution,” he said. Soros said countries in surplus ought to be investing and expanding more in poorer European countries, but he said Germany, Europe’s largest economy, can’t do it because of very strict constitutional limits. He called for a Europe-wide stimulus that can spur growth in countries that are lagging economically. He noted that “there’s a big push now on continental Europe for a financial transaction tax” which could possibly be used to help these countries as well as for other activities like fighting climate change. Britain, which is neck-and-neck with France for the second-largest economy in the 27-member EU but not part of the euro zone, has embarked on a major austerity program to cut government spending aimed at putting it on sounder economic footing. “I think they may be right in embarking on it,” Soros said when asked about the measures introduced by the coalition government led by Prime Minister David Cameron. “But I think they will probably have the sense that they’ll have to modify it when the effects are felt,” he said, “because I don’t think they can possibly be implemented without pushing the economy into a recession.” Soros said the initial reaction has been “very positive” and the world will be watching to see what happens, “but my expectation is that it will prove to be unsustainable.” As for the broader global economy following the 2008 economic crisis, Soros said, “I think there was a serious danger of a deflationary trap of debt with deflation reinforcing each other, the burden of debt and prices falling.” “This has been successfully fought off, and the balance is now tipping the other way,” he said.

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Plot Forex Trading Sessions on your Currency Charts

January 25, 2011

Plot Forex Trading Sessions on your Currency Charts

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How to Identify a Currency Pair that is in a Trend

January 19, 2011

How to Identify a Currency Pair that is in a Trend

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How to Identify a Currency Pair that is in a Trend

January 19, 2011

How to Identify a Currency Pair that is in a Trend

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U.S. Dollar Weakness To Be Short-Lived, Swiss Franc and Japanese Yen At Risk For Currency Intervention

December 31, 2010

U.S. Dollar Weakness To Be Short-Lived, Swiss Franc and Japanese Yen At Risk For Currency Intervention

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Home Foreclosures Jump In 3rd Quarter: Regulators

December 29, 2010

WASHINGTON (By Dave Clarke) – U.S. home foreclosures jumped in the third quarter and banks’ efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday. The regulators said one reason for the increase in foreclosures is that banks have “exhausted” options for keeping many delinquent borrowers in their homes through programs such as loan modifications. Newly initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from a year ago, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in their quarterly mortgage report. The number of foreclosures in process increased to 1.2 million, a 4.5 percent increase from the second quarter and a 10.1 percent increase from a year ago, according to the regulators. The report, which covers 33 million loans serviced by national banks and federally regulated thrifts, also shows a sharp drop in the amount of loan modifications processed through the Home Affordable Modification Program (HAMP), the Obama administration’s leading foreclosure prevention effort. HAMP loan modifications fell by almost 46 percent in the third quarter, according to the report. Regulators noted, however, that loan modifications done by servicers outside of HAMP increased by 10 percent in the third quarter. Overall home retention actions taken by banks to keep borrowers in their homes dropped by 17 percent compared to the second quarter. (Reporting by Dave Clarke, Editing by Chizu Nomiyama) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Video: Rosenberg Says Euro-Area Alteration a Matter of Time

December 23, 2010

Dec. 23 (Bloomberg) — David Rosenberg, chief economist at Gluskin Sheff & Associates, talks about the prospects for the euro and countries sharing the currency. Rosenberg reacts to Barclays Plc’s incoming Chief Executive Officer Robert Diamond’s remarks that the euro area could shrink. Rosenberg, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” also discusses Chinese inflation risks and investment strategy. (Source: Bloomberg)

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Democrats Push New Foreclosure Rules

December 22, 2010

Several key House Democrats are circulating a letter urging support for new regulations that would crack down on what critics say are rampant foreclosure abuses in the nation’s banking system. The letter, authored by Rep. Brad Miller (D-N.C.) encourages federal banking regulators to rein in practices at bank divisions called “mortgage servicers.” Servicers are responsible for collecting and processing payments, charging late fees, negotiating with troubled borrowers and implementing the foreclosure process. Servicers have been criticized for committing widespread fraud in recent months, charging improper fees and incorrectly evicting borrowers. The three House Democrats have already signed the letter, including House Financial Services Committee Chairman Barney Frank (D-Mass.), House Judiciary Committee Chairman John Conyers (D-Mich.), Rep. Maxine Waters (D-Calif.), Rep. Keith Ellison (D-Minn.) and Rep. Laura Richardson (D-Calif.). The letter from lawmakers comes one day after more than fifty economists, consumer advocates and banking experts urged regulators to take action on mortgage servicers. Federal Regulators are currently divided over whether or not to use new powers to regulate mortgage securities granted by this year’s Wall Street reform bill to crack down on servicing abuses. The FDIC wants to take the opportunity to rein in servicers, but the Federal Reserve and the Office of the Comptroller of the Currency are resisting the new rules, although spokespeople for both agency say they support stronger standards for mortgage servicing. Miller’s letter explicitly references Tuesday’s letter from experts and activists, and urges any new rules require servicers to undergo foreclosure prevention efforts where they are economically feasible. “The . . . letter makes sensible recommendations regarding the treatment of payments by homeowners, ‘perverse incentives’ in servicer compensation, mortgage documentation, and foreclosure forbearance during mortgage modification efforts,” Miller’s letter reads. “We especially urge that any exception require that servicers modify mortgages pursuant to established criteria to avoid foreclosure where possible.” About half of all mortgages serviced in the United States are handled by just four companies: Bank of America, JPMorgan Chase, Wells Fargo and Citigroup. Some of the anti-foreclosure activists who sent the letter to regulators on Tuesday have also started a new website, www.stopservicerscams.com where individuals can sign a petition supporting new foreclosure regulations. The full text of the Miller letter is available here (.pdf). The letter from economists and activists is available here (.pdf).

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Dylan Ratigan: Get America Working: We Need a Movement to Solve a Crisis

December 15, 2010

It’s time, America. Americans need work. Americans need jobs. And right now, our government’s main job must be to help create these jobs. The unemployment rate has lingered 9 percent for 19 straight months ; the longest postwar stretch on record. And with our list of challenges ranging from overpriced health care to evaporating manufacturing, where can we start? Here are four steps our country must take now to get Americans back to work. Each tackles a bottleneck to jobs that must be fixed now: Fair Trade, Not “Free” Trade First, we must balance our trade deficit by making trade fair . Some of our trading partners, China for example, have become our trading enemies by devaluing their currency, basically giving us their unemployment problem in return for buying our debt. Putting pressure on China to end their currency manipulation and illegal trade practices will immediately lead to more U.S.-based manufacturing — jobs we desperately need back. I did an interview with Dr. Peter Morici to discuss how our trade and banking policies are costing us jobs. Make Banking the Practice of Lending to Businesses, Not Gambling or Buying Treasuries Banks no longer make money from lending to American businesses. With massive bank consolidation due to deregulation, as well as massive bailouts, we now have four mega-banks that couldn’t be less interested in lending to businesses. Borrowing has declined 7 straight quarters while bank profits (and bonuses ) are at all time highs. We have to break the bankers to bring back jobs. Listen to my Radio Free Dylan with Barry Ritholz and Josh Rosner for more on this problem. Control Health Care and College Tuition Costs The US spends 16 percent of GDP (twice as much as countries like the UK) but have worse health care . Much of the brunt of paying for this inefficient health care comes from US-based companies that are (unlike their foreign counterparts) mandated to pay employee health care. The price of college tuition and fees are skyrocketing as well, rising over 439 percent (adjusted for inflation) over the past 25 years. Student borrowing has more than doubled in the last decade as prices jumped 8 percent last year alone, meaning college may soon be out of reach for many Americans. Meanwhile, there aren’t enough jobs for these students to pay off the debt, with high unemployment and over 17 million college graduates currently doing menial jobs. Listen to my interview with CEPR Director Dean Baker for more on this problem. Reform the Tax Code Right now, Warren Buffett’s secretary pays a higher percentage of income to taxes than Warren Buffett. That’s a very big problem for anyone who isn’t the child of a billionaire. We need to reorganize the tax code to promote US investment instead of rewarding overseas investment and aristocracy . Listen to my interview with tax expert and bestselling author David Cay Johnston for more on this problem. When you have problems as we do, surely there is opportunity for work solving them. But first we must correctly identify the root causes and activate the necessary debate around the actual problems that are costing America its jobs. For the next three days, I’m going to be traveling the country for the Steel on Wheels tour. We’re having a conversation about how to make things in this country again. Join us. We’ll be holding Town Halls on each leg of the tour, starting tonight at the University of Rochester ( watch the live stream at 7pm EST here ) And let me know what you think we need to do to put America back to work on our new collaborative website at SteelOnWheels.com ! Or, if you’d like to stream our live town hall on your own website, click here to grab the embed code.

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USD/CAD SSI Ratio Catches Our Eye; Stands Out from Other Currency Pairs

December 3, 2010

USD/CAD SSI Ratio Catches Our Eye; Stands Out from Other Currency Pairs

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Nathan Lewis: The End of the Keynesian Experiment

December 1, 2010

You, the common peasants, aren’t supposed to know this, but the wheels are coming off the world monetary system. The reason you aren’t supposed to know this is because governments around the world need to sell you a ton of their bonds. They are addicted to debt and you are their source. If you understood what “wheels coming off the world monetary system” means, then you would probably not want to buy their bonds — as has already happened to Greece, Ireland, and now Portugal, Spain and Italy. The real situation is described by the gold market. Gold itself has served, for thousands of years, as a stable measure of value. You can think of it as a world currency, just like the dollar or euro. The difference is that gold is stable in value, while the dollar and euro are floating currencies. When it takes more and more dollars to buy a euro, for example if the “price of euros” goes from $1.00 to $1.50, then most people understand that the dollar is probably falling in value. The same is true of gold. When the “price of gold” goes from $1000 to $1500, that means the value of the dollar is falling. The value of the euro has been falling, too. And the yen. And the Chinese yuan, the Russian ruble, the Brazilian real, and most every other currency on earth. We are now in the latter days of the “Keynesian Experiment.” Sometimes, governments undertake experiments. For example, the Soviet Union was an experiment in running an economy on central planning principles — rather than capitalist principles. It probably seemed like a good idea in 1917. However, the experiment was ultimately a failure. Russia and communist China later returned to capitalism. They tried the experiment, came to a conclusion, and then they moved on. It happens. The Keynesian Experiment began in 1971. Before 1971, all of the world’s developed countries used some variant of a gold standard. This had been the case for literally hundreds of years, back to medieval times. Beginning in 1971, the world then moved to a floating-currency system. This was actually an accident — the unplanned result of Richard Nixon’s “easy money” policy. But then, the Russian Revolution was a bit of an accident too, resulting from the turmoil of World War I. (Communist China grew out of the turmoil of World War II.) The immediate result of the Keynesian Experiment was an explosion of worldwide inflation during the 1970s. Then, there was a period of rough stability and recovery during the 1980s and 1990s. Today, we are in another period of currency turmoil, which will probably lead shortly to a crisis. Eventually the Keynesian Experiment will be regarded as a failure, much like the Communist Experiment. At that point, people will want to go back to the principles that have formed the foundation of the Western World’s success over the last half-millennia. Unfortunately, most people have forgotten those principles today. If I had twenty minutes with Barack Obama, Angela Merkel, or Hu Jintao — we will assume they know little about monetary economics — here is what I would say: Tenet #1: Stable Money is superior to Unstable Money. “Stable Money” is money that is stable in value. Capitalist economies work best with conditions of stable money. “Discretionary” monetary policy doesn’t really solve any problems, and actually causes new ones. Tenet #2: Gold is stable in value. Unlike other commodities, gold does not go up and down in value. For this reason, it is the premier monetary commodity and has been for literally thousands of years. Although it is a bit of a stretch to assume that gold is perfectly unchanging in value, nevertheless, after centuries of experience, we have established that it is sufficiently stable in value to serve its purpose as a monetary benchmark. Also, gold is a better measure of stable value than any other available reference or statistical concoction. Tenet #3: Therefore, if your currency’s value is pegged to gold, that currency will be as stable as gold. A gold-value peg is the best means to accomplish our goal of stable currency value. For the last 500 years, every government that has wished to implement a stable-currency policy has used some variant of a gold standard. It is proven, it works, and there is no need to invent another, inferior solution. Tenet #4: A token currency, whether coins or notes, can be pegged to gold via the adjustment of supply. “Supply” is technically known as “base money,” which consists of notes, coins, and bank reserves. If the currency’s value sags below its gold peg, then supply is reduced. If the currency’s value is higher than its gold peg, supply is increased. No gold bullion is needed to maintain this peg — only a mechanism to increase and decrease the supply of base money. Central banks accomplish this today by buying and selling government bonds in “unsterilized” transactions. This is effectively the same as currency board systems in use today. Tenet #5: A “lender of last resort” can be provided within the context of a gold standard. The original “lender of last resort,” or what we today call a central bank, was the Bank of England during the 19th century. The Bank of England was also the world’s premier champion of the gold standard. The Federal Reserve was originally constituted in 1913 to serve as a “lender of last resort” within the context of a gold standard system, and did so for 58 years until 1971. Central banks’ original purpose was perverted during the 20th century due to the rise of Keynesian soft-money ideology, causing them to come into conflict with the proper operation of a gold standard system. Of course, there will be many who will say that I am wrong. You would expect this after forty years of the Keynesian Experiment. In the Soviet Union, they used to put people in jail for “economic crimes” if they esposed capitalist principles. However, history is on my side. The entire course of the Western World, from the late medieval period to the 1960s, when men walked on the moon and the U.S. middle class reached its high point of prosperity, took place with a gold standard system. Although there were ups and downs, the long-term trend was up. We’ve had our ups and downs during the Keynesian Experiment too, just as the Soviet Union had its good and bad times. It is not quite clear yet, but will be as the Keynesian Experiment comes to a close, that the long-term trend during the Keynesian Experiment was down. At that point — not before! — the political consensus will conclude that it is time for something new. In 1979, Deng Xiaoping, the premier of China, declared that centrally-planned communism was bunk. China took a new way, which was really the old way, and it was a huge success. It is not too long — less than a decade I would guess — before the Keynesian Experiment also comes to an end, and the world can finally get back on a more productive and healthy track.

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A Return to Prominent Fundamental Concerns like Stimulus, Crisis and Risk Trends Revives Currency Correlations

November 13, 2010

A Return to Prominent Fundamental Concerns like Stimulus, Crisis and Risk Trends Revives Currency Correlations

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Gilbert B. Kaplan: Put on Your Workboots, America

November 12, 2010

Wouldn’t it be nice if someone would come forward with a real jobs program? Instead the debate in Washington is on things like tax cuts and what to do — next year — with health care and the budget deficit. These are important subjects, but none of them will have any near-term effect on the unemployment level (9.6 percent officially and probably 20 percent unofficially). It is no accident America largely turned one party out of office for another. A party in control of the White House and both houses of Congress that does not have a radical reemployment program at a time the sustained unemployment level is at a record high is not going to get a lot of sympathy. Yet there is something which can be done immediately, which will have an impact on U. S. jobs, particularly in the manufacturing sector. The Democratic party can do this now; they still have control of the Senate. If they want to send a message to America, there is a step they should take when they get back for the lame duck session starting Monday. The Senate should pass the China currency bill which already passed the House of Representatives in September, and which will make it much more likely the Department of Commerce will impose duties on imports of products from China to offset currency manipulation. The bill would remove an objection the Department of Commerce raised when it refused to investigate currency manipulation in two trade cases earlier this year, and clear the way for trade investigations of this pernicious, unfair practice. The next step is in the hands of the large Democratic majority in the Senate, which is not altered by the election in the upcoming lame duck session. And the action could have a dramatic effect on the job base of the United States on a fast-track basis. There is hardly a manufacturing company in the U.S. that is not being impacted by low cost Chinese imports. Yet there is very little that is being done about that. The Fed’s monetary moves will lower the value of the U. S. dollar, but not against the Chinese yuan, as long as the Chinese do not change their strategy of essentially pegging their currency against the dollar. There is not a commitment by the Democrats to take action on the currency bill. What are the implications of waiting until next year? In a word, disastrous for working Americans (and even worse for the millions of not-working Americans). Representative Kevin Brady (R- Texas), the likely next Chairman of the Ways and Means Trade Subcommittee, has already said he does not expect the House to act on currency legislation next year. So assuming the Republican House would ever act, which is doubtful, we are looking at well over a year before a bill would get back to the Senate. Meanwhile Americans watch their jobs move to China. That puts the issue starkly before the Senate Democrats. America has sent a strong message: we will not sit idly by while the folks in Washington ignore the jobs situation. And yet by not acting, that is exactly what the Senate will be doing. Once again, in the lame duck, our legislators will take up issues that most Americans don’t understand and don’t really care about, while a common sense pro-U. S. jobs bill is ignored. I would think this is a step the Senate should only take at its peril. So on second thought, America, leave your work boots on the shelf, gathering mold. At least until you see if the Senate has the guts to stand up for American jobs.

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Brett King: Could Facebook kill the US Dollar?

November 4, 2010

According to current statistics , Facebook has more than 500 million ACTIVE users, 50% of whom use Facebook everyday, 200 million of these users interact via mobile daily, and around half of the Top sites in the world are integrated with Facebook. PayPal recently announced integration of micropayments into Facebook’s platform.  Facebook also announced that you will shortly be able to buy Facebook Credits from Walmart and BestBuy. In the midst of all of this is a rapidly spiraling US dollar, with increasing competition from the Yen, Euro and hedge currencies like the AUD. The Fed’s QE2 moves tend to bring even more uncertainty to the USD in the near future. With questions over the future of the Yuan/RMB and the huge foreign reserves of USD in China, the uncertainty over the USD as a currency for the longer-term is simply building. Putting these facts together seems innocuous, but with a bit of imagination the future of Facebook Credits (or another such virtual currency) could change the way we think about, value and utilize currency globally. The fact is, today physical cash carries less and less value. Recently at the SIBOS Innotribe sessions we discussed “The Future of Money” where Venessa Miemis presented a compelling video that really triggers thinking around how currency will be defined as mobility, behavior, virtual trade, transparency and interactions start to impact. Virtual Money is not new AmazonPayments, both a type of digital currency and payment platform, has put Amazon into the online and mobile payments fray. Like PayPal®, Alibaba’s AliPay, Tencent’s QQ coins, Second Life’s Linden dollars, all these virtual currency players are trying to export their currency or payments platforms to the mobile sphere as a means of transferring money or buying goods, services and gifts securely online, or on the go. “The so-called ‘QQ’ coin–issued by Tencent, China’s largest instant-messaging service provider–has become so popular that the country’s central bank is worried that it could affect the value of the Yuan. Li Chao, spokesman and director of the General Office of the People’s Bank of China, has expressed his concern in the Chinese media and announced that the central bank will draft regulations next year governing virtual transactions. Public prosecutor Yang Tao issued this warning: ‘The QQ coin is challenging the status of the renminbi [yuan] as the only legitimate currency in China.’ ” – AsiaTimes Online, December 5, 2008 QQ currency speculators in China even opened up a Forex trade in the currency, as had already happened with Linden dollars – the currency that powers purchases in the Second Life virtual world. In China, the players in the currency game have gone one step further, with online vendors hiring professionals to play online games earning QQ coins as currency. Some even use hackers and other methods to steal the coins. They then sell the virtual currency below its offi cial value, at a rate of 0.4-0.8 yuan per coin. The Chinese government initially tried placing capital controls on QQ coins, but that just led to scarcity, driving up their real world value by 70 per cent in a matter of weeks. The impact of a tradable virtual currency, with 500 million users Let me give you two possible scenarios of where Facebook Credits could go that would ultimately result in the demise of real-world currencies weakened by plays such as QE2. Ultimately strong currencies are built on the credibility of that currency to be traded, so in the coming digital sphere, without a ‘gold’ standard, consumers could vote with their thumbs. Scenario 1 Facebook Credit announces a tie up with Apple for the iPhone 5 (NFC enabled) where you can use your Facebook credits for real-world purchases at the Point-of-Sale at participating retailers like WalMart, Best Buy, etc. Suddenly those Facebook Credit gift vouchers seem a lot more valuable. Scenario 2 Facebook, PayPal, Western Union and NCR tie-up to announce a global network of cash-in/cash-out points for Facebook Credits for Person-to-Person payments. You can now send Facebook Credits anywhere in the world and cash them out at a participating physical location or at a local ATM in your home currency. Fictional? Maybe, but either one of these scenarios, or something close to these are entirely possible with the consumer power that Facebook has with 500 million ‘friends’ behind them. Turning that into a credible, virtual currency that bridges the gaps between mobile, online and the real-world is not at all far fetched. What does it mean for the USD and global economies? Quite possibly we are looking at a global reset of how we consider the value of currency. This is at least as significant as Nixon’s decision to move away from the ‘gold standard’, announced on August 15th, 1971. Nixon claimed speculators had too much of a role in determining the value of the US dollar and that was the reason for the move away from the hard commodity link to Gold. “The strength of a nation’s currency is based on the strength of that nation’s economy” – President Nixon, August 15, 1971 It is possible, that the economy that Facebook, off the back of mobile-enabled P2P payments or a common virtual currency for the online world, could create a virtual economy second to none. I could be wrong – but The Future of Money has to be considered in the light of the impact of digital influence. Country boundaries and the value of a local note largely lose their import if a virtual currency can be credibly tradable across different modalities and that translates to the ability to trade goods and services in the real world. 500 million Facebook users could tip the balance here…

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Fluctuation movements in the currency market

November 3, 2010

Fluctuation movements in the currency market

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Dave Johnson: China’s Goverment Helps Manufacturers, Economy Booms. Ours, Not So Much.

November 1, 2010

As an election strategy conservatives blocked or watered down everything they could that might help the economy, hoping voters would blame the President’s party for job losses. Tomorrow we will learn if this strategy succeeded. But Wednesday can we start doing things to help the economy and the country again? Please? Candidates on both sides are running ads asking for fixes to trade with China. Chinese manufacturers are starting to fight, claiming that (now jobless) Americans will have to pay more for goods if they have to adjust their currency toward market rates. But Chinese manufacturers are doing just fine, according to recent surveys, because their government is doing everything it can to stimulate their economy, their manufacturing and their jobs. Where’s our government? Today’s Progressive Breakfast hilites two stories: Chinese manufacturers, complaining that their government has adjusted currency too much, tell Americans Christmas will be more expensive. W. Post : “‘If the renminbi keeps appreciating, our prices have no more room to drop,’ said Cai Qin Liang, 38, who has been in the business making Christmas ornaments and handicrafts for more than a decade. ‘We can just stop making these Christmas accessories, but foreigners still celebrate the Christmas holiday and need these things.’ It is small manufacturers such as these that the Chinese government says it is worried about as it resists calls for a larger and more rapid appreciation of the currency.” Yet Chinese manufacturing doing just fine, buoyed by stimulus. AP : “Chinese manufacturing accelerated in October with spending on infrastructure projects spurring a jump in new equipment orders even as export demand remained subdued, surveys showed Monday.” What kinds of things is the Chinese government doing to help its manufacturers? Earlier this year I wrote, in Lessons From China’s Stimulus China’s stimulus brought them through the economic crisis, even as they lost some exports because of the slowdown. They made the leap into alternative energy technology, spent $100 billion just for high-speed rail, and showed the world how fiscal stimulus works. Their growth rate is currently 13%. Ours is currently … nowhere near 13%. . . . So their stimulus totaled about 14% of their GDP. Our own stimulus was $862 billion in a $14 trillion economy, or about 6%. The differences between the priorities of the two plans are clear when seen on charts. From a year ago: China’s Stimulus Package: A Breakdown of Spending : (please click through for more ) . . . China focused on investment in public infrastructure, which leads to future economic growth. We are mired in conservative ideology so we focused on tax cuts, which do little more than increase our debt. . . . Quick lessons: – China spent serious money, quickly. It worked. – China focused on infrastructure. It worked. – China has a national economic/man manufacturing strategy and invests in R&D and developing strategically important industries. We don’t. – Don’t cut taxes, it only causes massive yearly deficits and accumulated debt. Frank Sobatka describes one of the main reasons for the problem: This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF. Sign up here for the CAF daily summary .

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U.S. GDP Advances 2.0 Percent in the Third Quarter, Currency Markets Show Muted Reaction

October 29, 2010

U.S. GDP Advances 2.0 Percent in the Third Quarter, Currency Markets Show Muted Reaction

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Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

October 29, 2010

Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

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Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

October 29, 2010

Japanese Yen: Will The Currency Finally Reach Its Peak This Week?

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Georges Ugeux: It’s the Dollar, Stupid

October 26, 2010

As hard to believe as it might be, the US authorities have discredited themselves in the handling of the so-called “currency crisis” and at the recent meeting of the G 20 Finance Ministers. For months, the Administration has tried to convince us that the future of the world economy was dependant on the exchange rate of the Yuan. The reality is very different. The United States keep its interest rates at historically low levels in order to stimulate the economy, and to indirectly support the banking system in its racketeering of consumers. By doing so, its interest rates no longer cover the “risk factor” that the markets consider to reflect its over-indebtedness. Such a policy is an answer to the slow economic recovery and high unemployment. It is perfectly coherent from a pure domestic viewpoint. At the international level, the insufficient remuneration of US Treasuries has a disastrous effect. First, it confirms the irresponsibility of the United States towards its international obligations. Nothing new. Since the “benevolent neglect” of the United States towards the dollar in the seventies, all US Administrations have neglected their responsibilities as the issuer of the most important currency in the world. It is their way to make the rest of the world pay for their defense umbrella. Or so the story goes. Regularly, the United States (and Larry Summers was the first engineer) went to visit foreign countries so that they act “responsibly” by increasing the value of their currency. Japan and China have been the prime targets of such policies. We fail to recognize that there might be some reasons why the dollar is structurally weak and neglected by its issuer: the Federal Reserve. Behind the currency debate, lies a somber reality. Most of China’s exports are the result of the relocation of production outside of the United States. It is American corporations that fuel the balance of payment deficit. Apparently this is for “competitive reasons.” To be clear, they want to increase their profits by producing cheaper goods abroad, and so do their competitors. By doing so, they strengthen the Yuan to the detriment of the dollar. What the Chinese are telling the United States is that they are unwilling to increase the value of the Yuan at the pace that the United States demands. They will not let the US increase their competitiveness while losing value on their holdings of US Treasuries. They are indeed the largest lender to the US Treaury. It is the weakness of the dollar that is the cause of currency disorders, not the disorder of other currencies. The United States has the right to have a currency policy totally driven by its self-interest. What does not work, is when the United States blames others for what is its own irresponsibility. That is plainly dishonest. Adding to that situation, Secretary Tim Geithner at the meeting of the Ministers of Finance presented a “plan” that the Administration should be ashamed of. Not only was it inapplicable, but it exhibited how little this Administration knows about international issues. As the single largest debtor country in the world, a country which depends heavily on foreign lending, the US simply cannot act this way. Geithner’s plan is to limit the balance of payment surplus to a certain percentage of the GDP of each country. The balance of payment deficit/surplus is the difference between exports and imports and currently the US deficit is at least 10%. The surplus of China is above 10%. How can champions of the market economy behave in such a contradictory manner? I suppose it’s easier to blame other countries than to convince US corporations to produce more domestically?! Maybe renouncing some of their bad habits (such as outrageous compensation) will make America competitive?! Or perhaps we should export more and import less? The answers to these questions lie in the United States, not abroad. A weak dollar will make US exports more competitive and imports more expensive. Casting blame on the world for your sins, while committing the most sins of all, is pure hypocrisy! It’s the dollar, stupid.

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Michael Pento: Bernanke Has Buried the Buck

October 25, 2010

It wasn’t too long ago that the parity pontificators were out in full force claiming that the European currency would trade one-to-one with the U.S. dollar. On June 7th 2010 the Euro hit a low of $1.1917. Since then, the Euro has risen over 17% against the US dollar, hitting $1.3961 as of today. That recent move, engendered courtesy of the Fed, has at least temporarily silenced the critics who questioned the viability of the European Union and its currency, while also serving to impugn the notion of the U.S. dollar’s permanent position as the world’s reserve currency. To be clear, there has never been any question in my mind that the euro is just another flawed fiat currency. However, it has since its inception deserved to maintain its status as an excellent diversification-currency for those who hold excess dollars. Now we find the question being correctly asked today more than ever before if the USD can act as a safe haven from the troubles found in international currencies. The answer to that question can be found in the data and from the lips of our Federal Reserve Chairman. The 27 countries comprising the European Union’s economy is the largest in the world. It’s GDP on a purchasing power parity basis was $16.5 trillion in 2009, which is greater than the $14.2 trillion US economy. The economies of the 16 countries in the Euro zone that use the Euro currency produced GDP of about $10.5 trillion on a PPP basis according to the CIA 2009 world fact book. That is equivalent to 74% of US total output. Therefore, the economies of the EU (27) or Euro Zone (16) are similar in size and scope to those of the US and should be viewed with the same gravitas. The size of the European economy had never been an issue. But according to the IMF, the US dollar accounts for 62% of global central bank reserves even though it represents less than 25% of global GDP. In comparison, the Euro currency represents just 26% of FX reserves. Why is it that the U.S. economy deserves to represent such a tremendous over-weighting of central bank reserves? Since their currency holdings are so vastly concentrated, it places global central banks in a tenuous and vulnerable position. Should they ever need to reduce their dollar holdings–especially in concert–it would place tremendous downward pressure on the US currency. But unlike the greenback no such over-owned condition along with its concomitant pent-up selling pressure exists for any other currency. Currently the gross national debt of the U.S. stands at 93% of GDP. The European Commission projects that their gross national debt will reach 84% of output this year and 88.2% in 2011. And In contrast, the Congressional Budget Office projects our national debt to reach over 100% of GDP in 2012, whereas the national debt of the EU will not reach 100% of output until 2014, according to the European Commission. Finally, U.S. interest rates are much lower as compared to those of the European Union. Therefore, the Euro should never have been viewed as a currency that is inferior to the USD. But What Happens the Next Time Down Investors the world over have traditionally flocked to the USD for safety. This past credit crisis caused the greenback to surge 27% on the DXY and crushed most commodity prices including gold. How do we know the next international crisis won’t cause the same global flight into the “safety” of U.S. debt and dollars and out of other currencies like the Euro? The answer can be found in our central bank’s reaction to that same crisis. Ben Bernanke’s initial response to the credit crisis was fairly muted. It may surprise investors to be reminded that the Fed left interest rates unchanged throughout the entire period from April 30th thru October 8th 2008, despite the fact that the S&P500 dropped from 1,413 to 899. And Bernanke only slightly increased the monetary base by $160 billion to just over $1 trillion during that drubbing in equities. During that time of relative inaction, global investors flocked to the dollar as they have done in Pavlovian fashion since the Bretton Woods agreement was signed. But after that, Ben sent out a fleet of helicopters to demonstrate to the world that he would not tolerate the appreciation of the USD or allow the rate of inflation to contract. Our central bank has now clearly inculcated to global investors that they will severely be punished if seeking shelter in our currency and bond market. The monetary base has now reached $2.0 trillion and the announcement of another dramatic increase is expected once again at the conclusion of the next FOMC meeting on November 3rd. The Fed has engineered robust growth rates in all the monetary aggregates and is also now on record for the first time in its history saying that the rate of inflation is too low. All this has resulted in the U.S. dollar losing nearly 13% of its value since June. I’m went on record last summer saying that selling Euros (or most any other currency) to buy dollars is sort of like exchanging your ticket on the Titanic for a ride on the Hindenburg. A viable solution cannot be to sell one sinking currency and jump on another one that is drowning as well. The only safe forms of money are those that can act as a store of wealth, that cannot be diluted by fiat and whose purchasing power cannot be corrupted by a government. The Fed has put the world on notice that the USD can no longer be viewed as a safe haven currency. During the next crisis, investors should seek the safer harbor that is derived from owning commodities and precious metals, rather than to believe the USD will once again offer them any real protection. Precisely because the position of the U.S. buck as the world’s reserve currency has been burned and buried by Ben Bernanke. Michael Pento is the Senior Economist for Euro Pacific Capital

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JPMorgan Almost Doubles Lobbying Spending In Third Quarter

October 21, 2010

The 10 biggest banks in the U.S. spent almost $11 million lobbying the government on financial reform legislation and other issues during the third quarter of 2010, according to the latest disclosure reports. And though the Dodd-Frank financial reform bill was signed into law by President Obama on July 15, several prominent banks have since increased their lobbying, a sign that the real back-room deals may be happening now while several agencies write the specific rules and regulations. Major Wall Street players and banks have been huddling in meetings with regulators and staffers at the Federal Reserve, the Federal Deposit Insurance Corporation, the Comptroller of the Currency and the Securities and Exchange Commission in recent months to hash out the details of those rules. JPMorgan Chase almost doubled their spending on lobbying to $2.7 million from $1.5 million in the second quarter. And Barclays PLC upped its expenditures to $1.09 million from $930,000 in the second quarter. But other firms reduced their spending, including Bank of America, which spent almost $700,000, down from $1.09 million in the second quarter, and Goldman Sachs cuts its lobbying almost in half, from $1.58 million to $780,000. In addition to financial reform, JPMorgan’s interests covered the gamut, from credit card transaction fees and proposals to increase commercial real estate lending to rural housing loan programs and the government’s massive $3.4 billion settlement of a lawsuit involving alleged mismanagement of Native American trust accounts — sometimes referred to as the biggest class-action lawsuit in history against the government. Here is how much the top 10 banks spent on lobbying in the third quarter: Bank of America Corporation – $690,000 JPMorgan Chase & Co. – $2.74 million Citigroup Inc. – $1.34 million Wells Fargo & Company ) – $1.18 million Goldman Sachs Group, Inc. – $780,000 Morgan Stanley – $650,000 Metlife, Inc. – 1.19 million Barclays Group US Inc. – $1.09 million Taunus Corporation (Deutsche Bank) – $540,000 HSBC North America Holdings – $540,000 `

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Top Bank Regulator Doesn’t Believe Consumers Harmed By Foreclosure Fraud Scandal

October 15, 2010

The nation’s top bank regulator doesn’t believe homeowners are being harmed directly by an ongoing foreclosure fraud scandal, despite multiple reports of banks mistakenly evicting homeowners who aren’t even in foreclosure. For example, Nancy Jacobini said she had been working on a mortgage modification with JPMorgan Chase after falling four months behind when the bank sent somebody to change the locks. “I did not receive any information at all in reference to a foreclosure,” she told CNN . The Office of the Comptroller of the Currency does not view anecdotes like Jacobini’s as evidence of consumers being harmed by the unfolding foreclosure fraud scandal. (There are several other similar anecdotes .) “The core issue remains the improper completion and submission of paperwork required by state law before foreclosing on seriously delinquent borrowers when alternatives to foreclosure are not possible,” said Kevin Mukri, a spokesman for the OCC, in an email to HuffPost. The nation’s largest banks have temporarily halted foreclosures across the country after revelations that “robosigners” put their signatures on foreclosure paperwork without verifying any of the information in the documents. It started when a robosigner for Ally Financial (formerly known as GMAC) admitted to signing thousands of foreclosure affidavits without so much as looking at the exhibits. Original notes have been lost as Wall Street banks repacked and resold mortgages as securities. “Immediately after concerns surfaced regarding Ally foreclosure processing issues, the OCC ordered large national bank servicers to review their procedures to ensure compliance with state and federal law before foreclosing on seriously delinquent borrowers,” Mukri said. “As a result, several announced temporary suspensions of their foreclosure proceedings.” Consumer advocates say the scandal is not just about bogus paperwork for seriously delinquent borrowers doomed to foreclosure. They say anecdotes like Jacobini’s are symptoms of the same problems at the heart of the robosigner scandal. “Part of the purpose of having a human being actually look at a file and verify that a particular mortgage should be foreclosed is to prevent that kind of thing from happening,” said Alan White, a professor at the Valparaiso University Law School. “OCC assumes incorrectly that foreclosures are initiated (and the robosigning starts) ONLY after all efforts at modifications and short sales are exhausted. This is clearly incorrect. Servicers routinely file foreclosure (with robosigned affidavits) at the same time that their loss mitigation departments consider requests for modification and short sales.” “They’re exactly the product of a servicing system that is non-functional,” said Ira Rheingold, director of the National Association of Consumer Advocates. “[The OCC is] afraid of saying anything that remotely points to the fact that the banks really have screwed this up, that the servicing industry is completely broken.” White and Rheingold said the well-documented shortcomings of the Home Affordable Modification Program show that servicers are dropping the ball for the seriously delinquent and not-seriously delinquent alike. Treasury Department guidelines require servicers to hold off on referring borrowers to foreclosure while they apply for HAMP, but homeowners and their lawyers say it happens all the time. “There are several class actions pending for homeowners who allege that they are being foreclosed despite being eligible for HAMP modifications,” said White. “In a case where a homeowner should be approved for HAMP modification, but the servicer has lost the paperwork or just hasn’t responded yet, the robosigner will send the foreclosure documents to the court without checking to see whether in fact there is an alternative to foreclosure in the works.”

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FOREX: US Dollar Rebounds as Currency Markets Brace for Bernanke Speech

October 15, 2010

FOREX: US Dollar Rebounds as Currency Markets Brace for Bernanke Speech

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Global Currency Meltdown

October 14, 2010

Global Currency Meltdown

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Video: Prasad Says IMF Best Institution for Easing Yuan Dispute: Video

October 11, 2010

Oct. 11 (Bloomberg) — Eswar Prasad, a senior fellow at the Brookings Institution, talks about the International Monetary Fund’s annual meeting yesterday in Washington and China’s currency policy. Global governments tasked the IMF with calming the recent outbreak of tensions over currencies amid signs they are already triggering a protectionist backlash. China, accused of keeping the yuan undervalued to boost exports, said they will stick to a gradual rise in the currency’s value to avoid social turmoil. Prasad talks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

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Video: Maher Says Fed Easing Not Fully Priced Into Dollar: Video

October 4, 2010

Oct. 4 (Bloomberg) — Daragh Maher, deputy head of global foreign-exchange strategy at Credit Agricole SA, discusses factors affecting the currency market, including a possible further monetary easing by the Federal Reserve. Maher speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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House Overwhelmingly Passes Trade Sanctions Bill Targeted At China

September 30, 2010

WASHINGTON (AP) — The House has approved legislation that would allow the U.S. to seek trade sanctions against China and other nations for manipulating their currency to gain trade advantages. The 348-79 vote Wednesday sends the measure to the Senate, where its prospects are unclear. Senate supporters hope to get a vote on a similar proposal after Congress returns following the November congressional elections. Supporters said the bill would allow the Obama administration to pressure China on an issue that they say has led to the loss of more than 2 million manufacturing jobs in the U.S. over the past decade. The vote came as lawmakers scrambled to wrap up unfinished business so they can hit the campaign trail with a little over a month before the Nov. 2 elections. Polls show that the state of the economy and an unemployment rate that remains stuck at 9.6 percent are the top concerns of voters. The measure was passed by a wide margin with 99 Republicans joining Democrats to vote yes. Those in opposition included 74 Republicans and five Democrats. Supporters said the size of the vote should send a strong message to Beijing that Washington will not tolerate currency manipulation and other trade practices viewed as unfair to American workers. House Speaker Nancy Pelosi said that in 20 years America’s trade deficit with China has gone from $5 billion annually to $5 billion every week, an imbalance she said demanded action by Congress to protect American jobs. “We do this because 1 million American jobs could be created if the Chinese government took its thumb off the scale and allowed its currency to respond to market forces,” she said in a speech on the House floor. American manufacturers contend that China’s currency is undervalued by as much as 40 percent against the dollar. That makes Chinese products cheaper and more competitive in the United States and American products more expensive in China. The legislation would allow the imposition of stiff sanctions on Chinese imports. It would expand the definition of improper government subsidies to include a government’s manipulation of its currency to gain trade advantages. Currently, the Commerce Department does not consider currency manipulation as a government subsidy for which it can impose trade sanctions. During the House debate, supporters cited studies that they said show the legislation would boost American exports and create more manufacturing jobs in this country. “Some credible estimates are that we could return a million American jobs to this country,” said Rep. Xavier Becerra, D-Calif., in urging support for the legislation. “We can either take bold steps or we can take baby steps.” Opponents said the legislation would boost the cost of clothing, toys and other goods that American consumers buy and also ran the risk of sparking retaliation by China against American exports. “The available evidence is that the price of many of these Chinese goods will go up 10 percent, a pair of shoes that a mother needs for her child to go to school … toys at Christmas, all become more expensive,” said Rep. Jeb Hensarling, R-Texas. Supporters rejected that argument, saying it is critical in hard economic times to protect U.S. jobs. “Without a job, you can’t buy goods at any price. This bill is about jobs,” said Ways and Means Committee Chairman Sander Levin, D-Mich. Passage of the proposal was cleared when Levin led an effort to craft a compromise proposal that supporters believe will be better able to withstand a challenge before the World Trade Organization, the Geneva-based group that oversees the rules of world trade. Before the House vote, Chinese officials in Beijing reiterated that they support exchange rate flexibility but offered no new indications that they plan to accelerate the revaluation of their currency, the yuan. In June, Beijing promised a more flexible exchange rate but since that time the yuan has risen by only about 2 percent in value against the dollar. Treasury Secretary Timothy Geithner told Congress earlier this month that the administration stands ready to find a more effective strategy for pressuring China. He said the administration is not only focused on the currency issue but on such topics as rampant copyright piracy of U.S. products and various barriers the Chinese have erected to U.S. goods. In a statement, the Treasury Department said, “Today’s vote clearly shows lawmakers have serious concerns about this issue. The president and Secretary Geithner share those concerns. They have said repeatedly that China needs to allow a significant, sustained appreciation over time.” The administration has not taken a position on whether it will support the House bill. But trade experts said they believed the administration will use its passage as a way to pressure Beijing to accelerate its appreciation efforts. President Barack Obama raised the currency issue in a meeting with Chinese officials last week in New York. He is expected to pursue the issue in November at the summit of the Group of 20 major economies in South Korea. Sen. Charles Schumer, D-N.Y., who is pushing a similar China currency bill in the Senate, said after the House vote that he will work to get a Senate vote on his bill during a lame-duck session of Congress after the November elections. “The Chinese ought to be aware that Congress is serious about confronting their currency manipulation,” Schumer said in a statement.

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Video: Schwab Says U.S. Must Use Multilateral Force on China: Video

September 20, 2010

Sept. 20 (Bloomberg) — Former U.S. Trade Representative Susan Schwab talks about China’s currency policy and U.S.-China trade relations. The yuan strengthened to a 17 year-high on speculation the Chinese government will yield to increased political pressure from the U.S., which is seeking a faster appreciation of the currency. Schwab speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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