Escalating Currency Wars May Make 2013 the Year of the Epic Economic Failure

By SD Contributor AGXIIK:

The trade between Japan and Europe and China and Europe will be hit very hard when Europe can’t afford goods from China and Japan.  The east will suffer badly as devaluations won’t overcome the recessions and depressions in Europe.

These are real and dangerous tipping points that won’t hold back very long. The people in Italy, Greece and Spain are near the breaking point.  I doubt if the Fed will have enough money to bail out Europe when Benny is spending all his political capital in bailing out the US, although I would not be surprised if the Fed doesn’t give it a try, nonetheless.   
If we thought 2012 was the year of the epic failure, it may have been just a warmup act to 2013.


2013 Year of the Snake 10 oz .999 Silver Bars
As Low As .99 Over Spot At SDBullion.com!

Virtually all the big GDP countries are engaged in ZIRP  printing to devalue their currencies, racing to this end to keep the trade engine going.
All the major GDPs are showing red arrows in their economic indicators.  For one country to win, others will be hurt.
Japan, China, the EU and US are all on track to accomplish this rampant devaluation business.   Japan is probably on a fast track to the bottom in their current bout of devaluation.
Abe is out for war, FIAT or hot, it does not seem to matter to him
South Korea is being hammered by the Yen but they are unlikely to launch missiles against the Japanese homelands.
China sees these FAIT effects on their exports.

What affects China in that regard is going to have repercussions that could easily go beyond a war of words and money as these two countries face off over the Sendaku Islands. China’s currency reserves are 300% larger than Japan’s.  That is some serious ammunition to use is trade wars.
The bond bubble could easily be broken in a currency or a shooting war.  Either way, the fragile bubbles could be popped with ease and at the slightest pressure.  Japan’s largest pension fund, with $1.2 trillion in assets, is trying to lightened up on Yen bonds. Other funds are trying to buy gold.

The bubble is going to break and it probably won’t be the UST first.  The US is still considered the world’s safe harbor for excess funds.  It is even more likely that when overseas bond bubble  monies flood to the US, the rates will drop again, like the last time money flowed into the UST market in 2008.
This time the flood could be in the trillions, instead of a few hundred billion.  Money market funds are having enough problems funding a home for the money they see coming in.

One unintended consequence will be NIRP rates offered by the Fed on short term notes.  Laws are being written that will allow MMAs to break the buck.   The Fed can keep our bubble intact for quite some time since they buy most of the debt. The wash of foreign capital will probably help sustain our deficits too boot.

Japan is running out of other people’s money.  Japan  could fail first but Europe is a train wreck moving faster with the Italian bank derivatives losses and Spain’s corruption scandals  building quickly. There’s not a bank in Europe that is worth a hill of beans.  Their leverage is 35 to 1. Greek failure would destroy most of these large Euro banks.

The trade between Japan and Europe and China and Europe will be hit very hard when Europe can’t afford goods from China and Japan.  The east will suffer badly as devaluations won’t overcome the recessions and depressions in Europe.  Consumer sentiments are dropping like rocks and have been for months and even years. The Euro GDP is nearly $18 trillion so big drops here are even more powerful in hurting imports.

These are real and dangerous tipping points that won’t hold back very long. The people in Italy, Greece and Spain are near the breaking point.  I doubt if the Fed will have enough money to bail out Europe when Benny is spending all his political capital in bailing out the US,  although I would not be surprised if the Fed doesn’t give it a try, nonetheless.   QEII slipped $600 billion under the ECB mat, not to mention the trillions is reparations sent to Europe for the fiasco of sub prime losses.  If the Fed does run to the rescue the amount of currency sloshing around could easily kick off some serious inflation on the continent.  It would certainly see FIAT mal-investments in MENA as food shortages this year will bump prices. QE II was a cause of the Arab Spring.

This whole region is exploding with Egypt on edge;  collapse possible in short order.  If we thought 2012 was the year of the epic failure, I think it was just a warmup act to 2013.