The One-Sided Compromise – Guest Commentary By John Browne October 29, 2010Posted by Admin in Market Commentary.
Tags: Capital, china, currency, dan mangru, Dollar, economy, Euro-Pacific, g20, geithner, global, john browne, mangru report, reserve, secretary, south korea, treasury, United States, yuan
The One-Sided Compromise
By: John Browne
Thursday, October 28, 2010
Last weekend, the G-20 finance ministers met in South Korea to find areas of agreement in preparation for the main G-20 gathering in November. The Chinese rebuffed renewed American pleas for them to revalue their yuan. They rejected Secretary Geithner’s suggestion of a four percent cap on current account surpluses. However, in return for accepting America’s continued dollar debasement, the Chinese did agree to “look into” a revaluation of the yuan and the management of trade surpluses. They also agreed to an international self-policing regime to curb currency manipulation. This ‘one-sided’ compromise was hailed in the Western media as a triumph for Mr. Geithner. The US stock markets and dollar rallied. All looked good for the election season in November.
Unfortunately, compromises are never one-sided; they are only construed as such. Though the reporting failed to emphasize it, Mr. Geithner actually agreed to a massive shift of monetary power in exchange for China’s empty concessions. The shareholdings and board composition of the huge and powerful International Monetary Fund (IMF) have now been shifted. China will now become the third largest shareholder of the IMF and the developing economies will get a six percent larger voting share. Two European states will lose their seats on the IMF’s board in favor of developing countries.
Meanwhile, China, supported by Russia, India, and even Brazil, continued to lobby hard for the US dollar’s privileged role as the international reserve currency to be replaced by a wide basket of currencies and gold. To this end, the IMF has recently been given additional “emergency” lending facilities. These could be used in a coming sovereign default crisis to ‘bail out’ Western countries, at which point they would be unable to resist global economic governance under the guise of the reformed IMF.
In short, Secretary Geithner’s “victory” at the G-20 was one only King Pyrrhus could love.
But the blame cannot be laid entirely with Mr. Geithner. The fact that he left the meeting at least saving a bit of face for his delegation is a monumental achievement, considering the dismal condition of the US economy.
Fed Chairman Bernanke appears desperate to flood the United States with another round of quantitative easing (QE-2). In a $13 trillion economy, a release of anything less than $1 trillion would not be seen as effective. Remember, the Fed already injected over $1 trillion after the credit crunch – and we are still in recession. How much will it take to right this listing ship?
When Geithner pledged to China a “gradual” debasement of the dollar, it is astonishing that they didn’t laugh him out of the room.
If he were to make good on his pledge and convince Bernanke to cut QE-2 to, say, $500 billion, the US GDP and stock markets would almost certainly begin to contract. This would threaten the banking system with a second crisis borne out of the ashes, or toxic assets, of the first.
For a frame of reference, the US home mortgage market is valued at some $10.6 trillion. Indeed, foreclosures and past-due loans amount already to some 14 percent of the market, or about $1.5 trillion. Of this staggering figure, the loans delinquent or in foreclosure to which the top three banks (Bank of America, Wells Fargo and JP Morgan) are exposed amount to more than $600 billion, an amount roughly equal to the original TARP bailout fund.
At the same time, thanks to falsely low interest rates, the banks’ net interest margins, or the difference between what they earn in loan interest and what they pay to their creditors, are being squeezed severely, while their non-interest earnings are falling, due to lower economic activity and the prohibitions contained in FinReg.
Finally, there is the murky question of how exposed the banks are to the massive derivatives market, a house of cards with a shaky foundation.
As we have described for several years, the US economy is virtually locked into a long arc of decline. There are no politically palatable solutions to this quandary. Until Americans are ready to take their lumps and accept a steep drop in their standard of living, the US government will have no leverage with the creditor nations and no ability to keep its promises. Therefore, we should celebrate when China even gives our Treasury Secretary an audience.
If China does manage to topple the US dollar from its perch as the international reserve currency, our economy will very likely move into free fall as decades of inflation come pouring back into the country. We will be forced to live within our means or face hyperinflation. Losing a few votes at the IMF is a small cost to delay this eventuality, but it also puts us one step closer to it.
John Browne is a Senior Market Strategist at Euro-Pacific Capital. He’s been a member of English Parliament, an advisor to Prime Minister Margaret Thatcher, and currently serves as Lead Panelist for The Mangru Report. You can view all of his commentaries by CLICKING HERE NOW.
Healthy School Lunches – Taxation By Representation – The Mangru Report on Fox Business October 12, 2010Posted by Admin in Panel Discussion.
Tags: analysis, Anthony Pulieri, Capital, cell phone radiation, commentary, Congress, dan mangru, discussion, economic, economy, education, educational, Euro-Pacific, finance, government, government spending, Healthy School Lunches, house, HR 5504, Improving Nutrition for America's Children Act, interviews, Jim Knight, john browne, low income, news, pelosi, physical fitness, politics, Representation, representatives, talk, taxation, taxes, television, The Knight Group, The Mangru Report, United Bullion Group
As Congress continues to debate a new bill to implement healthy school lunches across the country (HR 5504, Improving Nutrition for America’s Children Act), The Mangru Report panel of experts composed of John Browne (Euro-Pacific Capital), Anthony Pulieri (United Bullion Group), and Jim Knight (The Knight Group) discusses the merits of the bill and whether this is solving an epidemic problem or just more government spending.
The panel also weighs whether the healthy school lunches should be income based as opposed to being distributed to all students, whether food stamps should be cut to pay for it, whether physical fitness programs should accompany the healthy lunches, and whether the government should be intruding further into our lives.
Tags: aegis award, Anthony Pulieri, award, bert dohmen, best tv news program, carly fiorina, dan mangru, Euro-Pacific, finance, john browne, mangru, news, report, steve forbes, The Mangru Report, tv, wellington, wellington letter
We are proud to announce that The Mangru Report has won the 2010 Aegis Award for Best TV News Program. It is truly an honor, and want to thank our fans first, because without them we would not have a show.
We’d also like to thank all of our production staff, directors, producers, interns, and everyone who makes the show possible. Special thanks go to John Browne, Anthony Pulieri, Al Zucaro, Nicholas Brack, and all of our wonderful panelists who have made the show a great program to watch.
Also a big thanks to our guests such as Carly Fiorina, Steve Forbes, Bert Dohmen, Ron Paul, Jim Rogers, Robert Kiyosaki, Marc Faber, John Bogle, and everyone else who has contributed to the show.
For the complete list of 2010 Aegis Award winners click here.
Florida Senator Mike Haridopolos, John Browne, and Anthony Pulieri on The U.S. Dollar’s World Reserve Currency Status June 3, 2010Posted by Admin in Market Commentary.
Tags: Abu Dhabi, anthony, browne, Capital, commentary, currency, dan, Dollar, Euro-Pacific, florida, gold, Haridopolous, john, mangru, mike, president, pulieri, report, reserve, senate, senator, talk, tv, U.S.
With countries around the world plotting to overtake the U.S. Dollar, and places like Abu Dhabi installing gold ATMs (ATMs that spit out gold bars instead of dollars), is the U.S. dollar on the ropes? From Episode 5 of The Mangru Report on Fox Business, Florida Senate President Mike Haridopolos (www.senatormike.com), Anthony Pulieri (United Bullion Group), and John Browne (Euro-Pacific Capital) discuss the U.S. dollar’s future as the world’s reserve currency on this War on Your Dollar segment.
Tags: ambrose evans-pritchard, bailouts, browne, Capital, daily telegraph, Euro-Pacific, finance, greece, john, politics, talk, u.k.
Reporting from London, The Mangru Report’s very own John Browne interviews Ambrose Evans-Pritchard, International Business Editor for the London Daily Telegraph. During their interview, Ambrose Evans-Pritchard discusses everything from the recent U.K. elections, the E.U. / Greece Bailout, the financial health of the U.K., and America’s role in the E.U. bailout.
Also appearing on the episode was Dan Mangru’s exclusive One-On-One Interview with Martin Weiss. For the full interview CLICK HERE NOW.
In Case You Missed It… May 23, 2010Posted by Admin in Panel Discussion.
Tags: anthony, bailout, bernanke, browne, bullion, Capital, commentary, dan, dan mangru, Dollar, dow, equities, Euro-Pacific, finance, financial, index, inflation, investments, john, mangru, money, pulieri, reform, report, retirement, stocks, talk, taxes, tv, United Bullion Group
Here are some great clips (Taxation By Representation (May 15) and War on Your Dollar (May 8)) from previous episodes of The Mangru Report. To be the first to receive notice on these clips, breaking news, and more look to the right of your screen (on the website) and sign up for The Mangru Report Insiders Club – ABSOLUTELY FREE.
Also in case you missed yesterday’s (May 22) edition of The Mangru Report, be sure to catch the replay today Sunday May 23 at 5:30 p.m. on Fox Business Network, where we will be joined by Ron Paul (Texas Congressman and Former 2008 Presidential Candidate), and John Bogle (Founder of The Vanguard Group).
War on Your Dollar – The Mangru Report – Episode 3 – John Browne & Anthony Pulieri on U.S. Treasuries May 18, 2010Posted by Admin in Market Commentary.
Tags: America, anthony, bullion, Capital, Dollar, eu, euro, Euro-Pacific, greece, Greek, group, IMF, john browne, pulieri, treasuries, trickle, U.S., united
In this “War on Your Dollar” segment The Mangru Report Panel of Experts (Anthony Pulieri of United Bullion Group and John Browne of Euro-Pacific Capital) discuss whether the recent spike in U.S. Treasuries was planned by hyping up Greek defaults. The panel also discusses the trickle effect, the level of buying the U.S. dollar, and who will bailout the dollar when it comes time that the U.S. needs a bailout.