User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Wednesday December 2, 2009 - 15:00:50 GMT
Black Swan Capital -

Share This Story:
| | Email

Is gold hinting at a global economic earthquake - Protectionism!

Key News
European banks are emerging from the credit crisis bigger than before, posing more risk to their national economies. (Bloomberg)
German machinery and factory equipment orders posted their 13th consecutive drop for October, but improved on past months. (AP)
“Vietnam’s decision to devalue its currency by 5 per cent last week to protect itself from undervaluation of the Chinese renminbi, and the worried response from Thailand and other Asian countries, suggests the move towards global trade conflict may already be unstoppable. As one group of countries seeks to gain or maintain trade advantage by manipulating their currencies, the historical precedent suggests that countries that are not able to devalue will respond with trade protection, especially tariffs and other barriers, and global trade will suffer.”
      Michael Pettis
FX Trading – Is gold hinting at a global economic earthquake – Protectionism!   
Gold may be telling us a story. That story likely goes far beyond the run of the mill US dollar weakness we hear daily; otherwise the US dollar based on pure correlation would be well into all-time new low territory and free fall (not to suggest it can’t get there still).  [Chart not available in text format.]

We recently saw this kind of divergence between the dollar and another major asset— oil. Back in March 2008 oil prices rose from about $104 dollar per barrel to around $147 per barrel in July 2008. The dollar stopped going down (which was in an extremely tight negative correlation with oil at the time) in March 2008 and went sideways and up slightly (2%) to July, when oil peaked.  Then the buck surged on the credit crunch realization. We know the rest of the story. 
I am not saying gold will fall now, but I am saying the change in correlation is interesting. Gold in fact was one commodity that held up quite well during the credit crunch as the US dollar rallied; the premier risk aversion event of our time it was. I contend there are plenty other ticking time bombs in the global economy. Any explosions could lead to gold and the dollar rising at the same time.  
Yesterday, during a radio interview I was asked about whether we would see more events like Dubai, I said absolutely. I may have been wrong on Dubai contagion, as John Ross pointed out yesterday, but Dubai I think is a clear sign there are still lots of problems in the world financial system directly related to debt and global rebalancing. Or put another way, the continued write-down of private leverage, counteracting the public debt our “leaders” are pumping into the system, is feeding into the real economy in the form of lower demand and adding to sovereign credit risk. But rebalancing is the key, as western consumers continue to reduce spending, no matter what the non-farm payroll report says on Friday.  
Therefore, I think the key macro event i.e. major sustained risk event, will likely flow from protectionism. Rebalancing is the trigger for protectionism in a world when the major player, China, suppresses its currency.  
That is the point of Michael Pettis’ Quotable above. Beggar thy neighbor policies through currency suppression is the new policy. I think this is reflected in gold rising against all paper currencies from two perspectives: 1) a valuation perspective, and 2) rising systemic risk flowing from said policies.  
Below is an excerpt from yet another brilliant Michael Pettis piece that appeared in the Jan/Fed 2009 issue of Far Eastern Economic Review (a great publication being shuttered by Dow Jones likely because it shared the naked truth about China; it lost advertisers because of its integrity, I think. No surprise since most of our multinational companies are run by gutless wonders who rarely stand on principle, but instead want to be sure they aren’t blackballed from manufacturing or access the Chinese market; my personal opinion only of course). 
This summary suggests that China is in a very similar position as the US in 1929. China’s desperate need to export in an attempt to force its domestic readjustment on the rest of the world, just as the US did in 1929, is extremely dangerous for the global economy.   
Excerpt – Far Eastern Economic Review, by Michael Pettis, Jan/Feb 2009
It’s 1929 Again 
Although there are great differences between 1929 and 2008, the global payments imbalances that led up to the current crisis were nonetheless similar in many ways to the imbalances of the 1920s. A few countries, dominated by one very large one, ran massive current-account surpluses and in the process rapidly accumulated reserves. In the 1920s it was the U.S. that played the role that China is playing today. The U.S. economy was plagued in the 1920s with overcapacity caused by substantial increases in U.S. labor productivity. This in turn was a consequence of significant investment in the agricultural and industrial sectors and mass migration from the countryside to the cities. 
Although U.S. capacity surged in the 1920s, domestic demand did not rise nearly as quickly. As a consequence, the U.S. ran large annual trade surpluses ranging from 1% to 3% of GDP during the 1920s, or 0.4% of global GDP (China, although only 6% of world GDP, has run trade surpluses of roughly the same magnitude). U.S. overcapacity didn’t matter when there was sufficient foreign demand. It could be exported, mostly to Europe, while foreign bond issues floated by foreign countries in New York permitted deficit countries to finance their net purchases. 
But as the U.S. continued investing in and increasing capacity, without increasing domestic demand quickly enough, it was inevitable that something eventually had to adjust. The financial crisis of 1929-31 was part of that adjustment process. When bond markets collapsed as part of the crash, bonds issued by foreign borrowers were among those that fell the most. This, of course, made it impossible for most foreign borrowers to continue raising money, and by effectively cutting off funding for the trade-deficit countries, it eliminated their ability to absorb excess U.S. capacity. 
The drop in foreign demand required a countervailing U.S. adjustment. Either the U.S. had to increase domestic consumption, or it had to cut back domestic production, but there was unfortunately more to the crisis than simply the drop in foreign demand. With the collapse of parts of the domestic U.S. banking system, domestic private consumption also fell. The slack in demand should have been taken up by U.S. fiscal expansion, but instead of expanding aggressively, as John Maynard Keynes advised, President Roosevelt expanded cautiously. When the credit crunch came and the world was awash in American-made goods that no one was willing or able to buy, it was unreasonable, as Keynes argued bitterly, to expect the rest of the world to continue purchasing U.S. goods, especially since the financing of their consumption had been interrupted. 
Since U.S. production exceeded consumption, the need for demand creation, according to Keynes, most logically resided in the U.S. But Washington had other ideas. In 1927 and 1928 there were already unemployment pressures, and the 1929 collapse in demand exacerbated those pressures. This prompted U.S. senators to respond in 1930 with the notorious Smoot-Hawley Tariff Act aimed at boosting demand for domestic production. They attempted to divert demand for foreign goods to U.S. goods–basically to export their overcapacity–and in so doing force the brunt of the adjustment onto their trading partners. Their trading partners, not surprisingly, retaliated by closing their own borders to trade, causing international trade to decline by nearly 70% in three years, thereby shifting the brunt of the adjustment back onto the U.S. 
The trade tariff made things worse not just because impediments to trade are costly to the global economy, but rather because it set off a trade war in which other countries forced the U.S. broadly into balance. In two years, U.S. merchandise exports declined 53%, while the trade surplus declined by 63%. Excess production over consumption had to be resolved largely within the U.S., and since much domestic investment had been aimed at the export sector, the collapse in exports brought a concomitant decline in domestic investment. The U.S. either had to engineer a substantial increase in domestic demand by fiscal means, as Keynes demanded, or adjust via a drop in production and employment. It did the latter. 
Today China is facing a similar problem. With the collapse of bank intermediation, U.S. households and businesses are cutting consumption and raising savings. This is a necessary adjustment. Most analysts, perhaps thinking they are echoing Keynes’s analysis of the problem in the 1930s, call on the U.S. government to engage in massive fiscal expansion to replace lost private demand. But this is not what Keynes would have recommended. If declining U.S. private consumption is met with increasing public consumption, the world will simply continue playing the game that has already led into so much trouble. The only difference would be that instead of having one side of the global imbalance accommodated by private over-consumption and rising debt, it would be accommodated by public overconsumption and rising debt. Demand must be created by the trade-surplus countries that have, to date, relied on net exports to protect themselves from their overcapacity. They must force demand up quickly in order to close the gap, and since expecting private consumption to rise quickly enough is unrealistic, it has to be public consumption–a large fiscal deficit. 
Might China and smaller Asian countries repeat the U.S. mistake of the 1930s? Perhaps. Beijing already seems to be in the process of defending its ability to export overcapacity. Although there has been an attempt to boost fiscal spending, most analysts argue that this so far has been too feeble to matter much. On the other hand it has tried to protect and strengthen its export sector by lowering export taxes and reducing interest costs, which lower the financing cost for producers and have little impact on consumers. 
This cannot work for long. The proper place for new demand to originate is, as in the 1930s, in trade-surplus countries. They should be engaged in expanding demand, not expanding supply. If they try to export their way out of a slowdown, there will almost certainly be another trade backlash, in which case the full force of the adjustment will be borne by the trade-surplus countries, again as in the 1930s—with the proviso that although China’s trade surplus as a share of global GDP is comparable to the U.S. trade surplus in the 1920s, China is a much smaller economy, and so its trade surplus represents a much higher share of its GDP. 
In order to make the transition workable and avoid trade friction, the world’s major economies must engineer a joint program of fiscal expansion. The trade-deficit countries should expand moderately so as to slow down the adjustment period and to give maximum traction to fiscal expansion on the part of the trade-surplus countries. China must be given at least three or four years to make concerted efforts to boost domestic demand to the point where global imbalances are more manageable. 
The problem is that U.S. (and European) demand contraction is occurring at a shockingly rapid pace. There is a real risk that the adjustment process in China will careen out of control. In order to manage this risk, U.S., European, Japanese and Chinese policy makers must quickly come to a firm understanding of how significant the global adjustment is and how dangerous the process will be for China, and design a multiyear plan of demand expansion in which China is given time to adjust its overcapacity. If major economies focus only on domestic adjustment, China will almost certainly choose the path of defending its ability to export overcapacity onto the rest of the world, while the trade -deficit countries will discover the expansionary impact of trade constraints. In that case it is hard to imagine how China and the world can avoid disaster. 
Michael Pettis is a finance professor at Peking University and the author of The Volatility Machine (Oxford University Press, 2001).
Jack Crooks
Black Swan Capital LLC 

Long-term trends, major global economic issues, interviews with top traders, book reviews…
We do it all in our Currency Investor newsletter that’s geared toward newcomers and experienced investors who are looking for a conservative approach to the foreign exchange market. 
In plain language we deliver global macroeconomic analysis and actionable ideas geared toward exchange rate fluctuations.
Our analysis is comprehensible and our recommendations consist of ETFs, so don’t get turned off by buzz words like “exchange rates” or “foreign exchange” – this investing strategy is as easy to implement as buying and selling stocks.
Plus, at $39 per year it’s a deal you’d be hard-pressed to find anywhere else. Thorough global analysis plus complete investment guidance ... and all for only $39 per year? You can’t beat that with a stick. Click here to read more ... 


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105