Treasury Wars

Ukraine a "treasury-currency" reserve currency battle ?

2014-03-04T08:17:00.001-08:00

Ukraine crisis: Russia warns of dropping US dollar as reserve currency if US imposes sanctions

Reuters
March 4, 2014

A Kremlin aide was quoted on Tuesday as saying that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off any loans to US banks.

Image: U.S. Dollar (Wiki Commons).

Mr Sergei Glazyev, who is often used by the authorities to stake out a hardline stance but does not make policy, was cited by RIA news agency as saying Moscow could recommend that all holders of US treasuries sell them if Washington freezes the US accounts of Russian businesses and individuals.

The US Senate Foreign Relations Committee is preparing legislation to provide support to Ukraine and consulting the Obama administration on possible sanctions against individual Russians, the committee’s chairman said on Monday.

The committee was also consulting with President Barack Obama’s administration on possible sanctions against individuals ranging from visa bans and asset freezes to suspending military cooperation and sales, as well as economic sanctions.

Full article here

china & new zealand work to make currencies directly convertible

2013-05-28T07:39:00.000-07:00

via wallstreetjournal wsj.com

WELLINGTON, New Zealand—Seeking to help its exporters, New Zealand is negotiating with China to make their currencies directly convertible, a spokeswoman for Prime Minister John Key said.

Wellington's push is aimed at driving down costs for companies that do business with China, which is close to overtaking Australia as New Zealand's No. 1 trading partner.

Talks are in the "very early stages" and "progressing," the spokeswoman said, adding that the issue had been brought up during Mr. Key's visit to China last month.

Officials at the People's Bank of China didn't return calls seeking comment.

Direct convertibility between the Chinese yuan and New Zealand dollar would end the need for New Zealand's companies and currency traders to convert New Zealand dollars or yuan into U.S. dollars when making or receiving payments.

New Zealand's two-way trade with China totaled 15.3 billion New Zealand dollars (US$12.4 billion) in the year ended April 30, compared with NZ$16.8 billion with Australia, government data showed last week. Most of New Zealand's exports to China are agricultural products—particularly milk powder, meat and wool—while most of its imports from there are computers, mobile phones and clothes.

Earlier

China, Australia Reach Currency Deal

Trade relations took a knock earlier this month when China temporarily blocked millions of dollars of New Zealand meat from entering the country, as it bolstered scrutiny of imports after a spate of mainly homegrown food-safety scandals.

Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China's State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People's Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.

China and Australia reached a deal to allow direct convertibility between the yuan and Australian dollar last month; before that, only the U.S. dollar and Japanese yen were directly exchangeable with the yuan. As China has become more industrialized, it has become Australia's biggest trading partner and buyer of its commodities, including raw materials such as copper and iron ore.

For New Zealand, "There is no time frame for concluding an agreement," Mr. Key's spokeswoman said. "We are aware it took Australia around 12 months to achieve its recent agreement with China."

China topped Australia as New Zealand's biggest trading partner from February through April this year, recent monthly government data showed. Trade between the countries has been growing ever since they reached a bilateral free-trade agreement five years ago. That increased trade helped New Zealand, like Australia, weather the economic turmoil in Europe and the fragility of the U.S. recovery, which have weighed on global growth.

As well as lowering business costs, direct convertibility may pave the way for New Zealand's central bank to diversify some of its foreign-exchange assets into Chinese government bonds. Last month, the Reserve Bank of Australia said it planned to invest up to 5% of its foreign-currency assets—close to two billion Australian dollars (US$1.9 billion)—in Chinese government bonds.

The Reserve Bank of New Zealand declined to comment.

Write to Rebecca Howard at rebecca.howard@wsj.com and James Glynn atjames.glynn@wsj.com

Austerity and Higher Interest Rates

2013-05-24T03:49:00.001-07:00

By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — The “Dr. Boom” scenario: America is about to “unleash a spending spree. Years of self-denial give way to pent-up demand,” predicts UBS economist Maury Harris in USA Today’s bold lead story.

His clue? Consumer sentiment: “Harris estimates that in the next five years, catch-up consumption will boost annual consumer spending growth by a half point to above 3% from about 2%.”

Reassuring? No, wishful thinking. Be very skeptical. As Robert Kuttner, author of the new “Debtors’ Prison: The Politics of Austerity Versus Prosperity” once wrote in BusinessWeek,
_______________________________________________
Buy this Book via Amazon Here

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“What do you call an economist with a prediction? Wrong.”

Harris is bucking the headwinds of history. As Jeremy Grantham, chief strategist of the $100 billion GMO money managers, recently told InvestmentNews, the newspaper of record for America’s 90,000 professional investment advisers, “3% annual GDP growth is history.”

Here’s why you better be preparing today for a crash dead ahead. As Pimco’s Bill Gross warned in his recent newsletter: “You’re going to lose money investing ... because the central banks say so.” That’s right, this is a Fed-driven rally. Soon the Fed will be forced to stop printing cheap money.

No spending spree; Obama’s new Fed Chair has to raise rates

Here’s the alternative “Dr. Doom’s August scenario:” Aging bull market. Fifth year. Markets at risk. Down soon. August. Will Obama reappoint Bernanke again? No way. But who? New blood? Shake things up with Wall Street mastermind Mayor Michael Bloomberg? After more than two decades of Greenspan/Bernanke’s misguided, destructive monetary policies, America could use a guy like him at this crucial turning point.

But expect a safe bet. Obama favors a woman. The high rollers are already betting on Janet Yellen, vice chairman of the Fed, long-time monetary insider. Former San Francisco Federal Reserve Bank CEO. Also chairman of Clinton’s Council of Economic Advisers.

But watch out, even a sure bet can misjudge hidden dangers lurking ahead of a Titanic like the $15 trillion U.S. economy. As the Wall Street Journal’s Matt Wirz wrote in March:

The Fed “won’t be able to keep a lid on interest rates forever.” So “large money managers such as BlackRock, TCW Group and Pimco are getting ready for the day when rates take their first turn higher. It isn’t coming anytime soon, these investors say. But when it does, they worry, the ascent will be swift and steep.”

Get defensive now, start preparing for a crash ... later is too late

Get it? Rates will go up. Way up. Very fast. And America’s 95 million Main Street investors will be unprepared. Markets will crash. Like 1994’s 24% bond crash after Fed rate increases, notes Wirz.

The big players say the crash “won’t happen soon.” Don’t believe them. They’re betting with trillions. And they are hedging their bets, already preparing for “when rates take their first turn higher,” because rates will soar “swift and steep,” and when that happens it will be too late to prepare.

“Dr. Doom,” the economist Nouriel Roubini is also hedging his bet, misleading investors, telling us to expect a “huge rally in risky assets” the next couple years “setting markets up for a major sell-off.”

Warning, a crash is more likely to happen in August 2013 than in 2015 when the next presidential election campaign is kicking into high gear. So start preparing for a crash when the new Fed chairman ends cheap money.

article continued here....

http://www.marketwatch.com/story/bernanke-out-by-august-qe-ends-rates-up-crash-2013-05-22?pagenumber=2

Thanks, World Reserve Currency, But No Thanks: Australia And China To Enable Direct Currency Convertibility

2013-04-01T14:39:00.000-07:00

by Submitted by Tyler Durden on 03/31/2013 www.zerohedge.com

full article here

http://www.zerohedge.com/news/2013-03-31/thanks-world-reserve-currency-no-thanks-australia-and-china-enable-direct-currency-c

A month ago we pointed out that as a result of Australia's unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip.

Over the weekend, Australia appears to have come to the same conclusion, with the Australian reporting that the land down under is set to say goodbye to the world's "reserve currency" in its trade dealings with the world's biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process "slashing costs for thousands of business" and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar's reserve currency status until one day it no longer is.

That said, this latest development in global currency relations should come as no surprise to those who have followed our series on China's slow but certain internationalization of its currency over the past two years. To wit: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says", "India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees", and "The USD Trap Is Closing: Dollar Exclusion Zone Crosses The Pacific As Brazil Signs China Currency Swap."

And while previously the focus was on Chinese currency swap arrangements, the uniqueness of this weekend's news is that it promotes outright convertibility of the Yuan: something China has long said would happen but many were skeptical it ever would. That is no longer the case, and with Australia setting the precedent, expect many more Asian countries (at first) to follow in Australia's footsteps, because while the developed world is far more engaged in diluting its currency as a means to spur "growth", Asian and developing world nations are still engage in real, actual trade, where China is rapidly and aggressively becoming the world's hub.

Numbers behind DJIA New ALL TIME HIGH

2013-03-05T08:21:00.002-08:00

via Cramer, CNBC Host and for full article

http://www.zerohedge.com/news/2013-03-05/last-time-dow-was-here

"Mission Accomplished" - With CNBC now lost for countdown-able targets (though 20,000 is so close), we leave it to none other than Jim Cramer, quoting Stanley Druckenmiller, to sum up where we stand (oh and the following list of remarkable then-and-now macro, micro, and market variables), namely that "we all know it's going to end badly, but in the meantime we can make some money" - ZH translation: "just make sure to sell ahead of everyone else."

Dow Jones Industrial Average: Then 14164.5; Now 14164.5
Regular Gas Price: Then $2.75; Now $3.73
GDP Growth: Then +2.5%; Now +1.6%
Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
Americans On Food Stamps: Then 26.9 million; Now 47.69 million
Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
US Deficit (LTM): Then $97 billion; Now $975.6 billion
Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
US Household Debt: Then $13.5 trillion; Now 12.87 trillion
Labor Force Particpation Rate: Then 65.8%; Now 63.6%
Consumer Confidence: Then 99.5; Now 69.6
S&P Rating of the US: Then AAA; Now AA+
VIX: Then 17.5%; Now 14%
10 Year Treasury Yield: Then 4.64%; Now 1.89%
EURUSD: Then 1.4145; Now 1.3050
Gold: Then $748; Now $1583
NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares

Average:
This is going to End Badly with the small investor hurt the worst.... KO

Japan Fires First Shots in Currency- Treasury War

2013-01-16T07:24:00.001-08:00

see video here

http://www.cnbc.com/id/100377532

Faced with a stubbornly slow and uneven global economic recovery, more countries are likely to resort to cutting the value of their currencies in order to gain a competitive edge.

Japan has set the stage for a potential global currency war, announcing plans to create money and buy bonds as the government of Prime Minister Shinzo Abe looks to stimulate the moribund growth pace. (Read More: Japan PM Says BOJ Must Set 2% Medium-Term Inflation Goal)
Economists in turn are expecting others to follow that lead, setting off a battle that would benefit those that get out of the gate quickest but likely hamper the nascent global recovery and the relatively robust stock market.

While respective countries would have their own versions, the moves would follow three years of aggressive bond buying from the Federal Reserve as part of its $3 trillion quantitative easing program.

Though critics worry about the long-term consequences, the three rounds of QE have managed to keep the U.S. economy afloat and have boosted risk assets such as stocks and commodities.
"Ever since the Fed launched QE2 in August 2010, we have been in the currency-war regime," said Alessio de Longis, portfolio manager of the Oppenheimer Currency Opportunities Fund. "It will continue to be this."

In a late-2012 announcement, outgoing Bank of Japan leader Masaaki Shirakawa indicated an aggressive easing program that would total 50 trillion yen over the next year or so.
The move is part of Abe's plan to get the country out of its two-decade deflationary spiral, but has generated mixed reaction.

Atta Kenare | AFP | Getty Images

Dollar, Euro and Iranian Rial

"The economic policies of the new administration are set to be centered on loose monetary policy and fiscal pump-priming," Citigroup analysts said in a research note. "However, experience suggests this is unlikely to lead to a sustained revival of the Japanese economy."

Still, a declining yen would help Japanese exports and put upward pressure on other currencies, something unlikely to be tolerated by its competitors.

The massive Fed balance sheet expansion has resulted in the U.S. dollar declining about 11 percent against a basket of world currencies since QE began in 2009. In the meantime, stock prices have doubled since their March 2009 lows and the Morgan Stanley Commodity Related Index has gained about 80 percent.

With the U.S. as its guide, competitive devaluation is expected to accelerate.
Strategas investment strategist Jason Trennert included the "race to the bottom" as one of his five principle investment themes of the year.

"Recent actions on the part of the Fed, the ECB, the Bank of Japan, the Swiss National Bank, and the Bank of England all suggest that financial repression (or the perpetuation of negative real rates on sovereign debt) is likely to be the most enduring investment theme for the foreseeable future," Trennert said.

In 2012, global central banks cut interest rates some 75 times in an effort to create conditions that would spur growth.

Economists, though, expect growth to meander around 3 percent globally this year, a level generally considered to reflect little actual growth at all. (Read More: US Economy to Grow 2.5% This Year: Fed's Evans)

The hope, though, for those engaged in currency devaluation is that it cheapens the price of their goods globally and thus increases exports and creates positive inflation.

But the initial stages of inflation are usually bad for stocks and send investors to commodities and fixed income indexed for inflation, such as Treasury Inflation Protected Securities.

"So what could cause a market correction over the first half of 2013?" Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said in an analysis. "In our view it will either be 1) a rapid rise in interest rates and a re-run of the 1994 story; or 2) the economy fails to respond to the liquidity, forcing nations to devalue their currencies in an attempt to stimulate growth."

The Standard & Poor's 500 slipped about 4 percent in 1994, losing ground through year as the Fed tightened policy to control the recovery. Of course, a major bull run began the following year, with the index soaring 32 percent in 1995.

Though the release of the most recent Fed minutes scared some investors into thinking the Fed might normalize rates sooner than expected, those fears since have been largely dismissed.
Other central banks around the world are likely to take note. (Read More: Has Draghi Won the Battle With Financial Markets?)

"It is clear that many nations want/need a weaker currency – should China also feel the need for a weaker (currency)...then the risks of a risk-negative (currency) war would start to grow," Hartnett said. "Gold would rally sharply, but note a rise in gold prices and a fall in bond prices precipitated the 1987 crash."

He advised clients to keep a close watch on the Chinese yuan and the broader Asian dollar index.
Oppeheimer's de Longis adds the Colombian peso to that list as well as the New Zealand and Australian dollars, with others in South America and Europe possibly joining as well.

He fears that while the short-term effects could be positive for those countries involved as well as the risk assets associated with such moves, the long-term consequences could be onerous.

"These policies are creating the preconditions for central banks around the world in, say, five to 10 years from now to ask, 'How do we shrink these balance sheets in an organized and gradual manner?'" de Longis said. "History tells us that these large experiments, especially on a global scale, don't end up being unwound in an orderly manner."

—By CNBC's Jeff Cox

Geithner Proposes "NO" Debt Limit....

2012-11-19T08:29:00.001-08:00

Treasury Secretary Timothy Geithner said Friday that Congress should stop placing legal limits on the amount of money the government can borrow and effectively lift the debt limit to infinity.

That sounds great for wall street and drunk on money politicians who have a never ending quest to spend money, on the backs of "we the People"

On Bloomberg TV, “Political Capital” host Al Hunt asked Geithner if he believes “we ought to just eliminate the debt ceiling.”

“Oh, absolutely,” Geithner said.

“You do? Will you propose that?” Hunt asked.

“Well, this is something only Congress can solve,” Geithner said. “Congress put it on itself. We've had 100 years of experience with it, and I think only once--last summer--did people decide to use it to threaten default on the American credit for the first time in history as a tool for political advantage. And that’s not a tenable strategy.”

Hunt then asked: “Is now the time to eliminate it?”

“It would have been time a long time ago to eliminate it,” Geithner said. “The sooner the better.”

Geithner’s Treasury Department quietly warned at the end of October that the Treasury would reach current legal limit on the federal government's debt by about the end of the year.

In August 2011, President Barack Obama and Congress agreed to lift the legal debt limit by another $2.4 trillion--allowing the government to borrow up to $16.394 trillion. However, as of the close of business on Thursday, the Treasury had only $154.3 billion of that $2.4 trillion in new borrowing authority left.

Senate Majority Leader Harry Reid (D-Nev.) said last week that the Senate stands ready to increase the debt limit by another $2.4 trillion. “If it has to be raised, we’ll raise it,” Reid said.

Shadow Banking System

2012-11-19T07:12:00.002-08:00

The system of so-called "shadow banking," blamed by some for aggravating the global financial crisis, grew to a new high of $67 trillion globally last year, a top regulatory group said, calling for tighter control of the sector.

A report by the Financial Stability Board (FSB) on Sunday appeared to confirm fears among policymakers that shadow banking is set to thrive, beyond the reach of a regulatory net tightening around traditional banks and banking activities.

The FSB, a task force from the world's top 20 economies, also called for greater regulatory control of shadow banking.

"The FSB is of the view that the authorities' approach to shadow banking has to be a targeted one," the group wrote in a report, noting the current lax regulation of the sector.

"The objective is to ensure that shadow banking is subject to appropriate oversight and regulation to address bank-like risks to financial stability," it said.

Officials at the European Commission in Brussels also see closer oversight of the sector as important in preventing a repeat of the financial crisis that has toppled banks over the past five years and rocked the euro zone.

Marc Faber: Prepare For Stocks Meltdown

2012-11-13T10:07:00.001-08:00

via CNBC.com

Marc Faber: Prepare for a Massive Market Meltdown

Published: Tuesday, 13 Nov 2012 | 7:54 AM ET

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By: Holly Ellyatt
Assistant News Editor

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The markets are going to go into meltdown soon, so expect stocks to lose 20 percent of their value, Marc Faber, author of the Gloom, Boom and Doom report told CNBC on Tuesday.

Bloomberg | Getty Images

Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom and Doom Report

“I don’t think markets are going down because of Greece, I don’t think markets are going down because of the ‘fiscal cliff’ — because there won’t be a ‘fiscal cliff,’ ” Faber told CNBC’s “Squawk Box.” “The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view.”

Faber, who is known for his bearish views, cited tech giant Apple [AAPL 546.159 3.329 (+0.61%) ], a company whose disappointing earnings havecaused its stock to fall 20 percent from its September highs and 14 percent in the past month.

A series of poor quarterly earnings from corporate giants such asAmazon.com [AMZN 226.57 0.10 (+0.04%) ], McDonald's [MCD 84.86 -0.02 (-0.02%) ] and Google [GOOG 663.32 -2.58 (-0.39%) ] have hurt investor sentiment in recent weeks.

Faber argued that the “fiscal cliff,” a rise in taxes and automatic spending cuts, would actually involve some minor tax increases in “five years’ time” and some spending cuts “in 100 years.”

General Scandel Better Than General Hospital

2012-11-13T06:44:00.002-08:00

Gen. Patraeus and Mrs Broadwell

The Players:

Mrs Kelley far right

USMC Gen. Allen

Interesting Facts, Possible Reasons for Timing and Ultimately what it all means.

1. FBI interviews of Mrs Broadwell and Gen. Patraeus both admitted adultery and cooperated, freely gave access to computers.

2. Broadwell computer had both "Non-classified" and "classified" files, Gen. Patraeus stated he gave her no classified files.

3. Why was she emailing Mrs Kelley silly "catty" emails, when there was nothing to gain, since Mrs Kelley was friends with Mrs Patraeus?

4. Mrs Broadwell has some connections to House Majority Leader Eric Cantor, and know International Arms Dealer, Jans Henrik Jebsen, and one of his company's Gamma Applied Visions Group..

5. Gen. Patraeus was known to be somewhat "anti-Israel" and Eric Cantor is friends of "likud" party.

6. Timing? almost as soon as the election was called, this story is released, IE When Republicans realized they had lost whitehouse.

7. Mrs kelley was intentionally ensnared by Mrs Broadwell because she knew of her affair with Gen. John Allen, the top U.S. general in Afghanistan aligned with Gen. Patraeus and the Obama Line.

8. Broadwell has MS Degree with Focus on Iran and Syria ???

9. The FBI Agent Friend of Mrs Kelley, also sent Mrs Kelley hundreds of emails of his "Chest" bare naked chest with sexual overturns towards her.

Tying all this together, Obama allowed our Ambassador and staff to be sacrificed for destruction of the "Obama" torture prison at the compound and destruction of all evidence therein. That is why no agency was allowed to respond to the SOS via Benghazi staff.

Hillary Clinton and Pres. Obama very well might have covertly arranged for the Libyans to attack the compound, knowing that the Gen. Patraeus, and Gen. Allen Scandel was bound to reveal the CIA Torture Prison, and that Sex Stores were going to break either before or after the election.

Thus, Pres. Obama and Sec of State Clinton have their own Abu Ghraib, Watergate, and Clinton Sex scandal all rolled into One Big Cover up.

Republicans lost election, Obama and Clinton knew of Benghazi, CIA Torture Prison, If Mrs Broadwell is Israel plant, she hacked Patraeus email and computer. Israel wants war with Syria/Iran as do international arms dealers. Eric Cantor wants Obama to go down via its not the action, its the "Cover Up", Obama knew Benghazi was attacked to retrieve Libyan Al Queada suspects held in the CIA prison. Gen.'s Patraeus, and Allen were Anti War and against action by Israel and USA against Iran... Israel and Republicans want Obama Admin frozen in Scandal. Obama goes down for the "Lies" to congress and American People about allowing the death of the Benghazi staff.

This story is going to be better than General Hospital, no Pun Intended.

Eco-Tax, US Treasury studies Green Tax Code

2012-11-01T15:03:00.000-07:00

U.S. Treasury Sets "Green Tax Code"

Coming soon: a green tax code for American businesses and individual taxpayers alike?

Sensenbrenner, a Republican, is a former member of the House Select Committee on Energy Independence and Global Warming, created by the Democratic congressional majority during the Bush Administration.

It is there, he says, that the National Academies study was first ordered up, by Congressman Earl Blumenauer of Oregon, in 2008—but never funded, until the advent of the Obama Administration.

A major tax study currently being sponsored by the U.S. Treasury will give environmental activists a powerful new weapon in their campaign to alter the entire American economic and social landscape in the name of halting “climate change”—including the possible levying of new carbon taxes.

That campaign is bound to intensify in the aftermath of Nov. 6’s presidential election, regardless of who wins the race, as the nation faces the challenge of deficit reduction and tax reform that will be required to overhaul the country’s over-strained finances. Environmental advocates and others are likely to raise such innovative mechanisms as carbon taxes and major shifts in tax rates and incentives as part of the process—and the impending study may well provide them with important ammunition.

Under the bland title of Effects of Provisions in the Internal Revenue Code on Greenhouse Gas Emissions, the $1.5 million study is being carried out under the auspices of the National Academies of Science (NAS). Originally planned to take two years, the ambitious project aims to take an inventory of the U.S. tax code in terms of the effects of its most important provisions on the emission of carbon dioxide and other greenhouse gas emissions—a huge and complicated exercise in environmental and economic modelling.

The study itself will not be available until after the election. Originally slated for completion in September of this year, its publication has since been postponed until the first quarter of next year.

According to a NAS spokesperson, one reason is that it must go through a rigorous, anonymous review process. But according to a NAS staffer who spoke with Fox News, another significant reason is the Academies’ demand for a “consensus” among the committee members charged with its production before the review process begins. According to the staffer the study is “still in the process of late stage revision by the committee,” and will go for review “in the near future.”

The results will likely bring an entirely new dimension to any future bargaining table in Washington that aims at achieving financial reform. Such bargaining is considered nearly inevitable as the U.S. tries to back away from the fiscal cliff created by towering annual deficits and still accelerating obligations under Social Security and still-to-be implemented Obamacare.

What the NAS study will examine are the basic building blocks of the tax system, but not from a job creation or growth perspective. Instead, the question is what levels of greenhouse gas are currently produced by its provisions.

These include not only deductions and allowances for production of varying types of energy, but also such things as the home mortgage deduction and the investment tax credit to spur business activity, not to mention tax provisions that affect patterns of urban development, agriculture, forestry and all manner of industrial processes.

In short, just about everything.

The terms of reference of the study say it “will not recommend particular new taxes or tax incentives nor changes in existing provisions of the tax code.” On the other hand, the study “may evaluate the efficiency and effectiveness of different tax measures in reducing GHG emissions relative to other policy instruments.”

CLICK HERE FOR THE PROJECT DESCRIPTION

In other words, the study may provide the means to “comparison shop” tax levels and tax incentives for a wide variety of economic and social activities on the basis of their alleged impact on global warming.

One element of such an approach has been frequently hinted at by the Obama Administration during the election campaign, as it has argued against unspecified subsidies for the oil, gas and coal industries and greater emphasis on “renewable” energy sources such as solar and wind which have so far proved to be much more expensive.

The National Academies’ study is being overseen by an ad hoc committee of experts, whose membership is approved by the National Academies’ president, Ralph J. Ciccerone—himself an expert on atmospheric chemistry. The membership list is a lengthy roster of climate change and legal experts as well as economists versed in the arcana of computerized economic modeling.

CLICK HERE FOR THE COMMITTEE MEMBERSHIP

The committee is chaired by William Nordhaus, a distinguished professor of economics at Yale University and former member of the President’s Council of Economics under Jimmy Carter. Nordhaus has been involved in previous National Academies efforts to, as the study website puts it, “integrate environmental and other non-market activity into the national economic accounts.”

Approached by Fox News to discuss the study, Nordhaus declined until after its publication.

Until the study itself is published, it is also not possible to examine the research efforts that have gone into it, which largely consist, apparently, of four consultants’ reports commissioned by the National Academies’ committee selected to oversee the study.

One of those reports was delivered by a consulting firm headed by Dale Jorgenson, a renowned professor economics at Harvard University, and former chairman of the specific board of the National Academies of Science that was charged with producing the new tax code study.

Contacted by Fox News, Jorgenson also declined to speak about the project until a final report is published.

Among the many research items on Jorgenson’s Harvard University website, however, is testimony last June before the Senate Committee on Finance entitled “Tax Reform: the Impact on U.S. Energy Policy,” in which the economist outlines a new system of energy taxes on coal, oil and natural gas that could “clean up the environment and slow global warming” The new tax revenue could also “close the budget gap and reduce tax rates as part of comprehensive tax reform.”

CLICK HERE FOR JORGENSON’S WEBSITE

According to Ken Green, an environmental expert at the American Enterprise Institute, the entire NAS study “look like another effort aimed at paving the way for weaving carbon taxes into tax reform.”

Green says that option is favored not only by political liberals, but also by some conservatives who want a “revenue-neutral” version of carbon taxes to, among other things, “green up the conservative brand.”

Green argues that such taxes are not only ineffective, but dampen economic growth and are actually regressive, hitting lower-income Americans higher than harder-income earners.

To Congressman James Sensenbrenner of Wisconsin, the National Academies’ study, whenever it appears, is “a waste of money,” whose results, whenever they appear, should be opposed. “They are simply trying to bypass the people’s representatives and use technocrats to achieve their agenda,” he argues.

Rep. Blumenauer, a Democrat, is a strong advocate of “sustainable communities” and environmental causes. His office confirmed that he had originally proposed the National Academies study, but did not reply to additional requests for interviews or information.

Whatever the study’s origins, its research will be what counts—and in the tug-of-war between “climate change” concerns and economic growth, however that research is eventually used will still depend greatly on the results on Nov. 6.

Currency Wars

2012-09-20T15:17:00.000-07:00

China Threatens Japan with Treasury War

2012-09-19T09:02:00.001-07:00

via The Telegraph Written by Ambrose Evans-Pritchard

Chinese Navy Ships On Maneuvers

Sept. 18, 2012

Jin Baisong from the Chinese Academy of International Trade – a branch of the commerce ministry – said China should use its power as Japan’s biggest creditor with $230bn (£141bn) of bonds to “impose sanctions on Japan in the most effective manner” and bring Tokyo’s festering fiscal crisis to a head.

Writing in the Communist Party newspaper China Daily, Mr Jin called on China to invoke the “security exception” rule under the World Trade Organisation to punish Japan, rejecting arguments that a trade war between the two Pacific giants would be mutually destructive.

Separately, the Hong Kong Economic Journal reported that China is drawing up plans to cut off Japan’s supplies of rare earth metals needed for hi-tech industry.

The warnings came as anti-Japanese protests spread to 85 cities across China, forcing Japanese companies to shutter factories and suspend operations.

Fitch Ratings threatened to downgrade a clutch of Japanese exporters if the clash drags on. It warned that Nissan is heavily at risk with 26pc of its global car sales in China, followed by Honda with 20pc. Sharp and Panasonic both have major exposure. Japan’s exports to China were $74bn in the first half of this year. Bilateral trade reached $345bn last year.

Mr Jin said China can afford to sacrifice its “low-value-added” exports to Japan at a small cost. By contrast, Japan relies on Chinese demand to keep its economy afloat and stave off “irreversible” decline.

“It’s clear that China can deal a heavy blow to the Japanese economy without hurting itself too much,” he said. It is unclear whether he was speaking with the full backing of the Politburo or whether sales of Japanese debt would do much damage. The Bank of Japan could counter the move with bond purchases. Any weakening of the yen would be welcome.

A recent study by the US Defence Department concluded that a Chinese firesale of US debt was not a serious threat.

The US defence secretary, Leon Panetta, was in Beijing on Tuesday to try to stem the political crisis, calling for restraint on both sides.

He warned earlier that “provocations” over the islands could spiral out of control and lead to conflict.

Mr Panetta said the US is neutral but this is a hard balancing act, given the US nuclear umbrella for Japan and its use of military bases on Japanese soil as an “unsinkable aircraft carrier”. The ambiguity of the US role was glaring after a deal with Tokyo on Monday to build a new anti-missile radar shield – ostensibly against North Korea.

Diplomats say China is calibrating the crisis to probe the strength of US ties with Japan, knowing that alliance fatigue in Washington and the clumsy handling of the dispute by Tokyo has created a rare opportunity.

The Obama administration must navigate a delicate course. A tough line against China risks putting the world’s two superpowers on a collision course: a soft line risks setting off alarm bells in Japan and pushing the country towards rearmament.

Christian Le Miere from the International Institute for Strategic Studies said the crisis had become dangerous, citing Mao Zedong’s aphorism from 1930 that “a single spark can start a prairie fire”.

He said the region is “rife with historical enmity and chauvinism”, encouraged by Tokyo’s “seeming lack of contrition for wartime atrocities” and China’s own well-nurtured narrative of humiliation by foreigners.

China’s post-Maoist regime derives its legitimacy from nationalism, especially now that the boom is fading and China is losing some of its competitive edge.

The anti-Japanese fervour was systematically stoked by the “Patriotic Education Campaign” of Jiang Zemin in the 1990s to divert attention from party corruption and the growing gap between rich and poor.

But it is a double-edged sword for China’s leaders. “Given its potency, it is difficult to control. Nationalism can turn against the government, if it is perceived as doing too little,” he said.

Markets are already starting to price in an arms race in Asia. Shares of China’s North Navigation Control Technology, which makes missile systems, have jumped 30pc in recent days.

China is becoming self-sufficient in defence. It was the world’s biggest net importer of weapons six years ago. It fell to fourth place last year.

Japan is at the other extreme. An official report this year – “A Strategy for Survival” – said Japan’s spending on its “Self-Defence Force” had shrunk by 4pc in 10 years. It called for “urgent” action to rebuild the country’s military.

If there is any silver lining in an Asian arms race, it may at least soak up the region’s excess savings and pull the world out of semi-slump. But be careful what you wish for.

for additional news go here....http://www.telegraph.co.uk/finance/china-business/9551727/Beijing-hints-at-bond-attack-on-Japan.html

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