Who wins a currency war?

[Random.Capital]

Quote from Misthos:

Who "Wins" a Currency War?

Soros?

 

[newguy05]

It's a little known fact, but soros tried to pull the same game he did on the hongkong dollar during the asian crisis, it was working too but got the attention of the chinese govt, they basically said cant let a few investor do this shit to a country, and put the chinese govt behind it and wrote a blank check to support the hongkong dollar. Soros had to pull out and lost a lot of money.

edit: ok maybe not a little known fact, found tons articles on google. Here's one, although it said hk govt, in reality it was the mainland china govt that went all in behnd the scene, soros got his ass handed to him.

Soros manager regrets attack on HK dollar

Amy Nip

Thursday, July 05, 2007

An asset manager who represented George Soros, one of the predatory speculators who laid siege to the Hong Kong dollar and attempted to manipulate the stock and futures markets, has admitted making a blunder.

In an interview with mainland paper China Business News, Rodney Jones, the former managing director of Soros Fund Management in Hong Kong, admitted: "We made a mistake."

He said Wednesday the markets could have collapsed, "if the Hong Kong government hesitated any longer."

For two weeks beginning August 12, 1998, the Hong Kong Monetary Authority with the support of then financial secretary Donald Tsang Yam- kuen, waged war on currency speculators who were making a double play of dumping the Hong Kong dollar and shorting local stocks and Hang Seng Index futures.

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In the end, the speculators were literally caught short with their short positions on HSI futures and short positions on the currency.

Soros and his flagship Quantum Fund bet heavily that Hong Kong would end up on bended knee, but it was not to be.

In 1996, Jones was stationed in Hong Kong and was researching Southeast Asian markets. He said he noticed the asset price bubble in the real estate market and yet banks continued to lend to developers who had difficulty paying interest on loans. In the circumstances, Jones said he recommended to Soros that he short-sell the Thai baht.

"We started preparations six months beforehand and built short positions gradually," he told the paper.

In January 1997, Soros and other global hedge funds began dumping baht in large quantities, putting the exchange rate under immense pressure.

"Capital started to flow out of Thailand in May and Thailand imposed capital controls," he recalled. "But at that time, we already knew the baht could not hold."

At the time, the Thai economy was in trouble, exports had slumped, there was excessive investment and the country was grappling with a yawning current account deficit. Speculators smelled blood, believing the baht was overvalued.

Hedge funds launched a second assault on the baht in June that year.

With forex reserves depleted, the Bank of Thailand caved in and devalued the currency. After causing immense grief and turmoil in Southeast Asia, with the poor hit the hardest, Soros set his eyes on Hong Kong.

Jones said there was a bubble in the stock and property markets at the time, "although not as bad as in Thailand."

He added: "And we thought in the beginning that the cost of maintaining the linked exchange rate would be too high for the Hong Kong government."

The funds mounted a three-pronged assault on the currency, futures and stocks.

But then they came up against a well-prepared HKMA, which left greedy speculators with a bloodied nose. Hong Kong intervened in the markets, although there was concern in some quarters that the government had dipped into the Exchange Fund.

In hindsight, Jones, said he felt otherwise.

"Government intervention raised public confidence in the market when it was near total collapse. It prevented a bigger crisis and saved the market."

Tsang declared at the time: "We have frustrated their plan. We are absolutely determined to use all means available to us to protect the stability and integrity of our currency and financial markets."

Even the Bank of China supported the counterattack on speculators.

Tung Chee-hwa, the chief executive at the time, warned speculators saying: "We will continue to do what is necessary."

Jones said: "We used to doubt if the HKSAR government's intervention would be effective or not, as timing and choice of strategies were of crucial importance. From what we see now, the HKSAR government chose the right time to intervene. We made a mistake at the time."

http://www.thestandard.com.hk/news_detail.asp?pp_cat=1&art_id=48335&sid=14350285&con_type=1

 

[eMiniFreak]

Quote from brocklanders:

Hey, at least the US Govt spent most of our currency on weapons and weapon systems. could come in handy during that. :eek:

Weapons require people (read: salaries), imports, oil, and maintenance...

As long as the world keeps letting us roll our balances from one credit card to another that's fine... when the money runs out, our pants are down. I think we're borrowing something like $0.42 for every dollar spent.

 

[brocklanders]

Quote from eMiniFreak:

Weapons require people (read: salaries), imports, oil, and maintenance...

As long as the world keeps letting us roll our balances from one credit card to another that's fine... when the money runs out, our pants are down. I think we're borrowing something like $0.42 for every dollar spent.

There is something called "conscription" that is "non-negotiable and compulsory" during times of war. Labor will not be a problem and the money never runs out so long as a sovereign government controls the printing press... just worth less. Whether those who serve get paid with anything worth more than toilet paper won't really matter though because they won't have any choice anyway. Also, sourcing oil and other natural resources will not be a problem to a country with the military muscle to take it. I'm sure our neighbors in the Great White North won't mind if we need some in an emergency .

 

[psytrade]

I think that bit about Soros and HK is in one of Drobny's books - Inside the House of Money, or the new one - Invisible Hands

 

[eMiniFreak]

Quote from brocklanders:

There is something called "conscription" that is "non-negotiable and compulsory" during times of war. Labor will not be a problem and the money never runs out so long as a sovereign government controls the printing press... just worth less. Whether those who serve get paid with anything worth more than toilet paper won't really matter though because they won't have any choice anyway. Also, sourcing oil and other natural resources will not be a problem to a country with the military muscle to take it. I'm sure our neighbors in the Great White North won't mind if we need some in an emergency .

Good luck with all that theory ... here's an eye-opener:

The Rise and Fall of the Great Empires, Paul Kennedy

 

[Martinghoul]

Quote from endsongs:
My point is valid. Let's consider the gov't as a separate corporate entity. Revenue ~ 2.2T. Spending/expenses ~ 3.7T. Net loss per year ~ 1.5T. So, why is accounting that allows a corporation with a loss of 1.5T per year to advertise a 300B profit "right"?

I am really not sure how this is related to your point about debt and interest payments. Maybe I am missing the point you're really trying to make.

 

[Misthos]

Quote from eMiniFreak:

Weapons require people (read: salaries), imports, oil, and maintenance...

As long as the world keeps letting us roll our balances from one credit card to another that's fine... when the money runs out, our pants are down. I think we're borrowing something like $0.42 for every dollar spent.

The US does have one option at maintaining economic supremacy. But it won't be the same as the credit fueled post Bretton Woods I 1971 era we now know. It will require the US to keep a balanced budget and once again become a net global exporter.

In theory, the US can tell all its foreign creditors to go to hell. It would then back the US Dollar with gold once again. The US, by far as an individual nation has the most gold reserves in the world - at roughly 8,100 tons. Not exactly the 22,000 tons it had after WWII, but a hell of a lot more than China has today.

It would be an extremely messy transition, no doubt about that. But it is one scenario I see the US trumping China. The EU does have in the aggregate just over 10,000 tons of gold. But the EU faces a test of cohesion as this crisis plays out.

I believe the global financial system will once again use gold. It won't be by design, but by default.



Empire may be gained by gold, not gold by empire. It used, indeed to be a proverb that "It is not Philip, but Philip's gold that takes the cities of Greece."

- Plutarch

 

[helen82]

As I know, The US Government spent most of our currency on weapons and weapon systems.

 

[Misthos]

Quote from helen82:

As I know, The US Government spent most of our currency on weapons and weapon systems.

Yes, the US Gov't spends a disproportionate share on its military budget - for various reasons, but that currency is fiat -and a world reserve one at that. So it can be "printed" at little cost so long as the game continues. You can never run out of fiat money. Only its value gets compromised.

But once the game ends, and it always does, the US still has its gold. Don't get me wrong, the US prefers the fiat game to gold - and who wouldn't? It costs nothing to create fiat.

But Plan B is always an option. Default, remonetize...