Central banking's main purpose now is market suppression

1:45a ET Wednesday, October 3, 2007

Dear Friend of GATA and Gold:

The Financial Times story, appended here, about the eurozone's alarm at its strengthening currency suggests a few things:

1) Worldwide currency devaluations are ahead -- competitive devaluations if cooperative ones cannot be arranged.

2) Eurozone central bankers are getting awfully sarcastic about the U.S. government's supposed "strong dollar policy," but sarcasm is not likely to get them anywhere. The Europeans remain the craven stooges of the American empire even as it starts to fall of its own weight.

3) The most important developments in the world economy now are plainly currency market manipulations by governments, increasingly undertaken shamelessly, in the open. That is, when the central banks work together in the name of preventing "exchange rate volatility," as the FT reports here, they are actually undertaking to rig all sorts of markets everywhere. Indeed, the primary purpose of international central banking now is to prevent markets from breaking out and thereby undoing the venality of the central bankers themselves.

4) Notice in the FT's reporting here and in nearly all financial market reporting how it is simply taken for granted that everything the central banks do in the name of stabilizing markets is done in secret -- from the G7 meetings cited in the FT story to the distribution lately of ever-more-fantastic amounts of public credit to private financial houses. The central bankers are conjuring up and passing out all the money in the world to a financial aristocracy whose only claim on the money is that it has taken the rest of the world hostage. Yet the proletariat, which does the actual work of the world, is not to inquire into the particulars. And how would the proletariat even know to do so when the press itself doesn't try?

All this is simply ruthless expropriation on a planetary scale -- and yet it is portrayed as the natural order of things.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Europe Urges Tough Line on Dollar

By Tony Barber and Ralph Atkins
Financial Times, London
Wednesday, October 3, 2007

http://www.ft.com/cms/s/0/f3ef4c12-712d-11dc-98fc-0000779fd2ac.html

Eurozone policymakers will urge the US and other countries at the next G7 meeting to take a strong stance against exchange rate volatility in an effort to halt the dollar's decline against the euro, European Union officials said on Tuesday.

Finance ministers of the 13-member eurozone plan to forge a common position in Luxembourg next Monday, 11 days before the meeting in Washington of central bankers and finance ministers of the Group of Seven leading industrialised countries.

European politicians and business leaders have issued increasingly loud warnings about the dollar's decline since the euro rose above $1.40 on September 20 for the first time since its launch in 1999. The euro hit a high on Monday of $1.4281.

Jean-Claude Juncker, chairman of the eurozone finance ministers' group, on Monday said that the euro's rise "tends to worry us a lot" and that it was no longer acceptable that Europe was bearing the brunt of "the consequences of the existing global imbalances."

Christine Lagarde, French finance minister, said in an interview with Les Echos: "I'd really like to hear again [US Treasury secretary] Henry Paulson saying loud and clear that a strong dollar is good for the American economy."

The US has given no ­public signal yet as to what language it will accept on exchange rates in the communique to be issued at the G7 meeting.

Such communiques must have the consent of all seven governments -- Canada, France, Germany, Italy, Japan, the UK, and the US -- and Washington can count on UK support in resisting language that implicitly questions the role of currency markets in determining exchange rates.

The US is also keen to highlight the need for China to accept more flexibility in its exchange rate regime to address the issue of its vast current account surpluses.

In Europe, Jean-Claude Trichet, the European Central Bank president, has become noticeably more ­strident in recent days in emphasising the US interest in a strong dollar.

His comments may reflect ECB concern about fears of US inflationary pressures after the Federal Reserve cut its benchmark interest rate on September 18 by 0.5 percentage points to 4.75 percent.

Although eurozone inflation expectations might remain unaffected, the US experience could strengthen the ECB's determination to hold the line against eurozone inflation, which last month rose above its target of an annual rate of "below but close to" 2 percent.

The ECB's governing council meets in Vienna on Thursday, when it is expected to hold its main interest rate at 4 percent. With eurozone growth showing clear signs of weakening and the global credit squeeze clouding the outlook, the chances of another ECB rate rise have all but disappeared.

While Mr Trichet's comments after Thursday's ECB meeting may acknowledge the eurozone's changed prospects, he is likely nevertheless to keep a hawkish tone.

Speaking in Malta on Monday, Mr Trichet said he had "noted with extreme attention that the US Treasury secretary and ... the Federal Reserve have said a strong dollar is in US interests."

Robert Barrie, European economist at Credit Suisse, said the combination of a strengthening currency and weakening economy was proving awkward for the ECB. Mr Trichet's comments might have been "the start of attempts to embark on verbal intervention."

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