GENERAL INTEREST

An unfortunate needle points to war Harrison Dr. HB

Kiss Your Assets Goodbye If Certainty Reigns Ritholtz

FLASH CRASH - HFT - DARK POOLS

MARKET WARNINGS

10 Market Bubbles That Could Soon Burst Daily Finance

G20 MEETING

Federal Reserve action under global attack ahead of G-20 CNN

G-20 Nations Wrangle Over Strengthening Vow on Currencies  BL

Group of 20 nations failed to resolve differences over currency policies blamed for distorting global trade and investment, hours before their leaders gather, a South Korean official said.

 

G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends BL

Turkish PM to air concern over Fed's QE2 at G20 summit Reuters

CURRENCY WARS

Chinese firm downgrades US credit rating Xinhua

"In essence, the US government's move to devalue the dollar indicates its solvency is on the brink of collapse”

China, U.S. in `grand bargain' on yuan appreciation: Goldman's O'Neill BL

'Currency war can create prisoner’s dilemma' Korea Times

It's not just the dollar's fault Barr

 

"The US currency is roughly back to where it was before the global financial crisis (when many of the countries now complaining about a weak dollar were actually doing pretty well)," writes Julian Jessop of Capital Economics. "If this is a 'currency war,' it still seems pretty phony."

Greenback has fallen 12% against the yen and a staggering 18% against the euro since early June. The Fed's trade-weighted broad exchange index, which tracks how the dollar trades against two dozen or so global currencies, has fallen just 7% since the euro and yen took off in late spring. the reason the euro and the yen have been under such pressure is because they are bearing the brunt both of Bernanke's reflation play and of China's refusal to play by the same rules as most everyone else.

 

China's decision to continue with this policy, at a time when others in the emerging world are screaming about the dollar's plunge against their floating currencies, isn't just putting a floor under the broad dollar index and sending the yen and euro screaming higher. It's also holding back a deeply troubled U.S. economy, writes Andrew Balls of Pimco.   "The U.S. faces structural as well as cyclical problems and the fact that the U.S. dollar has not been allowed to weaken versus important Asian currencies is one factor frustrating structural adjustment in the U.S.," Balls wrote this week.   It is certainly not the only one. As Balls' colleagues at Pimco have pointed out repeatedly, U.S. politicians must confront the country's glaring deficiencies in areas such as infrastucture and energy policy before we can expect enough good jobs to start popping up here. Someone must also get a grip on the deteriorating U.S. fiscal picture, sooner rather than later.   But policymakers here aren't the only ones who bear responsibility for the muddle that is the global trade picture right now.   "At some point, emerging market countries may decide that the potential benefits of large scale currency interventions are outweighed by the costs, and therefore allow their currencies to appreciate rather than trying to frustrate the process of global rebalancing," Balls writes. "If not, creeping protectionism remains a serious threat."   Hopefully, this is not a something's got to give sort of situation. But even if it is, a look back at the last crisis suggests that it may not be the dollar that will end up taking the brunt of the bad news, however richly deserved it may seem.

Q3 EARNINGS

MARKET & GOLD MANIPULATION

World Bank chief says G20 should heed gold price FT

Zoellick said critics had misunderstood his proposal as a call for a return to the gold standard...

If the World Goes Gold... WSJ

Carney rejects return to gold FT

Roubini: Here's Why a Gold Standard Won't Work CNBC

Gold Standard: How to Prep for It TheStreet

Raise in CME Silver Margins Prompts After-Hours Sell-Off Kitco 

$60 Silver? Casey

“The margins were only raised for silver – but under the SPAN margining system that the CME uses, the possibility of other margin increases propped up...”

AUDIO / VIDEO

QUOTE OF THE WEEK

"It could unfold very, very quickly. Because deflation is a swing of poverty feedback, it can take awhile to build up. If you try to explain to people what's coming, because it doesn't happen instantly, they tend to go back to sleep. The thing they need to understand, however, is that when it does hit a tipping point, a kind of critical mass, then it can unfold exceptionally quickly. Then it's very much like having the rug pulled out from under your feet. So I tell people all the time, prepare now because it's better to be two years too early than five minutes too late. You can't play with this sort of thing. In September, 2008, we came within a few hours of the banking system seizing up, and that could easily happen again. People wouldn't get a lot of notice. For anyone who's not in the meeting room-it will be too late by the time they find out. My worry is that if there are an enormous number of people who just had the rug pulled out from under their feet, they're going to run around like headless chickens, and the human over-reaction to events will be really responsible for a large percentage of the impact. “ Automatic Earth