Russia Warns Of Currency War Ahead of February G20

In the wake of abolishing US adoption of Russian children, Russia has warned the world is on the brink of another currency war. The nation made the statement as European policy makers and Japan lamented the economic price of increasing exchange rates.  Countries the world over are weakening their currencies, and Russia has basically just noted this publicly. The phenomenon has been noted by innumerable analysts already. In less than a month, the yen has fallen 11 percent in contrast to the dollar and has this week nibbled on its lowest level in the past two years.

The alert from Russia, chair of the Group of 20, came as Luxembourg Prime Minister Jean-Claude Juncker bemoaned a “dangerously high” euro and officials in Norway and Sweden expressed exchange-rate concern. The push for weaker currencies is the only option left as the current pathways of economic growth have reached their limits.  As each nation eventually all at once attempts to boost exports, they will be effectively at currency war with each other, a sort of defensive undertaking.

G-20 finance ministers are set to meet next month in Moscow, three years reiterating their failed 2009 pledge to “refrain from competitive devaluation of currencies.”  Emerging markets have lamented dovish monetary policies in the west, as it has suppressed their exports. In 2011, Switzerland subdued the franc’s appreciation against the euro by tying it thereto, and Japan has also headed into a severe dovish period reliant on cheap printing presses. The yen now sits at its lowest level in two years.

The euro has increased 7% over the dollar in six months.  Goldman Sachs has signaled that if the euro strengthens much further the ECB might favor an interest-rate cut from the ECB.

This year will be the first time Switzerland will partake in the G20 meetings after being invited to take part in this year’s meetings of the finance ministers and central bank governors of the G20 group by Russia, with took over the G20 presidency this past December. Switzerland will also be included in technical working groups and preparatory meetings.  The Russian invitation cited Switzerland’s important role in the international financial system and its “positive and fruitful cooperation within the scope of the bilateral financial dialogue with Russia.”

Russia and Switzerland already hold regular meetings together to discuss financial issues and to exchange information. The frst finance ministers meeting of 2013 will take place February 15 and 16 in Moscow and followed by three more later in the year. Two will be held during the meetings of the IMF in Washington in April and October and other will be in Moscow in July.

As SV wrote recently:

In 2009, the G20 agreed not to pursue competitive currency devaluation, a view “analysts” at the time believed would make it easier for individual countries to weaken their currencies to support their economies. The joint statement issued at the end of the 2009 meeting said the states ”will refrain from competitive devaluation of our currencies and promote a stable and well-functioning international monetary system.”

Now, nearly four years later, it is clear that major economies in the G20 have abandoned the promise, pursuing instead, in concert, monetarist policies,  as the US has embarked upon a QE Infinity type deal. Since critical major economies have abandoned the policy, and nations the world over are announced qe policies, the effects on each individual currencies on the waydown are lowered. As is seen below with, most pointedly, the US dollar. Despite the aforementioned QE program, it remains a volatile, yet unmoved currency.

 

The Euro Zone has been straddled by crisis, and has devalued its currency while digging deep into Germany’s Treasury so as to ensure the political project remains.

Great Britain has been impressively aggressive in its race to the bottom, printing away for most of 2012 and before. The Pound has regained very little since the 2008-2009 banking crisis, which saw the GBP fall off hard.

While relatively calm when viewed within the context of each other falling precipitously through the ether of fiat atmosphere, when looked at it terms of their antithesis in real money – gold and silver- the aforementioned charts tell a different story. They tell of precipitously falling currencies, whose certain decline are only being masked by manipulative and coordinated governments and bankers.

That must of been to what Japan was referring to when they did mention through their press that G20 nations went back on their pledge to avoid currency devaluation.