EXPOSED: Another Currency Manipulator!

Currency manipulator!

Today we point an indignant and accusing finger at the latest currency manipulator.

Let all proper authorities take notice.

The accused is not China — incidentally.

But we cannot proceed without first noting another manipulated market…

The stock market presented a distressed scene this morning.

Plunging bond yields are the explanation widely on offer (falling yields reflect a poor economic outlook).

Yields on the 10-year Treasury slipped to 1.595% this morning — lowest since autumn 2016.

The Dow Jones was down 589 points before an invisible hand intervened, stabilized the bond market… and redirected the stock market.

The index nonetheless lost 22 points on the day.

Both S&P and Nasdaq gained on the day.

Meantime, gold spins into delirium — gaining another $25 today — to $1,509.50.

But now that the administration has hung a “currency manipulator” sign from China’s neck… we are duty-bound to expose the latest currency manipulators.

Our spies have marshalled the evidence. It is circumstantial evidence, we freely concede.

It is nonetheless damning — more than sufficient to empanel a grand jury.

Who are these latest currency swindlers?

Here we refer to the dastardly Swiss.

The Swiss are currency manipulators.

Our spies inform us…

That Swiss sight deposits — bank deposits that can be withdrawn immediately without notice — surged 1.6 billion francs in the week ending Aug. 2.

This anomaly follows a 1.7 billion increase one week prior.

Add one to the other and the conclusion is clear: The Swiss National Bank (SNB) has been monkeying in the currency markets.

It has been printing francs to purchase euros. Why?

To cheapen the franc… to advantage their exports… and to lift their tourism industry.

Evidence suggests Swiss manufacturing has already sunk into recession.

And the European Central Bank (ECB) is preparing to reopen the monetary faucets in September. The ensuing flow would depress the euro.

In comparison, the Swiss franc would tower high as the Matterhorn.

It is already at its highest peak since June 2017.

And so the Swiss authorities are purchasing euros — on the quiet — to cushion the blow.

That is the case we argue today.

Here we introduce our first witness, Credit Suisse economist Maxime Botteron:

I think the SNB was intervening in the market last week — this was the biggest weekly increase in sight deposits since May 2017. This is a clear sign the SNB was active in the market.

Witness No. 2 presently enters the witness stand, a certain Thomas Stucki.

Let the record indicate Mr. Stucki is former manager of the SNB’s foreign currency reserves:

When the ECB statement was published at 1.45 p.m. last Thursday the euro lost value against the dollar, but not against the franc… Any move by the SNB to buy euros with newly created francs would bolster the single currency [euro]. It is possible that the SNB is behind this development.

It is likewise possible that night will follow day… that a dropped apple will plunge groundward… that a senator of the United States will disgrace his office.

In conclusion we summon the testimony of Mr. Karsten Junius, chief economist at J. Safra Sarasin:

“The SNB are definitely in the market.”

The prosecution rests. The Swiss are currency manipulators.

And we consider the case jolly well closed.

When will the roars of protest come issuing from Brussels?

But let us now switch lawyerly roles… and leap to the defense of a currency manipulator wrongly accused:


The recent charges against China are not only false. They are precisely, exactly, 180 degrees false.

That is, China has been labelled a currency manipulator not because it has manipulated its currency.

China has been labelled a currency manipulator… because it temporarily ceased manipulating its currency.

Here is the dynamic in operation…

China pegs its yuan softly to the dollar. But the dollar packs vastly more muscle than the yuan.

In order to maintain its peg, China manipulates the yuan higher — not lower.

That is, the People’s Bank of China buys yuan… and sells dollars.

And since last April alone, the yuan has appreciated 10% against the dollar.

A 7:1 exchange ratio is widely considered the “line in the sand.”

But this past Monday China temporarily let go of the yuan… and let it slip to 6.97 (the yuan presently trades at 7.06 per dollar).

The United States subsequently labelled China a currency manipulator — for failing to manipulate its currency.

Ponder the loveliness, the blinding brilliance… the staggering beauty of the charge.

Could Mr. George Orwell have improved upon it?

We can identify another term for currency manipulation.

It is a euphemism… designed to take much of the curse off “currency manipulation.”

That term is monetary policy.

The Federal Reserve runs its own.

And it has destroyed 96% of the dollar’s value since 1913…


Brian Maher
Managing Editor, The Daily Reckoning

The Daily Reckoning