I was on Prime Interest (formerly Capital Account) with Bob English on Tuesday, August 20.
We discussed troubled currencies, the Indian Rupee, the Australian dollar, the US dollar, the Euro, gold, Bernanke, a US property bubble, the carry trade, and other topics.
At one point I asked bob "So what do you want to hold?". Given that central banks everywhere are inflating, my answer was "gold".
Synonymous with the carry trade, money poured into India, Brazil, and other markets for currency appreciation and interest rate speculation. That hot money is now fleeing, and various currencies are in a state of collapse.
Here are a few charts.
Indian Rupee
Indonesian Rupiah
Egyptian Pound
Brazilian Real
Japanese Yen
Brazil, India, and Indonesia have acted to prop up their currencies.
Brazil is particularly amusing because just a couple months before the Brazilian government acted to prop up the Real, government officials were complaining the real was too strong.
Here is a chart from my June 18 post Brazilian Currency Touches Four-Year Low Prompting Intervention; Currency Intervention Madness Displayed in Chart Form
Real Monthly Chart Shows Intervention Madness
My Comment at the Time
Is this madness or what?
By the way, with the huge slowdown in China (and Chinese demand for commodities plunging), Brazil is going to have a damn tough time stopping the slide in the Real and an equally hard time controlling inflation.
What happened to the alleged nirvana "When the real appreciates, it reduces our competitiveness?"
I expect similar problems for Japan with its foolish (yet widely praised - for now) actions to destroy the Yen.
Meanwhile, India and Indonesia are both having the same difficulty of maintaining growth while funding current account deficits and battling inflation.
For details regarding India (and also a key focal point of the interview) please see Official Denials Run Rampant in India; "No Question" of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned.
The moral of the story is simple: inflation does not cure problems it only masks them temporarily, for the benefit of those with first access to money. The US will pay a price too, just not yet.
