Home Rule Globally
Abstract of -
and International Rivalries
Written in the fall of '07, nine months before the financial crash, this article discusses the excesses of international economic competition – including monetary manipulation as a tool of merchantilism – and as a related afterthought presciently predicts "an early bursting of the bubble of US prosperity."
Absent financial or structural manipulation, currency markets will move in rough correspondence to international trade surpluses and deficits, seeking to find equilibrium between the availability of and the demand for national currencies. Manipulations by speculators are typically designed to take advantage of anticipated trends, and tend to amplify those trends when they occurr. Sometimes such trends arise as the result of central bank policy, and speculators are great readers of the "tea leaves" of central bank pronouncements. Such pronouncements seldom tell the whole story, however, and central bank currency manipulations are a basic instrument of national competitive strategy that can determine short term gains, losses or stability in a currency's rate of exchange with respect to competive national currencies.
For those who seek a safe-haven from the gyrations of currency markets, there is gold, and other precious metals. These metals enjoy steady demand from the jewelery market, and are accumulated by both governments and speculators as predictably stable and easily monetized assets. In this essay Ewbank stresses that the price of gold is a good index to the intentions of dominant trading nations who have surplus foreign exchange to dispose of. If gold rises quickly, it may imply that some such cash- flush nation is spurning a trading partner's currency, pushing it onto world currency markets by buying gold. When speculators discern such a policy at work, they too will buy gold, which they sense is going up, and sell the unfortunate trading partner's currency as they sense it is destined to go down. It is easy to see how this sort of strategy can be used for geo-political purposes. Ewbank suggests that China may have such a strategy lying in wait for it's trade-deficit running trading partner, the US, and is simply waiting for the right moment to spring the trap.