Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

The paper chase...
Interest rate arbitrage between the Yen and the Dollar
(Mar 09, 2007)

Tokyo, Japan – Disconnecting paper currencies from gold allows the private central bankers, the Federal Reserve in America and the other G7 World Bankers in Japan, France, Germany, Canada, Italy, and Britain to play lots of interesting paper money games, such as creating trillions of dollars out of thin air, selling it at interest to the U.S. Government as a "made-up" National Debt, and then making U.S. citizens pay it back to the bankers through taxation.  The bankers "retire" the "created" fake money and keep the interest which they then transfer into hard commodities such as real estate, corporations, and, yes, gold bullion.


   There exist a myriad number of ways in which the newly "created" paper money (or credit) gets disbursed from the Federal Reserve and out into the national and global economy:  (1) paper and debased coins, (2) congressional deficit spending, (3) mortgage money from member banks to fuel the housing inflation, (4) Treasury Notes earning interest to investors such as China (lower interest than the Fed charges American taxpayers on the originally "created" debt so the Feds can make a profit) and other paper money scams which could never happen on a gold standard.


   Creating lots of paper money not backed  by gold and shoveling it into the economy makes people think they are rich, and so they invest wildly in the stock market or housing market or currency market, which, in turn, bids prices up even higher to expand the illusion of growing wealth.  But remember, it is not a real increase in wealth or savings from new time-and-labor-saving devices.  It is only paper, not backed by anything, and growing exponentially.  This is called a "bubble" because it can pop, losing all its fake value in one fell swoop, because the paper is not a receipt for a real asset such as gold.  Remember the premise, the private central bankers, the Federal Reserve, have disconnected the concept of gold from paper money.  We now live in a state of paper fear.  Will my bank account erode?  Are we in hyper-inflation?


   Wall Street brokers love to play this paper money game because the more they churn, buy and sell, the more broker's fees they earn.  We have already discussed "black box" computer trading and claim that “black box,” or “algorithmic arbitrage,” trading is the ultimate form of insider trading and should be considered a white-collar crime by the SEC since its only function is to mis-use the buy-sell methodology inside high speed computer algorithms to gain the ultimate insider information in the market to make money outside the original function of the stock market.  (See  12-19-2006 "Black box" trading on the Big it legal... is it moral?  Part 1  More... 12-26-2006 "Black box" trading on the Big it legal... is it moral?  Part 2  More... )


   Now we come to another form of paper money arbitrage -- simultaneously buying and selling of different paper currencies with different interest rates.  This, too, is a money manipulation game brought about by the private central bankers having detached paper money from gold.  It's called the carry trade and here's how it works.


   The Japanese Yen is loaning out at 0.5% interest.  The U.S. Dollar is at 5.25% interest.  Investors borrow thousands of Yen at 0.5% and invest it in, say, the Dollar or Dollar-denominated CDs, earning the higher Dollar interest, then selling it and paying off the cheaper interest Yen loan.  Of course, they have to pray that the exchange ratio between the Dollar and the Yen doesn't change overnight in the wrong direction and wipe out their profits.


   This interest rate arbitrage, the carry trade, is not limited to the Dollar and the Yen.  No paper currencies today are backed by gold, so take your pick since there is an international currency exchange rate war going on to see which central bankers can outwit and out-print their paper currencies faster than the other crooked central bankers.  British Pounds, the Euro, the Chinese Yuan, your choice.  Nor is the carry trade limited to the Big Money Boys on Wall Street.  Many average Japanese Joe Kamakazis are going out on a long cherry tree limb -- 90% margin -- to invest in the Yen carry trade.  Some lose their kimonas, others get rich in one month flat.


   The main point is that all of the world's currencies are now a big paper joke since they have all been totally corrupted by disconnecting them from gold.  So whodunnit?  The private central bankers, of course, who can "create" paper money at will, secretly  buy and sell (as unidentified hedge fund investors from the Cayman Islands) in the Comdex markets to drive down the price of gold to try to convince the world it's just another metal, or buy and sell in the regular Forex markets, helping their Wall Street buddies churn, churn, churn that hyper-inflated paper.


   And you thought the main function of today's stock market was to facilitate the capitalization of new companies offering new time-and-labor-saving products?  Think again, folks.  99% of the activities of today's stock market brokers and central bankers is to churn the fake wealth of the fake paper and transform it into hard assets before you catch on.  This could never happen on a gold standard, which is why we ain't on one.  "Yo-ho, yo-ho, a pirate's life for me..." -- FM Duck 

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