Defaulting banks - where will it stop?

[Jan Klimkowski]

There are very strong rumours that China is about to devalue its currency by c30%. It's a logical - perhaps inescapable - move for the Chinese, and will have huge knock-on effects.

Ticker Forum's Karl Denninger has reached for the single malt, and spells out some of the consequences in his normal, um, colourful style. (The charts and videos referenced in the piece can be seen at the original url):

http://market-ticker.org/archives/674-Aw...Again.html

Aw Crap - Told You So (Again)

This was worth a glass of 18year single-malt.

This evening a rumor showed up on the forum that China and another nation (Korea?) are going to intentionally devalue their currencies within days by 30-35%.

I was wondering how long it was going to take for the Chinese to decide how to deal with Paulson for what he did to them.

See, back on September 30th I wrote a ticker in which I reproduced the portion of an interview on CNBC in which it was disclosed by Mr. Sherman of California that the TARP/EESA was intended to bail out Chinese investors who our bankers screwed (along with everyone else) by selling them trash securities that were claimed to be "AAA" grade paper.

I even did a short video on it on October 2nd, which I an reproducing here, once again:

Now of course Paulson, it appears, was lying not only to Congress, but also to The Chinese!

Congress is spineless. Paulson counted on them (and the media) failing to raise sufficient hell to agitate the American people prior to the bill's passage, and he also counted on The American People being a nation of sheep who would not descend on Washington DC and demand that he resign immediately, refusing to leave town until he did.

But did Paulson and Bernanke ever intend to actually pay off the Chinese, never mind that our government has no business covering the outrageous (and even possibly unlawful) actions of private banks?

Or was Paulson and Bernanke's original intent to use any possible excuse to get their hands on a crapload of money to pay off their buddies in the banks, while screwing everyone they promised they would help, including the Chinese?

You decide; here's a video I put up on the 15th of November:

Now it would appear that the Chinese are rather pissed off. See, China's Central Bank chief made an "unscheduled" trip to America yesterday, while Paulson was in China himself.

Who did he come to see?

Perhaps, did he come to deliver notice to America?

Was his message a gigantic "screw you America", perhaps?

What say you Congress, and The American People, now?

Let me put this in stark relief - there is absolutely nothing that we (or the Japanese, who will get screwed to Mars by this as well) can do about this. Well, nothing other than play "Smoot Hawley", or worse, "Cowboys and Chinese."

Don't think some bright folks will not think about one (or both) of those options folks. They will. Either would of course be an absolute disaster, but that's nothing new for our political elite.

Why is this such a big deal? Because this sort of intentional devaluation is the precise "beggar thy neighbor" policy that was followed in the 1930s and was in no small part responsible for accelerating the deflationary spiral downward into hell on a global basis.

If there's anything to this you can kiss off what's left of our export market and further destruction of the American Wage Base. Oh, and while we're at it, would anyone like to take a bet on these same nations unloading into our government's tampering with the Treasury and Agency markets "while the getting is good", then telling us to bite it on future purchases of those securities too? How do you spell "bond market dislocation"?

This, if true, is massively deflationary on a global scale and there isn't jack that we can do about it.

I have said for over a year that the right thing for America to do is to force all of the bad debt into the open, default that which must default, and then go after each and every individual involved in any part of this massive fraud, no matter who they are and who they work for. While this would not have prevented the losses (indeed, it would have forced them to the forefront) it would have demonstrated to the world that (1) we are a nation of laws, and lawlessness will not be tolerated, and (2) it would have provided a buffer (foreign and domestic victims could go after the malfeasors both personally and corporately) against any argument that our government was officially sanctioning these acts.

Instead, Ben and Hank did in fact sanction the outrageous actions of these firms and individuals, and since they are speaking as officials of The United States Government their actions in this regard have now caused other nations - those aggreived - to search for ways to punish not the executives of Wall Street firms who did these evil things but rather The United States as a whole.

Once again Ben Bernanke and Hank Paulson have demonstrated their arrogance in believing that they can act unilaterally in America, lying to people for years by allowing the commission of financial fraud, then hide behind the trappings of their power when the music stops.

Every action Bernanke and Paulson have taken since this crisis began has broken new records in outrage and arrogance.

Now the leaders of other nations may be about to "give something back" to America for its actions against them - and it is not going to be pretty.

We should have locked up the bankers instead of bailing them out - including Paulson and Bernanke.

Pray this rumor proves incorrect, or you'll see a one-line Ticker very soon:

"I hate it when I'm right"