Thank G20 It’s Friday!

"Do as I say, not as I do – or say…"

That’s the word from US Treasury Secretary Tim Geithner as he seems to forget that people follow him around with notepads and microphones as he begins the game of "Survivor – Global Currencies" although Tim seems to be following the very interesting strategy of trying to be voted out first so maybe there’s a method to his madness after all.

Like any good player, Timmy tries to form alliances and keep the other players off balance. On Wednesday, he told Brazil’s Finance Minister, Guido Mantega, that the U.S. won’t allow the Dollar to weaken. After telling Guido he had a hidden immunity idol that would protect the Dollar, Tim walked down the beach looking for others to form an alliance with and the cameras followed Mantega to one of those "private chat" areas, where he explained why he had formed an alliance with Timmy:

He said he doesn’t intend to allow a devaluation of the dollar. He assured me that the policy is not to weaken the dollar, but on the contrary, to strengthen it.

Brazil’s finance minister said he told Geithner that a firm stance by the U.S. against further weakening in the dollar would “create conditions to open a negotiation” with other countries seeking to reduce volatility in their currencies, and may help reduce pressure on China to strengthen the yuan. “Otherwise it’s hard, to weaken the dollar and to want a revaluation of the yuan,” Mantega said. “I then asked him about the Fed’s policy and he said that this policy’s impact is being overestimated,” Mantega said.

Apparently, Tim was able to swing enough cast members to pull a G7 Meeting this morning, apart from the G20. Who was conspicuously left out of the G7 (US, Japan, the UK, Germany, France, Italy and Canada)? Why China, of course. Poor China was sent off to get some water while Tim and the other ministers talked behind their backs. The United States and European Union accuse China of keeping its Yuan grossly undervalued to benefit exporters. Beijing counters that Washington’s loose monetary policy is swamping emerging markets with destabilising capital inflows, as investors chase higher yields than they can secure from the dollar.

In addition to trying to build an alliance before heading off to G20 tribal council, Tim further stirred the pot by sandbagging the G20 meeting with a letter to the Finance Ministers, telling them to (from the pot to the kettle): "Stop manipulating their currencies to prevent "excessive volatility" and a global currency war." In a letter to the G20 finance ministers, he also urged them to cap current account surpluses or deficits to rebalance the world economy and said the International Monetary Fund should monitor countries’ progress.

He called on countries to refrain from manipulating currencies to achieve competitive advantage by either weakening their currency or preventing the appreciation of an undervalued currency – a clear dig at China. Other countries, including Brazil, Japan, South Korea, Switzerland and Taiwan have also moved to weaken their currencies so forming a back-door alliance with Japan is critical if the US wants to take down China.

There was a rumor that Chinese Finance Minister, Xie Xuren, was furious when he got back and wanted to know who, when and how – but it turns out those were just the names of three guys who called for him while he was out. We’ll have to wait until tomorrow to see how this little drama plays out.

Meanwhile, the dollar held the 77 line yesterday in relatively quiet trading but every tiny move in the dollar becomes a violent move in the US markets and it has been a wild week. We’ve fallen from 88.71 in June to 76.14 this week, which is 14% in 4 months or 3.5% of your dollar-denominated assets being stripped away each month so we really could use at least a small break on the way to losing 20% of our wealth in 6 months. The 5% rule tells us to ignore the move over 88 and 85% of 88 is 75ish with 10% being 70ish so around 77.5 we would expect to see some critical resistance and we finished yesterday at – 77.42. One of our Members suggested yesterday doing some 5% charts that adjust for the dollar moves and that’s a great idea so we’ll do that over the weekend.

With the G20 gathering in Gyeongju, Global markets were mixed today with everyone in Asia giving up about half a point into the close except Japan, who gained half a point to finish the week down just 1%, as they were encouraged by Geithner’s comments to Mantega. Europe was down very slightly but have now gone up very slightly (9am) as the dollar has dropped from $1.386 to the Euro at 4am to $1.397 at 9 am (0.7%) led by the Yen bouncing off the critical 81 mark so a little Yentervention by Japan, even as they are meeting with Tim to talk about how wrong that would be.

[france1022] Things are heating up in France as a coalition of unions called for two more days of Nationwide demonstrations, now heading into the school holidays which is likely to but more youths on the street. France’s problem is their retirement age is so young that the people the government is screwing over still have the energy to protest. This is not likely to happen in America, where we work pretty much until we’re dead….

On Thursday, Sarkozy’s Government asked senators to speed up their examination of the pension bill, which was approved by the lower house last month. In an attempted filibuster to upset the bill’s passage, opposition parties have submitted hundreds of amendments. Relying on a little-known procedure, the government asked senators to pass or reject all the remaining amendments in a single vote, instead of voting on each one separately. "This is a coup," said Martine Aubry, head of the opposition Socialist Party. The government said opposition senators had had ample time to voice their hostility to the pension bill.

So once again the markets will give us an opening based on a debased dollar that is likely to fade once the reality of volume hits the indexes. Nothing is certain until after the elections but that’s just a bit more than a week now so we are good and cashy and waiting for a little market certainty at this point. I’ll give the final word of the week to Matt Taibbi, who sums it up nicely in his new book, Griftopia:

America is quite literally for sale, at rock-bottom prices, and the buyers increasingly are the very people who scored big in the oil bubble. Thanks to Goldman Sachs and Morgan Stanley and the other investment banks that artificially jacked up the price of gasoline over the course of the last decade, Americans delivered a lot of their excess cash into the coffers of sovereign wealth funds like the Qatar Investment Authority, the Libyan Investment Authority, Saudi Arabia’s SAMA Foreign Holdings, and the UAE’s Abu Dhabi Investment Authority.

Here’s yet another diabolic cycle for ordinary Americans, engineered by the grifter class. A Pennsylvanian like Robert Lukens sees his business decline thanks to soaring oil prices that have been jacked up by a handful of banks that paid off a few politicians to hand them the right to manipulate the market. Lukens has no say in this; he pays what he has to pay. Some of that money of his goes into the pockets of the banks that disenfranchise him politically, and the rest of it goes increasingly into the pockets of Middle Eastern oil companies. And since he’s making less money now, Lukens is paying less in taxes to the state of Pennsylvania, leaving the state in a budget shortfall. Next thing you know, Governor Ed Rendell is traveling to the Middle East, trying to sell the Pennsylvania Turnpike to the same oil states who’ve been pocketing Bob Lukens’s gas dollars. It’s an almost frictionless machine for stripping wealth out of the heart of the country, one that perfectly encapsulates where we are as a nation.