markconsueloss: Guest Post: Currency Wars: Trading The Driver$

Monday 26 November 2012

Guest Post: Currency Wars: Trading The Driver$ | ZeroHedge

Submitted by Gordon T. Long of GordonTLong.com,

Since September, the Currency Wars have escalated. It isn't just because of the seminal monetary events of the Federal Reserve's QE III "unlimited" and the ECB's OMT "Uncapped". It is more likely about the fact that China announced its eleventh agreement that effectively bypasses using the US dollar with China's strategic trading partners. The latest agreement with Russia places trading oil, in non-US dollars, into the spotlight. The infamous petrodollar has had its destructive profile raised.

The Petrodollar has long been the cornerstone that solidified the US dollar as the key currency reserve holding. The Petrodollar strategy is arguably more important that the Bretton Woods agreement which officially made the US dollar the world's reserve currency at the end of WW II. This is now being called into question. Minimally, it suggests a weakened requirement for holdings of the current levels of US dollars in sovereign reserve accounts.

For the sake of space I won't lay out all the details of this but instead refer you to two recent video releases I have produced and participated in on the subject.

Currency Wars: The Failing Petro$$ Strategy

Triffin's Paradox & the Rule of Law

What is important to Traders is what it means to your trading strategy in the short to intermediate term. To Investors it has profound longer term consequences.

To determine short term effects, we first need to understand the relationship of the drivers involved. The three critical currency relationships near term are the US$, the ? and the ?. Then we need to understand how they will effect US Treasury yields.

First however it is important to understand the controlling mechanism of global fiat currencies.

THE $67 TRILLION SHADOW BANKING SYSTEM (The Fiat Currency Control Block)