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The 2013 Currency thread : Charts & News

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The 2013 Currency thread : Charts & News

 

Chart Links

=========

FXA / A$-- : Monthly : Weekly : Daily-2yr : 6mo : 10d

FXB / GBP : Monthly : Weekly : Daily-2yr : 6mo : 10d

FXC / C$-- : Monthly : Weekly : Daily-2yr : 6mo : 10d

FXE / euro : Monthly : Weekly : Daily-2yr : 6mo : 10d (128.49 / 1.294 : FXE = 99.30 x EUR)

FXF / SWF : 10d

FXY / Yen- : Monthly : Weekly : Daily-2yr : 6mo : 10d

DXY / USD : Monthly : Weekly : Daily-2yr : 6mo : 10d (80.40 / 0.773 : DXY = 104.00 x $/EUR)

UUP / 2X $ : Monthly : Weekly : Daily-2yr : 6mo : 10d (80.40 / 22.00 : DXY = 3.655 x UUP : 2x Pct. move)

GLD / gold : Monthly : Weekly : Daily-2yr : 6mo : 10d (Gold= 10.33x GLD)

=========

 

idx24_usd_en_2.gif : exr24_eu_en_2.gif : 24hr-gbp-small.gif

 

The Euro's recovery may be ending soon (even as early as today)

 

FXE / Euro etf ... update / Note: FXE-$129, is approx. EUR-$1.30

 

fxe.gif

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A FINAL SPIKE to $1.30 today? Possibly...

 

eurj.gif

 

Euro zone, IMF reach deal to cut long-term Greek debt

Reuters Africa-3 hours ago

BRUSSELS (Reuters) - Euro zone finance ministers and the International Monetary Fund clinched agreement on reducing Greece's debt on ...

 

Euro Touches 1-Month High After Greek Debt Deal

CNBC.com-1 hour ago

The Euro [EUR=X 1.2985 watchlist_up.gif 0.0013 (+0.1%) realtime_icon.gif]

 

Rose to as high as $1.3010, its highest level since late October, before easing to $1.2981, down 0.1 percent from late U.S. trade on Monday.

"It was not a huge reaction because (the deal) was already priced in," said Joseph Capurso, a strategist at Commonwealth Bank of Australia. He said the euro should start losing momentum and ease around a cent by the end of the week.

 

"Economic data in Europe is getting worse and you also have the unresolved U.S. fiscal cliff in the background," he added.

Euro zone finance ministers and the International Monetary Fund agreed on a package of measures to reduce Greek debt by 40 billion euros, cutting it to 124 percent of gross domestic product by 2020.

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A look at the Japanese Yen. Short term looks like it is approaching important support ... longer term fractal seems to have broken down:

 

XJY.png

 

XJY1980-2012fractal.png

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Nice charts!

I agree, and think the Yen may fall fast if/when that support near 120 is broken.

Falling stocks, may be accompanied by a rising dollar - and Larry Pesevento may be right about a mid-week peak in stocks

 

Marking up Happy's Euro chart / HERE / I show my down channel

=== ===

 

DXY / Trade-weighted US Dollar ... 2yrs-update

dxy.gif

 

Could be turning up here, from 80.

And that would likely be associated with a falling Euro/ FXE and maybe Yen/ FXY too.

 

DXY - Intraday ... update

dxy.gif

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A different look at USDX ... 80 level is sitting right on the ascending 50% support line. A break here would suggest a move down to the ascending 61.8% support line (around 78.5-79).

Note, a test of the ascending 61.8% line would remain consistent with the September 2012 test/rejection of the descending 61.8% fan line. In other words, a further move down to 78.5 - 79 would remain entirely consistent with the view that the USD is building a base to higher highs and in the early stages of a bull market.

Screenshot2012-11-27at20745PM.png

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Gold plummets, as the Euro falls / USD strengthens

 

GOLD's getting crushed - down $21, over -1%

 

t24_au_en_usoz_6.gif

 

USD is stronger, like +0.25%

 

idx24_usd_en_2.gif

 

Gold : is Nearly $28 down now.

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GDX is bouncing back from a big opening gap down.

If Gold fails to recover a good share of that drop (too), it could get ugly - and your targets may be realistic

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GDX is bouncing back from a big gap down.

If Gold fails to recover a good share of that drop (too), it could get ugly - and your target may be realistic

 

Indeed. Will be interesting to see how the bounce in GDX shapes up. E.g., GG looks like it may have put in a low in what looks like an exhaustion gap down / wave 5 (?) At least, the $38 low on GG = 61.8% retracement from Jul-Sep rally.

 

Actually, I remember Ross Clark mentioning that according to his research, in order for the recent "isolated low" in Gold to remain valid/bullish, the first test of this low should not be violated. Going by the GLD chart above, looks like this remains in tact ... by a whisker!

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As a deflationist, I treat gold as an appreciating currency. The long term average appreciation is 20% odd a year. Say 2012 has built a base and consolidated around 1750 then 2013 should see a new base at 2100. No doubt it could spike higher. The prices are denominated in USD and should really be thought of as a currency swap, or exchange rate.

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As a deflationist, I treat gold as an appreciating currency. The long term average appreciation is 20% odd a year. Say 2012 has built a base and consolidated around 1750 then 2013 should see a new base at 2100. No doubt it could spike higher. The prices are denominated in USD and should really be thought of as a currency swap, or exchange rate.

 

It certainly is not being driven by Inflation, as Paul Van Eeden has pointed out.

 

So it must be attracting buying based on its merits as being nearly the "only currency that is not someone else's liability."

That's important in a world of countries with ticking debt bombs

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The Dollar could not hold its gains

 

DXY ... update

fxe.gif

 

 

Dollar Declines as Lawmakers Express Optimism on Cliff

 

The Dollar Index fell for the first time in three days as comments from U.S. lawmakers fueled optimism the so-called fiscal cliff will be avoided.

 

The yen rose to a one-week high against the dollar as technical indicators signaled its recent decline may have been excessive. The euro erased losses against the greenback as stocks rebounded amid speculation investors will accept Greece repurchasing its own bonds at below market prices. Brazil’s real fell against all its major counterparts on speculation the central bank will keep interest rates at record lows.

. . .

Boehner, Obama

Equities reversed declines as House Speaker John Boehner, an Ohio Republican, said he is optimistic lawmakers engaged in budget talks can “avert this crisis sooner rather than later.” He made his remarks to reporters, while saying he continues to oppose the expiration of tax cuts for top earners and Democrats need to get “serious” on budget cuts.

===

/more: http://www.businessw...deal-will-stall

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So it must be attracting buying based on its merits as being nearly the "only currency that is not someone else's liability."

That's important in a world of countries with ticking debt bombs

 

This can't hurt either: Basel III & Gold

 

"The most significant change is moving gold from its tier 3 status to tier 1 capital as 100% loan-backing reserves, the same as cash and bonds. For the first time in 42 years, gold is being brought back into our financial system as money. All the world's banks are now storing this metal, not as some 3rd rate "asset," but as all the world's working capital - its money. So it's not just any voice, it is the ultimate voice on what is money that has spoken. Gold was removed from our system by Nixon in 1971, when he took us off the gold standard by disallowing foreign governments to exchange their dollar reserves for US-held gold. Ironically, they were doing this in great volume because of Washington's lack of fiscal discipline. Now, as gold has appreciated from $35 to $1700 in the unofficial gold standard interim, Washington's lack of fiscal discipline is again an issue, and we are now being forced to recognize gold as official money again." - Bruce Pile, November 18, 2012 ( http://seekingalpha.com/article/1016161-basel-iii-and-gold )

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This can't hurt either: Basel III & Gold

 

"The most significant change is moving gold from its tier 3 status to tier 1 capital as 100% loan-backing reserves, the same as cash and bonds. For the first time in 42 years, gold is being brought back into our financial system as money. All the world's banks are now storing this metal, not as some 3rd rate "asset," but as all the world's working capital - its money. So it's not just any voice, it is the ultimate voice on what is money that has spoken. Gold was removed from our system by Nixon in 1971, when he took us off the gold standard by disallowing foreign governments to exchange their dollar reserves for US-held gold. Ironically, they were doing this in great volume because of Washington's lack of fiscal discipline. Now, as gold has appreciated from $35 to $1700 in the unofficial gold standard interim, Washington's lack of fiscal discipline is again an issue, and we are now being forced to recognize gold as official money again." - Bruce Pile, November 18, 2012 ( http://seekingalpha....el-iii-and-gold )

 

Without the institution of a standard, gold is not recognized as 'official money'. It would be better to say gold is now acting as an unofficial currency. With gold currently in a free market there is a potential danger for governents, markets and economies; increased instability and uncertainty could see a period where gold acts like a black hole sucking capital out of economies. This would be a scenario where gold would have to go back onto a standard, where stability becomes the new economic imperative as opposed to growth.

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It certainly is not being driven by Inflation, as Paul Van Eeden has pointed out.

 

So it must be attracting buying based on its merits as being nearly the "only currency that is not someone else's liability."

That's important in a world of countries with ticking debt bombs

 

Yep, and add to that metaphysical macro-economic uncertainty. Being the strongest symbol of money [money is after all only an idea] gold should appreciate relative to all else.

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Without the institution of a standard, gold is not recognized as 'official money'. It would be better to say gold is now acting as an unofficial currency...

Yes.

So it's appreciation is being by Seignourage : the privilege that accrues to any currency or "marker" which people choose to hold as a store of value.

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Yes.

So it's appreciation is being by Seignourage : the privilege that accrues to any currency or "marker" which people choose to hold as a store of value.

 

And what if at some point too much capital flies into gold on some melt-down? Governments would obviously step in and tie gold to currency. And neither would it be a question of what we think 'ought' to happen. It would happen out of practical necessity.

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And what if at some point too much capital flies into gold on some melt-down? Governments would obviously step in and tie gold to currency. And neither would it be a question of what we think 'ought' to happen. It would happen out of practical necessity.

???

Why should they "pin" their currencies to Gold at a high gold price?

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???

Why should they "pin" their currencies to Gold at a high gold price?

 

To cap it. To stop it going higher. To stop further capital flying into gold. The real issue will not be so much the price at which gold is 'capped' against USD, but the relative price of the other currencies pegged in turn against USD. The US will want other currencies to be pegged for the same reason that gold would need to be fixed; to stop free range capital fleeing weaker currencies and strengthening them.

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To cap it. To stop it going higher. To stop further capital flying into gold.

 

Haha. The rich and powerful PTB will just love that !

They will be able to switch out of (expensive) Gold into undervalued currencies at a HIGH FIXED Gold price.

Imagine if they had been able to do that at $750 or $800 an ounce back in 1980 - They would have loved it.

 

Of course, TPTB are supporting many websites and media outlets that pretend that is a good idea.

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Haha. The rich and powerful PTB will just love that !

They will be able to switch out of (expensive) Gold into undervalued currencies at a HIGH FIXED Gold price.

Imagine if they had been able to do that at $750 or $800 an ounce back in 1980 - They would have loved it.

 

Of course, TPTB are supporting many websites and media outlets that pretend that is a good idea.

 

Also, the price would have to go higher in order to re-capitalize economies/ balance debt. The mistake Churchill made after the Great War was to fix the price too low. With a mythic awe towards gold, they could not conceive of a standard but only the standard. Accordingly they massively appreciated the currency overnight without taking into account the actual depreciation in the course of the war.... deflationary disaster. If gold were again to play an official role, in both recapitization and international stability, the price should be higher. The market is effectively doing the job now, with governments perhaps stepping in when the process gets out of control, ie; capital flight.

 

 

Haha. The rich and powerful PTB will just love that !

They will be able to switch out of (expensive) Gold into undervalued currencies at a HIGH FIXED Gold price.

 

If a currency is fixed to gold it can not be over-valued or under-valued relative to gold because its value is defined by gold.

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If a currency is fixed to gold it can not be over-valued or under-valued relative to gold because its value is defined by gold.

???

Of course it can !

Imaging all those wealthy Illuminati families who are playing the Dollar depreciation trade.

They will be delighted if someone fixes the Gold price at a high level, before it follows the 1980 pattern and collapses.

The 1980 peak was $850, and it eventually slid to $250. They will be delighted to have a high price, like $5,000 -6,000,

and may be using their influence now to assist websites that promote the Fixed price idea.

 

Ron Paul is not in favor of a Fixed gold price, but rather sees it as a competing currency

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???

Of course it can !

Imaging all those wealthy Illuminati families who are playing the Dollar depreciation trade.

They will be delighted if someone fixes the Gold price at a high level, before it follows the 1980 pattern and collapses.

The 1980 peak was $850, and it eventually slid to $250. They will be delighted to have a high price, like $5,000 -6,000,

and may be using their influence now to assist websites that promote the Fixed price idea.

 

Ron Paul is not in favor of a Fixed gold price, but rather sees it as a competing currency

 

It's quite a different scenario, and therefore a different 'paradigm' is needed. The previous bull market was inflationary, this one is deflationary; gold is strengthening not as an inflation hedge [which I thought you were in agreement with] but as an informal currency. Considering its function as a [potentially bedrock] currency then it quite obviously can fix the value of other currencies... by very definition.

 

It is not about morality, but about the practicalities of money, its nature, and the way it has worked. History not ideology [or views of inept governments and evil elites] is the key to an objective understanding.

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The Price relationship of Gold to stocks, CPI, and the CRB (is gaining momentum)

 

It's quite a different scenario, and therefore a different 'paradigm' is needed. The previous bull market was inflationary, this one is deflationary; gold is strengthening not as an inflation hedge [which I thought you were in agreement with] but as an informal currency. Considering its function as a [potentially bedrock] currency then it quite obvious can fix the value of a currency... by very definition.

 

On that basis : Gold could go to ANY price at all.

 

64.jpg

 

On some South Pacific islands, large round stone disks were used as currency, and that worked so long as people had confidence in them. But take those stones to another island, and they had no value whatsoever, Same thing with paper money - it is a fiat currency, lacking any intrinsice value. In the same way, I suppose people could "value" gold at any crazy price they like, and people will flock to it, if they have lost confidence in the alternatives. But paper currencies and Gold are not the only ways to store wealth - there are alternatives (albeit most are not easy to hold as Gold or paper currency.) If we want to understand whether or not gold is overvalued, then we need to consider the price relationships to those alternative stores-of-wealth - I like to do it using Ratios.

 

Once Gold gets bid up to a crazy price, it may not stay there, as we saw after the 1980 Gold price spike. The price ran up from $35 an ounce to $850. and then eventually as inflation came down, prices slid from $850 to $250. And from that $250 low, they started moving up again. So people have said that the "intrinsic value" of gold over long, long periods of time = one good man's suit. Well I think we are above that now. I can buy several good suits for $1720. And people like Paul Eaden are saying that Gold is now trading at twice its fair value, based on inflation.

 

I understand your point about Gold getting bid up, if currencies implode and people lose confidence in holding obligations of heavily indebted governments. Many are preferring to hold Gold, since it is the only major currency marker which is not someone's liability. But I reckon that the deflation will quickly be followed by a quick burst of hyperinflation, as people seek to unload the wobbly currencies they hold, and get their hands on something more stable. The recent move in Basel, to treat Gold as a tier one asset is a good sign of where we are headed with Gold. When the currencies implode, people are going to prefer the most enduring form of money.

 

I do think many rich folks are now sitting on massive gold holdings awaiting the inflationary end game. And they may or may not have confidence that they can time their exit out of gold at the right time, before it repeats the post-1980 swan dive. Those that have little confidence may prefer the Dollar (or their home currency) being pinned to gold at a high fixed price. This way, they will have plenty of time to unload their gold. For these folks, the plan will not be to sell the gold and then hold some devalued currency. It will be to sell the gold and buy currency and then quickly convert it into Real Assets: like income-earning property, or maybe shares in healthy companies. Or even baskets of consumer goods that can be stored. Those "real" items will carry more confidence than a wobbly currency, especially after a big devaluation, And once the currency is convincingly pinned to Gold, Gold itself will lose its "safe haven" preference.

 

So maybe you should be looking at the relationship between Gold and those alternative real assets - this will tell us when Gold is getting overvalued.

 

Here are two charts - I think they make it pretty easy to spot the Buying and Selling opportunities !

 

Gold -in-SPY units

goldtospy.png

 

Gold -in-CPI units

goldtocpi.png

 

What we see in the second chart, is a growing preference for Gold.

 

People are showing a preference for holding gold, rather than a basket of commodities and/or other items in the CPI.

 

What is in the CPI ??

 

Weights of the CPI

The weight (or quantities, to use the above terminology) of an item in the CPI is derived from the expenditure on that item as estimated by the Consumer Expenditure Survey. This survey provides data on the average expenditure on selected items, such as white bread, gasoline and so on, that were purchased by the index population during the survey period. In a fixed-weight index such as the CPI, the implicit quantity of any item used in calculating the index remains the same from month to month.

A related concept is the relative importance of an item. The relative importance shows the share of total expenditure that would occur if quantities consumed were unaffected by changes in relative prices and actually remained constant. Although the implicit quantity weights remain fixed, the relative importance changes over time, reflecting average price changes. Items registering a greater than average price increase (or smaller decrease) become relatively more important.

======

/source: http://en.wikipedia....mer_Price_Index

 

Here's another chart to look at from time-to-time, showing the relationship between Gold and the CRB (Commodity Research Bureau index). You will note that Gold is gaining on this index also - Gold has gained something like 1-unit on the Ratio each 12-18 months : from 4 to 5 in 2010, from 5 to 6 in 2011, and maybe from 6 to 7 (or higher) in 2013.

 

Gold -in-CRB units

goldtocrb.png

 

The chart may help give some clues as to when the rapid moves will occur. For instance, and break above 6.0, may lead to a rapid move to 7.0 or higher.

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The Price relationship of Gold to stocks, CPI, and the CRB (is gaining momentum)

 

 

 

On that basis : Gold could go to ANY price at all.

 

64.jpg

 

On some South Pacific islands, large round stone disks were used as currency, and that worked so long as people had confidence in them. But take those stones to another island, and they had no value whatsoever, Same thing with paper money - it is a fiat currency, lacking any intrinsice value. In the same way, I suppose people could "value" gold at any crazy price they like, and people will flock to it, if they have lost confidence in the alternatives. But paper currencies and Gold are not the only ways to store wealth - there are alternatives (albeit most are not easy to hold as Gold or paper currency.) If we want to understand whether or not gold is overvalued, then we need to consider the price relationships to those alternative stores-of-wealth - I like to do it using Ratios.

 

Once Gold gets bid up to a crazy price, it may not stay there, as we saw after the 1980 Gold price spike. The price ran up from $35 an ounce to $850. and then eventually as inflation came down, prices slid from $850 to $250. And from that $250 low, they started moving up again. So people have said that the "intrinsic value" of gold over long, long periods of time = one good man's suit. Well I think we are above that now. I can buy several good suits for $1720. And people like Paul Eaden are saying that Gold is now trading at twice its fair value, based on inflation.

 

I understand your point about Gold getting bid up, if currencies implode and people lose confidence in holding obligations of heavily indebted governments. Many are preferring to hold Gold, since it is the only major currency marker which is not someone's liability. But I reckon that the deflation will quickly be followed by a quick burst of hyperinflation, as people seek to unload the wobbly currencies they hold, and get their hands on something more stable. The recent move in Basel, to treat Gold as a tier one asset is a good sign of where we are headed with Gold. When the currencies implode, people are going to prefer the most enduring form of money.

 

I do think many rich folks are now sitting on massive gold holdings awaiting the inflationary end game. And they may or may not have confidence that they can time their exit out of gold at the right time, before it repeats the post-1980 swan dive. Those that have little confidence may prefer the Dollar (or their home currency) being pinned to gold at a high fixed price. This way, they will have plenty of time to unload their gold. For these folks, the plan will not be to sell the gold and then hold some devalued currency. It will be to sell the gold and buy currency and then quickly convert it into Real Assets: like income-earning property, or maybe shares in healthy companies. Or even baskets of consumer goods that can be stored. Those "real" items will carry more confidence than a wobbly currency, especially after a big devaluation, And once the currency is convincingly pinned to Gold, Gold itself will lose its "safe haven" preference.

 

So maybe you should be looking at the relationship between Gold and those alternative real assets - this will tell us when Gold is getting overvalued.

 

Here are two charts - I think they make it pretty easy to spot the Buying and Selling opportunities !

 

Gold -in-SPY units

goldtospy.png

 

Gold -in-CPI units

goldtocpi.png

 

What we see in the second chart, is a growing preference for Gold.

 

People are showing a preference for holding gold, rather than a basket of commodities and/or other items in the CPI.

 

What is in the CPI ??

 

Weights of the CPI

The weight (or quantities, to use the above terminology) of an item in the CPI is derived from the expenditure on that item as estimated by the Consumer Expenditure Survey. This survey provides data on the average expenditure on selected items, such as white bread, gasoline and so on, that were purchased by the index population during the survey period. In a fixed-weight index such as the CPI, the implicit quantity of any item used in calculating the index remains the same from month to month.

A related concept is the relative importance of an item. The relative importance shows the share of total expenditure that would occur if quantities consumed were unaffected by changes in relative prices and actually remained constant. Although the implicit quantity weights remain fixed, the relative importance changes over time, reflecting average price changes. Items registering a greater than average price increase (or smaller decrease) become relatively more important.

======

/source: http://en.wikipedia....mer_Price_Index

 

Here's another chart to look at from time-to-time, showing the relationship between Gold and the CRB (Commodity Research Bureau index). You will note that Gold is gaining on this index also - Gold has gained something like 1-unit on the Ratio each 12-18 months : from 4 to 5 in 2010, from 5 to 6 in 2011, and maybe from 6 to 7 (or higher) in 2013.

 

Gold -in-CRB units

goldtocrb.png

 

The chart may help give some clues as to when the rapid moves will occur. For instance, and break above 6.0, may lead to a rapid move to 7.0 or higher.

 

Yes, and no.

 

Yes, I think all those charts/ strengthening ratios of gold against commodities and real assets should hold good. Throw into the mix currencies as well, and you have gold strengthening against currencies, and 'doubly' strengthening against assets [as priced in currencies].

 

No, I doubt hyper-inflation will occur. If anything I think hyper-deflation more probable. In that scenario the USD could strengthen [even as gold strengthens against USD... both forms of liquidity] against real assets, and perhaps even commodities. If currency were to be fixed to gold due to hyper-deflation, it would not be because USD drastically depreciated [hyper-inflation] but rather because the currency drastically appreciated [relative to real assets, commodities, and otther more peripheral currencies... not re-monetized gold]. It would crucify the economy, Rather than allow mass unemployment, [international] government would step in to stabilize currencies and thus economies.

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