Submitted by Phoenix Capital Research on 01/29/2013 10:41 -0500
The tension between Central Banks that we noted yesterday continues to worsen. This time it was China and the EU, not just Germany, that fired warning shots at the US Fed.
A senior Chinese official said on Friday that the United States should cut back on printing money to stimulate its economy if the world is to have confidence in the dollar.
Asked whether he was worried about the dollar, the chairman of China's sovereign wealth fund, the China Investment Corporation, Jin Liqun, told the World Economic Forum in Davos: "I am a little bit worried."
"There will be no winners in currency wars. But it is important for a central bank that the money goes to the right place," Li said.
Speaking at the same session, French Finance Minister Pierre Moscovici voiced concern that the euro was becoming overvalued as a result of quantitative easing and other stimulus actions taken by other nations' central banks.
"Certainly, the level of the euro is high and creates some problem," he said, attributing the single currency's recent gains partly to the return of confidence created by the European Central Bank and euro zone governments in starting to overcome Europe's debt crisis.
So first Germany begins pulling its Gold reserves from the US, and now China and the EU are saying publicly that the Fed’s policies are damaging confidence in the US Dollar.
This does not bode well for the financial system. The primary role of Central Banks is to maintain confidence in the system. If the Central Banks begin to turn on one another it is only a matter of time before the system breaks down.