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Monday, July 28, 2014 2:26 PM

IMF Warns Pound Overvalued; What About Other Currencies?

Is the British pound overvalued? What about the Euro? The US Dollar? The Yen?

Curiously, economists make that case for all of those currencies.

And today, the IMF is pounding the drums with this proclamation "Overvalued" Pound Prevents Rebalancing.

The International Monetary Fund warned on Monday that the pound was “overvalued” and preventing the rebalancing of the economy away from a reliance on spending and imports.

In its annual assessment of the UK economy, the fund said sterling was between 5 and 10 per cent overvalued because of a “lack of competitiveness and limited export diversification”.

“Staff estimates that the current account balance is 2.6 per cent weaker than its equilibrium level, and that the real exchange rate is overvalued by about 5–10 per cent,” the IMF said.
Equilibrium Level Madness

Apparently the IMF is the arbiter of the "equilibrium level" of any and every currency. A few examples will prove the point.

New Zealand Dollar Overvalued by 20%

On April 10, 2014 the IMF warned New Zealand Dollar May Be Overvalued.

Canadian Dollar Overvalued by 10%

On March 2, 2014 the IMF Warned Canadian Dollar Overvalued by 10%" despite recent depreciation, thus the Bank of Canada should wait before hiking rates..

Australian Dollar Overvalued by 10%

On November 21, 2013 the IMF Stated Australian Dollar Overvalued by 10%.

US Dollar Overvalued

This dates back a while but on October 28, 2010 the IMF said US Dollar 'Overvalued' On Currency Markets.

Swiss Franc Overvalued

Returning to this year, on March 24, 2014, IMF Suggests SNB Use Negative Rates if Franc Pressured because the "franc remains moderately overvalued."

Euro Overvalued

As shocking as this may seem, I cannot find a recent IMF opinion on the Euro, but on May 8, 2014, Mario Draghi, president of the ECB discussed the Pernicious Effects of an Overvalued Euro.

I am pretty sure the IMF would agree.

Yen and US Dollar Overvalued

On October 12, 2012, the Wall Street Journal proclaimed If Yen Overvalued in IMF View, So May Be Dollar.
Japan's finance minister may have breathed a sigh of relief Thursday when the International Monetary Fund chief reaffirmed the yen is "moderately overvalued," a phrase traders believe is supportive of potential market intervention to weaken the currency against the dollar.

Not so well-known in the market, however, is that the 188-member international lender also sees the dollar as "moderately overvalued," a view that makes it harder to conclude the IMF would endorse future intervention by Tokyo in the dollar-yen market.
Yuan "Moderately" Undervalued

On May 29, 2013, and contrary to sentiment in Washington DC that says the Yuan is massively undervalued, The IMF Seeks Flexible Chinese Yuan, Says "Moderately Undervalued".

US Dollar Index

click on chart for sharper image


Note that the US dollar is about where it has been since the beginning of 2012, but higher than it was in October of 2012 when it was judged to be "overvalued".

Is it more overvalued today? 

Apparently the British pound, New Zealand dollar, Australian Dollar, the US dollar, the euro, and the yen are all overvalued.

The yuan is the one major currency that is allegedly undervalued, but only "modestly".


IMF overvalued-undervalued judgments are generally on a basket of currencies basis.

However, it is not mathematically possible for all those currencies to be 5-20% overvalued against all the other currencies in the same basket.

Even if it was possible, based on precise timings and currency fluctuations, the idea that the IMF can fine tune currency valuations to the nth degree as it has done is absurd.

All Currencies Overvalued

Nonetheless, the IMF appears to be on target with all those "overvalued" assessments, not against  other currencies in the basket or against each other individually, but against gold, and by far greater percentages.

If you agree with my assessment, and perhaps even if you don't, please consider How Much Gold Should Someone Own? Where and How To Own It?

Mike "Mish" Shedlock

2:24 AM

No BBC Video Removal Scandal After All; Evidence of Military Planes Shadowing MH17 Mounts

On July 23 the BBC deleted a video report from correspondent Olga Ivishina regarding the crash of MH17. This has caused quite a stir in the blogosphere because the deleted video contained eyewitness reports of military aircraft flying on the same day, shadowing MH17.

Here is the deleted video from cache: Катастрофа рейса MH17 Би би си в поисках Бука 23 07 2014, LQ 

Global Research Canada has some interesting translation clips in Deleted BBC Report. “Ukrainian Fighter Jet Shot Down MHI7″, Donetsk Eyewitnesses.

BBC's Initial Response

I found dozens of references to the removal, but to find BBC's reason for removing the video, I had to search the BBC website. It's in Russian.

Jan Leder, managing editor of Russian BBC Service explains Why Bi-bi-si Material Removed From Site.

Video Reposted

My initial reaction was that Leder's response was disingenuous.

However, the BBC has since re-posted the video.

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, went over the original and now re-posted videos and it appears the BBC was telling the truth all along.

From Dreizin

Although it's not entirely clear, the managing editor says that the intent from the get-go was to fix the material and put it back up as soon as possible.

I have reviewed the original version side-by-side with the new one. And I can see what she's talking about. The new video still has all the eyewitness ladies that everyone has focused on.

The new video removed a somewhat irrelevant lecture from the VItalii Naida, the Ukrainian counterintelligence chief. Instead, it has a Ukrainian official claiming that no combat flights take place over rebel areas, followed by a local resident making a mockery of that claim.

It also has a segment where a BBC aviation expert is quoted as giving his rebuttal to a rebel's claim that Ukrainian warplanes have used civilian flights as cover.

The expert says that while he can't rule it out, it seems very unlikely to him, for various technical reasons. However, I don't think he quite understands precisely what the interviewees are saying.

All in all, there's no BBC scandal here.  But if you just want to focus strictly on what the eyewitness ladies said I've improved it a bit.  Here goes...

Eyewitness #1:  There were two explosions in the air.  This is how it [the plane] tore apart. And it [the remains of the plane] flew off to the sides [gesturing with hands in two opposite directions]. 
Eyewitness #2:  And nearby there was one other airplane, a military one, everyone saw.
Eyewitness #1:  Yes, yes. It was going lower, because it could be seen. It was going below the passenger plane.
Eyewitness #3:  There were sounds of an explosion. But they were in the sky.  Then this plane turned around sharply like this [gesturing with her finger], changed trajectory, and flew in that direction [showing the direction with her hand].
Mounting Evidence

  1. Credible eyewitnesses saw multiple planes.
  2. Russia claims radar picked up multiple planes
  3. Russia claims Ukrainian Buks in Eastern Ukraine
  4. Plane moved from original flight path in mysterious circumstances

Russia gave a detailed report on numbers 2 and 3 (See Russia Claims Photos of Ukraine Deploying BUK Missiles in East, Radar Proof of Warplanes in MH17 Vicinity)

Ukraine denies all of the above, and of course the rebels deny having Buks. It's quite possible, and in fact likely, that both sides are lying about multiple things.

That said, Russia has at least come out with some of its evidence. The US and Ukraine have little to offer but hype and reports that appear fake, coupled with over-reliance social media.

Mike "Mish" Shedlock

Sunday, July 27, 2014 6:23 PM

Ukraine's Army Advances; Unguided Rockets Kill Civilians; Demise of Rebels?

There are lots of conflicting, even contradictory news reports regarding Ukraine in the past couple of days. Let's take a look at a few of them starting with the Bloomberg report Ukraine Army Advances as EU Plans Tougher Putin Sanctions.

Ukraine’s army advanced on a last main separatist stronghold as the U.S. said Russian President Vladimir Putin is poised to give the rebels heavy weapons and European Union leaders considered their toughest sanctions yet on Russia.

Ukrainian troops are battling insurgents in the town of Horlivka, about 20 kilometers (12 miles) northeast of the regional capital Donetsk, a city of 1 million people where rebels retreated after abandoning other positions earlier this month. Taking Horlivka would open the way to attack one of their last redoubts, Ukrainian Defense Ministry spokesman Andriy Lysenko said yesterday in Kiev.

“Fighting to take over Horlivka is going on,” he told journalists. “Donetsk will be next.” CNN reported that long lines of cars jammed roads leading south from the city yesterday as residents tried to flee.

Ukraine’s State Security Service, or SBU, posted what it said was an intercepted plea for help made by Alexander Borodai, head of the self-proclaimed Donetsk People’s Republic, to a Russian it identified as Alexei Chesnokov.

“If nothing changes in terms of military activity, the situation will not be held for more than two weeks,” a voice that the SBU said is Borodai’s says in the intercepted call it posted yesterday on its YouTube page.
YouTube Page

Chesnokov cited a YouTube page in a voice that allegedly matches Borodai’s.

OK. Let's see the video. If you are going to post an allegation citing a YouTube that purportedly "sounds" like Borodai, why not link to it?

So why doesn't Bloomberg ask for it?

Civilians Flee Horlivka

In regards to Civilian fleeing Horlivka and other war zones. I don't doubt it.

Bloomberg cites CNN, but Bloomberg's link is to a totally useless Bloomberg discussion page called http://topics.bloomberg.com/cnn/, not anything useful on CNN, not even a discussion of the civilian flight.

Clearly Bloomberg is fishing for clicks. 

CNN Video of Fleeing Civilians

Here is a link to the real CNN report and video: Donetsk residents flee fighting; Russians report spike in Ukrainian refugees.
Long lines of cars jammed the roads leading south out of Donetsk in eastern Ukraine Saturday, as residents attempted to flee the city center after a night of heavy shelling on the city's northern outskirts.

Hundreds of vehicles were caught in heavy traffic, and trains are no longer running in and out of the city, which is a stronghold for the pro-Russia rebels.

There was heavy shelling and antiaircraft fire on the outskirts of the city to the north throughout the night. There has been sustained fighting in the area for weeks, but it appeared more intense overnight than in recent days.

Russian news agency Interfax reported a dramatic increase in the number of Ukrainian refugees seeking refuge over the border in Russia.

"The Ukrainian government officials were seeking to encircle the city, really squeeze the remaining pro-Russian separatist forces that had fallen back there since being driven out of other strongholds across Eastern Ukraine," said CNN's Phil Black, reporting from a congested road in Donetsk while scores of people attempted to leave.
Why do Civilians Flee?

Neither CNN nor Bloomberg gave the real reason civilians are fleeing. Human Rights Watch does provide the reason: Unguided Rockets Killing Civilians.
Unguided Grad rockets launched apparently by Ukrainian government forces and pro-government militias have killed at least 16 civilians and wounded many more in insurgent-controlled areas of Donetsk and its suburbs in at least four attacks between July 12 and 21, 2014, Human Rights Watch said today.

The use of indiscriminate rockets in populated areas violates international humanitarian law, or the laws of war, and may amount to war crimes.

Grads are unguided rockets that cannot be targeted accurately, and are often fired in salvos from multi-barrel rocket launchers to saturate a wide area. Human Rights Watch called on all parties to the conflict in eastern Ukraine, particularly Ukrainian government forces, to stop using Grad rockets in or near populated areas because of the likelihood of killing and wounding civilians.

“Grad rockets are notoriously imprecise weapons that shouldn’t be used in populated areas,” said Ole Solvang, senior emergencies researcher at Human Rights Watch. “If insurgent and Ukrainian government forces are serious about limiting harm to civilians, they should both immediately stop using these weapons in populated areas.”.
Unguided Rockets Kill Civilians

40 Barreled Grad

My understanding is these rockets fire sequentially, one after another, sort of like roman candles going "poof, poof, poof" louder of course.

Both sides have these weapons, but it is the Ukrainian troops who are readily willing to use them on civilians. Please don't compare this to the accidental downing of a plane, regardless of who you think did it.

Attack on Gorlovka

Here's a short, 43-second video of a grad attack on the city of Gorlovka.

The title reads On July 27 Gorlovka suffered rocket mortar attack.


While Ukraine is advancing in some areas, the above videos add a needed perspective that mainstream media does not provide.

What with all the satellites in the sky, all the tens of billions of dollars the US spends on "intelligence" every year, is it too much to expect the US to portray these aspects? 

Not All Battles Going Ukraine's Way

Contrary to mainstream media reporting, not all of these battles are going Ukraine's way. Yesterday I posted a video of Ukraine's 72'nd brigade.

Today I have a video of the demolition of part of the 79'th brigade. It was taken a few days ago.

Ukrainian forces are doing the talking. Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian provided this synopsis.
In this video, the speaker is actually on the Ukrainian side. The speaker is complaining about not getting enough support from Kiev, and recounting what types of munitions were used to destroy his camp. In the other video you posted earlier, it seemed that the people in the video were rebels who came to take a look. 

This is a different video, which shows remnants of a unit of Ukraine's 79th Airmobile Brigade, not the 72nd Mechanized Brigade.

Here's one notable part:

"We have no option but to retreat because our government doesn't do anything to pull us out of here or to give some kind of reinforcement, to save people. They are doing absolutely nothing."
Regarding Ukrainian advances, the flight of civilians, and trapped Ukrainian forces, Dreizin adds ...
41 Ukrainian soldiers are reported to have escaped to Russia today, the largest one-day total so far.

Nonetheless, the rebels in Lugansk city, Donetsk city, and some other spots are very hard pressed at the moment. Lugansk city in particular is being pounded hard.

However, the Ukranians are incapable of any kind of targeted fire.  OSCE observers have been monitoring the situation and have confirmed the civilian casualties and the indiscriminate, seemingly random fire that causes them. 

A few days ago, the rebels had to make an organized retreat from the Severodonetsk/Lisichansk region nothwest of Lugansk city. Their hope now is to finish off the surrounded Ukrainian forces in the south quickly in order to free up substantial forces for a counterattack in the north. These southern forces would certainly shift the balance. The question is how fast they can be freed-up.
So is the war really going as mainstream media plays it?

Mike "Mish" Shedlock

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