IN THE YEAR OF COMPETITIVE DEVALUATION... Who will destroy theirs first in the international currency wars?

The time has now come for the year-end assessments and for the forecasts for 2013. Like it has already become customary, Danish investment bank Saxo Bank has published its "outrageous" forecasts for 2013.

They have been widely reproduced by the international and Romanian press. Unfortunately, the foreword of Steen Jakobsen, the chief-economist of the bank, was less popular.

"The macroeconomy has run out of ammunition to improve the sentiment in the markets", writes Jakobsen, and "we are only left with praying for a better future", as "we have been reduced to the status of observers of the actions of the central bank, like a horde of junkies waiting for the next liquidity injection".

After he writes that "we have a proforma capitalism, with a de facto totalitarianism", Jakobsen makes a request, probably addressed to the governments and central banks, "to get the free markets back".

Unfortunately, for now, Santa is unable to fulfill the wish of Steen Jakobsen. And he implicitly acknowledges this, because the return of the free markets is so "scandalous" that it hasn't found its place among the ten forecasts that strive to shock.

Closer to the reality in the field, Jim Rickards, the author of the book "Currency wars - the making of the next global crisis", sees an intensification of the actions of the central banks and governments to weaken their own currencies.

Rickards recently said for RT News that "Federal Reserve is in fact fighting against the economic depression. The leaders of the Fed do not use this word, but we need to admit that we have been in an economic depression since 2007". He means of course the new quantitative easing program launched by the American central bank. "But can the Fed reach its goals before people lose their confidence in the dollar?", he asks.

Just like nuclear arsenals are capable to create a "mutually assured destruction", just as guaranteed is the destruction of the economies through the deliberate wrecking of the national currencies. What kind of competitive advantage can a deliberately devalued currency provide, if everyone is doing the same?

And yet, in spite of other ideas, "competitive devaluations" seem to be ready to be accelerated, in spite of numerous warnings provided by history. The authorities of the more or less developed economies are looking for new ways to manipulate the consumer price indexes, so that they can hide the effects of the new currency waves.

Unfortunately, it is too late even for such financial and statistical tricks. Even though the novelty has worn off, the Arab "springs" are ready to "flourish" again, as shown by the escalation of violence in Bahrain.

The escalation of the social pressures is caused especially by the accelerated increase of prices, amid monetary regimes built around a peg of the local currencies to the US dollar. And the discontent isn't limited to the Arab world, but also extend from Asia to Latin America.

The signals concerning the true intentions of the American authorities have appeared a long time ago. Kyle Bass, founder of Hayman Capital Management, was saying at the AmeriCatalyst conference, one year ago, that "the current plan of the government (author's note: American) is to overcome the crisis through exports, and when I asked an official of the Obama administration how this is going to happen, if the deflation of the nominal wages won't be allowed, he said that they would kill the dollar.

Ben Bernanke, the chairman of the Federal Reserve, proved that he is ready to play the role of the executioner, especially if we take into account his admiring statements towards the policies of Franklin D. Roosevelt. "His most effective actions were the rehabilitation of the banking system and the depreciation of a quantitative easing policy", Bernanke said since back in 1999, in a conference at Princeton.

If the actions that Bernanke has taken so far haven't been convincing enough about how resolute the authorities in Washington are when it comes to "vaporizing" the dollar, perhaps the arguments of Robert Rubin, former secretary of the Treasury during the Clinton will hold more weight.

At the TradeTech conference of March 2012, that too many of his assets are denominated in dollars and that he should diversify his portfolio, according to Bloomberg, and QE3 (author's note: which was only a plan at the time) will not achieve much, other than increasing the money supply. "We need to hope for the best, but it would be prudent to prepare for the worst", Robert Rubin concluded.

Kyle Bass has also presented his new forecasts, which aren't scandalous at all, at the AmeriCatalyst conference this year, starting off from the observation that "the world is in a place where it's never been before in times of peace, in terms of the global imbalances and deficits".

Bass wrecked the myth of Germany's fiscal responsibility in just a few words, reminding about the official public debt of over 80% of the GDP and the flawed capitalization of the German banks. The founder of Hayman Capital Management also reminded that over the last ten years, the global credit, has increased from 80 trillion dollars to over 200 trillion, with an annual rate of 10.7%, whereas the real global GDP has increased at an annual rate of approximately 3.8%.

Data clearly shows that the current situation is not sustainable. But can the inflationary policies relieve the debt burden? In the opinion of Kyle Bass, the authorities' hopes are vain, because they think they can find the solution to a problem which can't be solved mathematically: the covering of expenditures which increase exponentially with revenues which increase linearly.

In an article published by the Bank for International Settlements in September 2011 ("The real effects of debt", BIS Working Papers No 352), it is said that "the problem of debts which the evolved economies are faced with is much worse than we thought", and the authors show that the burden of debts will become increasingly greater, amid the deterioration of the economic outlook and the aging of the population.

It's been over a year since the study was published and nothing suggests that the authorities are ready to act in order to eliminate the causes of the global crises. On the contrary, the public debts have maintained their upward trend.

In order to reduce the indebtedness and to solve the problem of unsustainable debts, the article proposes the intensification of the efforts to increase the cost of lending and to eliminate the various subsidies, as well as the elimination of the preferential fiscal treatment of the debtors.

The conclusion? The only way to exit the debt crisis is saving. This is vital especially for the developing countries, which are currently faced with outflows of foreign capital.

Why saving? Because there is no other way to rebuild the capital base of a nation, especially for those which have been badly affected by the burst of the speculative bubbles generated by out-of-control lending and endorsed by the central banks in an irresponsible manner.

Even if the authorities will not fulfill the wish of Steen Jakobsen, to get back the free markets, because this would mean the recognition of the failure of the socialist policies and the loss of the huge privileges, the chief-economist of Saxo Bank will at least have the opportunity to console himself with their development in the "underground economy".

Until economic reality will invalidate all the anti-crisis plans of the governments and central banks, all we have left to do is to get ready for the intensification of the global currency war and to hope that it will not spill over into a different type of coordinates, much "hotter".

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Note: The article represents the author's point of view, it does not reflect or imply the opinions of the institution that employs him and it does not represent an investment recommendation.