How Can You Avoid a Currency War After It Starts?
We've discussed "currency war" in the past. (If you haven't read or aren't familiar with Jim Rickards excellent book on the subject, click HERE.)
So the following article puzzled us as much as the currency traders:
So the following article puzzled us as much as the currency traders:
LONDON—A statement from the Group of Seven leading economies on Tuesday attempted to head off a potentially destabilizing round of currency devaluations, but comments aimed at elaborating on it left currency traders puzzled.
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Currency devaluations are nothing new. Indeed, the heating up of currency devaluations was one reason for investing in gold starting in 2000 - 2001. While perhaps the world wasn't quite in a full-fledged "currency war," at that time, it's hard to see how it's not in the midst of one now. The statement by the Group of 7 was given as a reason gold's price dropped a bit yesterday. Supposedly there would be no reason to own gold to protect yourself now that these eminent leaders declared that exchange rates would adjust "naturally" rather than be manipulated.
These sorts of comments leave me wondering just how worried these leaders must be at this point. Everyone knows currency devaluations have increased and probably heated up to the point where calling them currency wars isn't any kind of exaggeration. Are they afraid that things are about to get really out of control now that Japan has announced it will engage in drastically increased QE, which will include knocking the Yen down so that Japanese products will be more competitive? Do they think the Japanese government, having just been elected to devalue the Yen and increase the rate of inflation will now turn around and change course - a course they've just started?
No, they don't - or maybe we should say can't possibly - think that. So maybe they're just trying to put up a facade of responsible fiscal governance. They want to appear that they prefer responsible fiscal policy. This in the face of the incredibly irresponsible policies they've pursued for decades.
When I read something like this, I don't know what to think. Puzzled probably doesn't really describe how I react. Sometimes I feel angry, sometimes disgusted, sometimes I just laugh. Today I think I'll laugh. And since we all need a good laugh once in a while, in case this article didn't do it for you, try this classic minute and 17 seconds from Peter Sellers:
Doesn't matter how many times I see it, I laugh every time.
Currency devaluations are nothing new. Indeed, the heating up of currency devaluations was one reason for investing in gold starting in 2000 - 2001. While perhaps the world wasn't quite in a full-fledged "currency war," at that time, it's hard to see how it's not in the midst of one now. The statement by the Group of 7 was given as a reason gold's price dropped a bit yesterday. Supposedly there would be no reason to own gold to protect yourself now that these eminent leaders declared that exchange rates would adjust "naturally" rather than be manipulated.
These sorts of comments leave me wondering just how worried these leaders must be at this point. Everyone knows currency devaluations have increased and probably heated up to the point where calling them currency wars isn't any kind of exaggeration. Are they afraid that things are about to get really out of control now that Japan has announced it will engage in drastically increased QE, which will include knocking the Yen down so that Japanese products will be more competitive? Do they think the Japanese government, having just been elected to devalue the Yen and increase the rate of inflation will now turn around and change course - a course they've just started?
No, they don't - or maybe we should say can't possibly - think that. So maybe they're just trying to put up a facade of responsible fiscal governance. They want to appear that they prefer responsible fiscal policy. This in the face of the incredibly irresponsible policies they've pursued for decades.
When I read something like this, I don't know what to think. Puzzled probably doesn't really describe how I react. Sometimes I feel angry, sometimes disgusted, sometimes I just laugh. Today I think I'll laugh. And since we all need a good laugh once in a while, in case this article didn't do it for you, try this classic minute and 17 seconds from Peter Sellers:
Doesn't matter how many times I see it, I laugh every time.
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