Saturday , 22 October 2016

Currency Wars: Here’s What They’re Really All About

A currency war is a battle, supposedly an economic policy to cheapen a country’s currency compared to that of others, to promote exports but the real reason, the one that’s less talked about, is that countries actually want to import inflation – a way of creating monetary ease and importing inflation. Let me explain.

The above edited excerpts, and the paraphrased comments below, are from an article by Jim Rickards for entitled A Brief History of Currency Wars which can be read in its entirety HERE.

There have been three currency wars in the past one hundred years.

  • Currency War I covered the period from 1921 to 1936. It started with the Weimar hyperinflation in 1921 in Germany followed by France, Belgium and others in 1925.
  • Currency War II raged from 1967 to 1987. The seminal event in the middle of this war was Nixon’s taking the U.S., and ultimately the world, off the gold standard on August 15, 1971.
  • Currency War III began in 2010 when the U.S. tore up the deal to maintain the purchasing power of the dollar and have its trading partners link to the dollar or some peg to the dollar.

The lesson of currency wars is that they don’t produce the results you expect which are increased exports and jobs and some growth. What they produce is extreme deflation, extreme inflation, recession, depression or economic catastrophe.

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