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We believe that we are in the “competitive devaluation” stage presently [see graph 
below] as country after country is printing money in order to lower rates and doing whatever possible to devalue their currency – to have the fastest currency in the…race to the bottom – in order to export their goods and services. [The next stage will be protectionism and tariffs. This article gives an update on the race to debase.]
So say Comstock Partners (http://comstockfunds.com) in edited excerpts from their original article* entitled Currency Wars will only get worse.
This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
The article goes on to say in further edited excerpts:
When massive private and public sector debts result in a credit collapse and recession, the efforts to pare down the debt is deflationary. Measures to inflate…out of the situation are likely to fail as households attempt to pay down debt and increase savings, rather than start a new round of debt accumulation.
- World Debt 101
- Consumer Indebtedness Leading to Currency Devaluation & Beggar-Thy-Neighbor Economic Policies
In addition, financial institutions are willing to lend to only the strongest borrowers…This is called a “liquidity trap” and it is very difficult to extricate from….
- “Liquidity Trap” is Fast Approaching
- We’ve Reached the Tipping Point: Are Consumers Prepared to Save the Day?
The Cycle of Deflation
Trying to remedy the significant amounts of debt the global economy[has] built up could lead to a debt collapse and depression if not dealt with aggressively….We have warned numerous times about the “Cycle of Deflation” and the potential “competitive devaluations”, and “beggar-thy-neighbor” policies that are all symptoms of the deflation we expect to take place very soon….
- World’s Largest Economies Have NO Choice But to Engage in Massive Money Printing – Here’s Why
- Richard Duncan: IF Credit Bubble Pops Civilization Won’t Survive the Depression that Follows
- Eric Sprott: More Government Spending Is NOT the Answer to Our Economic Woes – Here’s Why
Deflation is a product of too much debt….[Countries must] either default on their debt or pay it off. When we get to the dashed line in the “Cycle of Deflation” chart below, right after “protectionism and tariffs,” is when deflation sets in and economic pain becomes unbearable.
Different Race Strategies Abound
The main driver of the recent currency movements has been the various monetary policies of the world’s major central banks. The U.S. Federal Reserve, the Bank of England, the Bank of Japan, the Peoples Bank of China, and the European Central Bank (ECB), are all attempting to grow their economies with different policies. These are just the major central banks. Actually, there are 38 central bankers around the world either printing money or initiating loose monetary policies. Some, as was the case just a few days ago in Venezuela, just devalue their currency (the Bolivar).
- Peter Schiff: The Federal Reserve is Now 100% Committed to the Destruction of the Dollar
- This Chart Proves That Your Currency Is Being Debauched At An Accelerating (Parabolic) Rate! Got Gold?
- What Will the Outcome of All the QE Mean for the U.S. (and the World)?
The Euro Zone Has Fallen Behind
Some countries/zones have it easier than others. In fact, because the ECB is not able to pinpoint exactly which of the 17 countries in the Euro Zone need the most help they were forced to offer three year loans to banks at the cheap interest rate of 1%….over a year ago but the Euro vs. the dollar…[has risen] by almost 10% since then, and…[has been] up more than 20% for the last 3 months. This put the Euro Zone under economic pressure as they found it difficult to export goods to their trading partners with [such] an increasing currency. In fact, the latest statistics…show the 4th quarter annualized GDP of Germany to be down 2.3%, France down 1.1%, Italy down 3.7%, Spain down 2.8%, and Portugal down 7.2 %. Also, the ECB forecasted zero growth for the Euro Zone this year.
Japan Has Spurted Ahead
…[Recently] Japan, realizing that they were not aggressive enough with competitive devaluation over the past couple of decades, has decided to do whatever is possible to lower the value of the Yen and increase inflation. So far, they have been very successful…[but, as a result, have become] the target of all of their trading partners. It is clear this is not over yet.
Conclusion
The competition to have the fastest currency in the…race to the bottom is not over. Stay tuned to the “Cycle of Deflation” as we continue to update it.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://comstockfunds.com/default.aspx?act=Newsletter.aspx&category=MarketCommentary&newsletterid=1703&menugroup=Home
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