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Currency War

The point of competitive devaluation, aka currency war, is that a cheaper currency gives a country several advantages over its trading partners, leading to better growth and generally happier voters. The trading partners, meanwhile, get the ugly mirror image — slowing growth and disgruntled citizens — so they eventually respond in kind, with devaluations of […]

 

The euro is tanking again, as the ECB starts buying bonds for its long-promised “whatever it takes” QE program. Today’s exchange rate move is dramatic enough to generate headlines like this, from Forbes: Euro Nears Parity With U.S. Dollar And the decline is accelerating: What we’re seeing here is a brilliantly-fought currency war battle, i.e., […]

 

The Day The Dollar Crushed Everything

by John Rubino on March 6, 2015 · 3 comments

The way markets usually work is that on any given day (or in any given year) some asset classes are up while others are down. Investors, as a result, are always torn between the impulse to pile into the best looking sector and the urge to diversify against the unexpected. But sometimes it doesn’t matter […]

 

What Do These Two Charts Have In Common?

by John Rubino on March 5, 2015 · 10 comments

The premise of a currency war is that by devaluing its currency a country is able to sell things overseas more cheaply, which gooses its growth at the expense of its trading partners. If it actually works that way, then you’d expect this chart of the euro plunging against the dollar… …to be reflected in […]

 

Now Watch Denmark

by John Rubino on February 10, 2015 · 11 comments

One of the reasons we’ve all heard of George Soros is that back in 1992 he pulled off an epic financial coup by “breaking” the Bank of England. At the time the UK was trying to maintain a loose peg with the German Deutsche Mark, despite the fact that the two countries had very different […]

 

Two weeks ago Switzerland abruptly decided that it couldn’t keep buying billions of euros every month just to maintain a somewhat arbitrary peg with that currency. It stopped trying, allowed the Swiss franc to trade according to market forces, and watched it soar. At the time there was some question about whether an export-centric economy […]

 

Australia just fired a serious shot in the currency war by cutting its overnight lending rate to a record-low 2.25%. With the aussie as a result tanking, local holders of bank accounts and cash are quite a bit poorer than they were at this time last year. But owners of gold are doing just fine. […]

 

This Is What It Means To Lose A Currency War

by John Rubino on January 27, 2015 · 68 comments

The term gets tossed around a lot, but the meaning and consequences of a “currency war” aren’t intuitively clear to most people. Especially confusing is the idea that you lose the war when your currency goes up. The suddenly very strong dollar, for instance, should, one would think, be a good thing, since it seems to […]

 

Can You Just Surrender In A Currency War?

by John Rubino on January 18, 2015 · 40 comments

Switzerland, as everyone knows by now, has slipped out the back door of the drunken orgy that is the modern financial system. And the other revelers are wondering if it’s time to find their own clothes and start tiptoeing towards the exit. Because the Swiss have such a big “mind share” in the world of […]

 

Germany Caves On Greek Debt; Italy Takes Note

by John Rubino on January 7, 2015 · 94 comments

Global financial markets breathed a sigh of relief today on news that Germany might cut Greece some slack after the latter elects an anti-austerity government: Greek Debt-Relief Talks Possible After Vote, Germans SayGermany is leaving the door open to discussing debt relief with Greece’s next government, lawmakers in Chancellor Angela Merkel’s coalition said, signaling a […]

 


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