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Currency War

Is The Credibility Bubble Bursting?

by John Rubino on April 19, 2015 · 0 comments

In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips […]

 

Welcome To The Currency War, China Edition

by John Rubino on April 13, 2015 · 11 comments

Here’s one for the “seriously, you’re surprised?” file: China pegs its currency, the yuan, to the dollar, the dollar soars, taking the yuan with it…and fewer foreigners buy suddenly-much-more-expensive Chinese products. Duh. China’s Export Engine Loses Steam, Adding to Growth Pressure China’s exports unexpectedly slumped last month, eroding the outlook for one of the economy’s […]

 

Is The Whole World Slowing Down?

by John Rubino on April 4, 2015 · 23 comments

The stats just keep getting stranger and, if you’re a policymaker or an investor, scarier. According to a (now widely publicized) McKinsey & Co study, instead of deleveraging after the debt-induced crisis of 2008-2009, the world borrowed another $57 trillion. And virtually everyone has been expanding their money supply aggressively. The next couple of charts […]

 

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 · 12 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. […]

 


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