Post by The Great Aztec Joe on Oct 25, 2010 4:39:42 GMT -8
All of the industrial nations are now engaged in currency wars with each other trying to lower their currency opposite the others. If we lower our currency we can sell more of our product at lower prices in foreign markets. Yahoo!
The end result will be that chaos will ensue.
The short term result is that commodities will soar in price. As we lower the value of the dollar opposite the value of corn or wheat or beef, those items will increase in price, but our products for export will go down in price and we can increase what we sell on the world market. Our trade deficit will become a trade surplus, or so the thinking goes. In the United States, all the Social Security recipients will not receive enough in monthly payments to buy their food as that food (processed agricultural commodities) will be too expensive.
The housing prices will stop going down and that crisis will disappear with only a whimper.
Unfortunately, the reality is that many foreign countries peg their currencies to the American Dollar. That way they can still manufacture and sell to the American market place.
So if we lower, they lower and we lower and they lower and all we do is make commodities more expensive, but we do not do away with the balance of trade deficit.
At least by looking at this situation we can see that it would be very unlikely that the dollar would ever see hyperinflation like the insane Ron Paulites have been screaming about for years and years.
With their hype they can push the price of Gold and Silver up and up and up and up, but it will tumble eventually when people see that there is no inflation of the dollar in the global market and all the hype about gold was just that, HYPE.
Of course the Chinese could decouple from the American Dollar but that would be catastrophic for their sales to the US that have made their economy what it is in the past thirty years.
The end result will be that chaos will ensue.
The short term result is that commodities will soar in price. As we lower the value of the dollar opposite the value of corn or wheat or beef, those items will increase in price, but our products for export will go down in price and we can increase what we sell on the world market. Our trade deficit will become a trade surplus, or so the thinking goes. In the United States, all the Social Security recipients will not receive enough in monthly payments to buy their food as that food (processed agricultural commodities) will be too expensive.
The housing prices will stop going down and that crisis will disappear with only a whimper.
Unfortunately, the reality is that many foreign countries peg their currencies to the American Dollar. That way they can still manufacture and sell to the American market place.
So if we lower, they lower and we lower and they lower and all we do is make commodities more expensive, but we do not do away with the balance of trade deficit.
At least by looking at this situation we can see that it would be very unlikely that the dollar would ever see hyperinflation like the insane Ron Paulites have been screaming about for years and years.
With their hype they can push the price of Gold and Silver up and up and up and up, but it will tumble eventually when people see that there is no inflation of the dollar in the global market and all the hype about gold was just that, HYPE.
Of course the Chinese could decouple from the American Dollar but that would be catastrophic for their sales to the US that have made their economy what it is in the past thirty years.