On October 2nd, the head of the International Monetary Fund (IMF) warned the world’s countries not to start a currency war. Such action could end any economic recovery. The problem is that it appears that the world is already in a currency war.
Today, October 6th, an RT (I think it stands for Russia Today) program called Cross Talk, interviewed three currency analysts about the race, by most countries, to devalue their money.
Countries want their money to be low in value in order to attract foreign customers. International trade is key to growing a country’s economy. An economy that’s based on domestic trade only, leads to stagnation. But, if all the major traders in the world crash the value of their money the result could be worse than an economy based only on domestic trade.
The analysts interviewed on RT represent companies/organizations from Hong Kong, Russia and the U.S.
They said currency devaluation works only if a handful of countries do it. The problem is that “everyone” is doing it. The result will be global inflation.
The analysts agreed that the coming global inflation will not affect the ‘western’ countries as badly as the rest of the world. They didn’t give any example of how bad it would get.
An allegory was used to explain the effect of most countries trying to devalue their money at the same time: It’s like a marathon where you have so many runners that they knock each other out of the race. I other words, some countries are going to have their economies “knocked” out.
To solve the problem of currency wars, the analysts said world leaders might create a common global currency, or at least common rules on currency trading.
Increasing commodity prices, currency wars, actual wars, massive debts owed by governments, continuing job losses, etc. It seems to me that despite the positive spin our leaders, and main stream media puts on our economy, the evidence is clear that things are going to get worse. Buckle up.
