Peter Schiff’s latest commentary at Euro Pacific Capital examines the logic behind an international currency war. Schiff looks at the recent example of the Swiss franc to show what happens to an economy that decides to abandon a strong currency. Of course, if you want to avoid the woes of fiat currencies, it’s important to invest in something real and tangible, like precious metals.
“Productive nations generate excess goods and services that can be sold abroad and their growth and stability attract investment funds from abroad. These conditions will tend to increase demand for the nation’s currency, thereby pushing up its price. A strong currency keeps capital and raw materials costs low, enabling more productive workers to earn higher real wages. But according to most economists, a strong currency will bring down an economy because it destroys international competitiveness and can even lead to lower prices (deflation) which they see as economic quicksand. These fears have ignited a “global currency war” in which countries are expending huge amounts of national savings in order to ensure that their currencies stay cheap. In today’s economic logic we must fail in order to succeed.”