In his latest commentary, Peter Schiff explains the dynamics of a currency war and the disastrous consequences for the citizens of any country that participates in one. The Japanese are particularly intent on destroying the yen, though the United States remains in the lead with a dollar that no longer reflects any real fundamental value.
“While the world’s economies jockey one another for the lead in the currency devaluation derby, it’s worth considering the value of the prize they are seeking. They believe a weak currency opens the door to trade dominance, by allowing manufacturers to undercut foreign rivals, and to economic growth, by fighting deflation. On the other side of the coin, they believe a strong currency is an economic albatross that leads to stagnation. But the demonstrable effects of currency strength and weakness reveal the emptiness of their theory.
A country that attracts investment from abroad (through stable and fair governance, low taxes, a growing economy, and a productive labor force) and produces goods that are in demand on the global stage will generally see a rising currency. In essence, this is the reward for a job well done. Strong currencies then help nations stay strong by conferring greater purchasing power to its citizens and businesses, which keeps input costs low, thereby enhancing international competitiveness. Strong currencies also encourage savings, keep real interest rates low, lower capital costs, and allow for greater productivity and higher real wages.”
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I have been reading Peter’s commentary for a long time. And I just want to say that I have enjoyed every and each of his commentaries. They all have illuminated my understanding on economy. I am in 99% agreement of what Peter has said. There is just 1% that I can’t agree on. I hope I can receive additional information from Peter so I can agree with 100%. Peter said recently that on the next crisis, unlike what happened in 2008, foreigners will not buy US dollars and US bonds, so they will fall big time. I think differently. Next time, foreigners may still buy US dollars and bonds because comparing to Euro and Yen, US dollars and bonds would still be in relatively better shape.
Respectfully,
A loyal reader
Thank you for your support, loyal reader, and for taking the time to leave a thoughtful comment. Even with a more optimistic view of the US dollar and bonds, we trust you’re not putting all your eggs in one basket! It’s only a matter of time before we all find out precisely how the next crisis plays out. Here’s wishing you a healthy and prosperous future.