|A little off topic, but I just finished Currency Wars by Jim Rickards. Great book and an easy read. Essentially, Rickards' thesis is that when countries are in a bind -- high unemployment, slow economic growth, high debt, in other words, what we're facing currently as a nation -- they devalue their currencies to boost exports to boost GDP and inflate out debt. The only problem is, that only works temporarily before our trading partners retaliate with devaluations of their own, resulting in global stagflation and eventually war. Rickards goes through the earlier two currency wars of the 20th century and attempts to figure out how the current war, started in 2008 with QE1, will play out. |
The Fed is still trying to actively devalue the dollar to mitigate our debt and boost the economy. Unfortunately, the dollar is still holding steady because our trading partners are selling their currencies like mad and exchanging them to dollars and buying treasuries, thus attempting to put a floor under the dollar. This will probably continue until foreign inflation that is being generated by this action becomes unbearable, at which point the tide will reverse and the United States will start seeing runaway inflation.