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What You Need to Know about the Currency War

Oct 09, 2010

The average person does not understand the economic causes of war. This is largely because governments usually provide the public with more palatable justifications for war, usually some atrocity that they are accused of doing.

Yet the real causes of war are usually economic, and in today's world of Mystery Babylon, they take the form of currency wars.

In a world where "free trade" is the sacred cow, every nation seeks to export more than it imports in order to service its debt and provide employment for its people. When one country--like China--exports far more than it imports, it means that some other nations--like America--are importing far more than they export.

The reason is that China has cheap labor, while America has expensive labor. The trade unions of the past century have worked to increase the standard of living for American workers. "Free trade" is the corporations' revenge. They knew that by establishing "free trade" it would soon be impossible to manufacture anything in America if it could possibly be manufactured more cheaply in another part of the world.

This is simple Economics 101, regardless of how they sold it to the American people.

Once "free trade" is established, every nation has to resort to currency manipulation as a means of increasing its exports. Denied the right to impose tariffs on imports, their only tool is to have a cheaper currency than their neighbors. As is so often stated about currencies, "it is a race to the bottom." Whoever has the cheapest currency has the best chance of exporting the most goods, thereby providing their own workers with employment.

Cheap currency is accomplished by printing great quantities of money, which cheapens the value of the entire currency. The governments of the world know that they can print lots of money and have it to spend on their social projects, while at the same time making their exports less expensive to other countries that buy them. These are huge incentives to debase one's currency.

America has been trying to do this by its monetary policy, but China has figured out how to counteract it. They simply peg their yuan to the dollar, so that whenever the dollar drops, so does the yuan. The more the dollar becomes worthless, the more the yuan follows suit. This has made Timothy Geithner froth at the mouth, crying "Foul!" (But, hey, they should have figured this out decades ago when they established "free trade" policies.)

The IMF has met this week to try to resolve this issue. Their utter failure has people talking about a currency war.


WASHINGTON -Global finance leaders have failed to resolve deep differences that are threatening the outbreak of a full-blown currency war.

Various nations are seeking to devalue their currencies as a way to boost exports and jobs during hard economic times.

The International Monetary Fund wrapped up two days of talks in Washington on Saturday with a communique that pledged to "deepen" its work in the area of currency movements, including conducting studies on the issue.

The communique essentially papered-over sharp differences on the currency issue between China and the United States.

As long as the world economy was humming along, everyone was happy with the "free trade" agreements. But once the debt-money system reached the point where people could not borrow any more, and trade slowed, then everyone began to be worried about selling their goods to other countries (particularly to America, the great Consumer Nation).

Each exporting nation then began to reduce the value of its currency, hoping to out-do their neighbors who were doing the same thing. With the failure of this latest IMF negotiation, the whole Babylonian financial system could collapse in a trade war, which is actually a currency war. Picture Geitner in his track uniform racing against the treasury officials of other nations, each trying to reach the tape first--zero point currency.

The outcome of this race itself means that gold and silver and other commodities will rise in value against ALL currencies. That is why gold is now near $1350 and silver is near $23.50. These high prices simply reflect the devaluation of currencies, so that it takes more dollars to buy the same amount of gold or silver.

Here is where it affects us personally, depending on whether we are holding dollars or metals. It used to be wise to save money in the bank. But in a currency war, the opposite is true. Why save something that is plunging in buying power? As in Germany during the 1920's, the people would get paid twice a day, put it in their wheelbarrow, and take it quickly to the grocery store before the prices doubled again a few hours later.

The average person is uneducated in economic matters, and so they are the first victims of the currency wars. I write of these things in order to keep you from being victimized by this coming war. What you don't know will indeed hurt you. So be prudent so you don't see your life's savings wiped out by a currency war.

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Category: Financial

Dr. Stephen Jones

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