if you google "currency wars" it is not a new thing per say. It has gone on before but they are
getting more desperate since they expected the economy to recover
(they say it has but we all know it hasn't).
In the United States the Democrats are fighting a Republican Congress over the economy. In
Europe the Germans are fighting with the Greeks, the French, and other
European countries about the policies of the Euro. And in Japan they want very
artificially low rates that are not practical. Japan was lightly touched on in the G7 meeting and will be
the main focus for the G20 meeting in Moscow this weekend.
Whenever they have these meetings (any bank meeting) it causes confusion in the markets - they just had a G7
meeting the other day and prior to that there was a bunch of other bank meetings by the US, Australia, and Europe. So they are almost all done. Anyone that tries to trade when things are like this
usually gets their head cut off so I'm waiting until this is done with. It's impossible to pick the correct direction when they are bickering unless you are lucky and luck has to do with gambling - only
stupid traders gamble.
The US has agreed that it will keep it's rates artificially low until unemployment drops to 6% (I think it's 7.8%)..
Gold will probably go up this year and the next.. The housing market
is likely a fake recovery too because the current buyers are
institutional investors and not 1st time buyers. The institutions are
buying them not to make money from the price of the real estate but to
rent them out so it is not a real recovery at this point and if the economy doesn't get on track there will likely
be another real estate crach. 1st time buyers have a tough time qualifying for homes
and right now the savings rate is very low because as you know not
only is the economy bad but savers or punished by the banks.
With a record number of people living below the poverty line - it's not realistic to expect another boom in real estate anytime soon.
Even if you by treasury bonds with a 3% return it doesn't account for
inflation which makes it a losing return on the investment because of
the federal reserves banking policies that are causing purchasing
power to erode. Right now the stock market is going up because the
big investors have temporarily moved into stocks because bonds are not attractive.
There is a lot of talk about a bond bubble and a lot of people that
say not to worry - when they say not to worry that's when you worry
Since Nixon removed the gold standard the price of gold has gone up
40x (that not 40% but 40 times --- 3900% if my math is correct). It's likely gold will
continue to go up in the future since the US continues to borrow to
support the economy and pay for wars. I don't see this trend
reversing anytime soon unless the economy can somehow recover but
rather than recover it will probably reach a point where it breaks -
that is why some economist are saying gold will go to 3000 or more and
gas price to $8 bucks or more there's a good chance prices will go up soon especially
with price per barrel nearing $100.).
It's not a time / scenario for long term investors to breath easy and sit back in their easy chair - you have
to be on top of every occurrence - if unemployment and the debt situation doesn't change overseas investors that are holding up the US economy will continue to lose confidence in the US (they are already upset) and continue to invest outside the US - that only means one thing ---- a great
Neal Vanderstelt - Currency Analyst
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