Precious metals “bugs” have long predicted that the final phase of the hyperinflationary depression would be a “race to the bottom.” This race is a currency race, or more correctly a war, where each nation tries to boost its domestic industries by making its exports cheaper. How does it do that? By shamelessly and radically devaluing their currency. Nations will see each other engaging in this tactic, and will follow suit. Soon, the tactic is fully embraced by the world’s central banks, and the “Race To The Bottom” is on!
From Bloomberg today (6 September 2011):
“Swiss Pledge Unlimited Currency Purchases” by Klaus Wille
The Swiss central bank imposed a ceiling on the franc’s exchange rate for the first time in more than three decades and pledged to defend the target with the ‘utmost determination’…
The Swiss National Bank is ‘aiming for a substantial and sustained weakening of the franc,’ the Zurich-based bank said in an e-mailed statement today. ‘With immediate effect, it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.20 francs’ and ‘is prepared to buy foreign currency in unlimited quantities.’
“Unlimited quantities” has a nice ring to it, don’t you think? Gold priced in Swiss Francs (CHF) immediately jumped almost 8%. While Swiss exporters are hailing the move, Swiss savers are getting royally screwed, as the price of everything bought with CHF just went up, and consequently the buying power of Swiss savings just went down.
Bank of Japan, from Marketwatch, August 2011:
- The Bank of Japan raised its total asset-purchase program to approximately 50 trillion yen ($630 billion), from ¥40 trillion previously. The central bank said its policy board voted unanimously in favor of the action, as analysts had anticipated.
Markets reacted more to the intervention, with the Japanese yen falling by the most since September against the U.S. dollar USDJPY +0.83% after approaching its record low in recent days.
Japan intervenes in currency markets in an effort to stem the rising yen. Will this unilateral move effectively contain the currency’s climb and improve conditions for the country’s exporters?
The Bank of Japan moved its policy decision forward one day after the Ministry of Finance intervened in the foreign-exchange market earlier Thursday, to depress the value of the yen.
Will the day come when your central bank makes such an overt move to devalue YOUR currency? What do YOU think? Did you see in the article above how the writer equated “asset purchases” with “depress the value of the Yen”? Have you heard the term “asset purchases” before? Who would do such a thing?