Who Wins in a Currency Devaluation War?

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Who Wins in a Currency Devaluation War?

The paradox in the question of who wins in a currency war presupposes that any participating combatant can actually claim victory. If winning means ending up with the most cash, when the value of the money as a store of tangible wealth is debased, it is doubtful anyone can be declared the victor.  The absurdity of lowering the purchasing power of a countries currency to enable exports to be more competitive is economic sacrilege that the heretical “Free Trade” mythos is based upon. Without a reliable standard of objective comparison, floating currencies maneuver their exchange rates to disguise internal imbalances in their own political and economic expenditures.   

With the hullaballoo from the recent Chinese devaluation, the rupture in the foreign exchange markets has shown signs of a panic. Accounts from the economic press vary from the country reporting the slant on the forthcoming fallout. Newsweek Europe presents this assessment in the article, China Yuan Devaluations Could Spark Currency War.

“The successive devaluations have generated a range of reactions across the financial world. In Vietnam, the State Bank doubled the trading band of its currency on Wednesday in response to China's decision, in effect paving the way for the Vietnamese dong to depreciate in value. Other Asian currencies fell following the yuan's devaluation, with South Korea's won, Malaysia's ringgit and Indonesia's rupiah all declining by at least 1 percent against the dollar, according to Bloomberg.

Gabriel Stein, Director of Asset Management Services at global think-tank Oxford Economics, says he expects Taiwan, Malaysia and Singapore to follow suit by devaluing their currencies in an attempt to compete with Chinese exports. However, too many countries devaluing at the same time will lead to a global slowdown in growth, says Stein. "It's a bad thing because it means imports become more expensive for everyone that does this," he says. "The idea with devaluing your currency is you have less domestic demand and your exports gain competitiveness, but everyone cannot do it at the same time and, if they try to, that's demand deflationary for the global economy."

A contrary viewpoint is expressed in the Forbes version, Yuan Devaluation Does Not Mean a Currency War.

“A more likely explanation for the PBoC’s move may be the country’s pride-driven desire to be join with the dollar, euro, pound and yen as a reserve currency in the IMF’s Special Drawing Rights basket of currencies.  The mechanism offered for exchange rate setting in this most recent shift is meant to be more market driven and transparent, which the IMF likes.  Devaluation, especially as delivered this time, promises such a direction and has been called a “welcome step” by the IMF.”

The logical implication from this evaluation transitions into an international central banking system adjusting to a globalist imposition for a bundle of different legal tender. Redefining a different monetary standard for a reserve coinage has been in the making for a very long time.

The most likely introduction will come after a major collapse in the foreign exchange markets. The obvious advantage for the money changers is that the smoke from the economic explosion that is on the horizon provides ample cover to maintain their continued control over global money transactions.

How will the U.S. Dollar fare in this mix of musical chairs? For a counter mainstream analysis from author Andrew Moran, the essay, Impending U.S. Dollar Collapse Should Be Getting Attention, Not China’s Devaluation, Financial Analyst cites Peter Schiff.

“He added that the U.S. economy is in a much worse situation right now than the Chinese.

That’s going to sink the dollar and then the Chinese are going to have to revalue their currency much higher in the future against the dollar and it’s the dollar collapsing that’s going to hurt the US.”

While the empirical fact that the U.S. economy maintains a perpetual balance of payment deficit, the notion that a currency war will result in a bankster version of a monetary restart, ignores the reality that international trade benefits foreign corporations or subsidies of American companies.

America as a country or as a people, see little return from the fleet of container ships docking at the Long Beach port.

Think about the consequences of Schiff’s conclusion. U.S. consumers would be burdened with buying higher priced Asian goods with a much lower purchasing value from our own dollar.

Any correlation between commerce and national prosperity has been severed long ago. As the middle class crumbles faster and further, the net result is that essential goods and services become even more expensive, since it takes more depreciated dollars to buy the necessities of life.

When the world was on the gold standard and had fixed currency exchange rates, the flexibility of governments and central banks to cook their books had a powerful restrain. Since the age of future contracts, market casino and FOREX trading, the speculative exchange rates have been volatile.

At least be honest, there is no free market in the determination of actual differences in value among currencies. Since the world is dominated by central banks, the cooperative looting of national treasures both public and private is the most profitable sport on the planet.

Introducing a new money scheme to camouflage the enormous mountain of debt is the true strategy of any fabricated skirmish over currency convertibility and rates.

Fiat tender has a practical value of whatever the global elites thrust upon the vulnerable populist and defenseless nation states.

Because of this political assessment, the economic equation must factor in the tangible nature of money exchange rates within the geopolitical context. Fighting against a money war means that the enemy is the entire central banking structure, designed to keep humanity in an effective prison of subsistence.

The threat of warfare and conflict always overhangs those countries that buck the established monitory system that keeps the New World Order advancing to their ultimate goal of total world domination. A Dollar here, a Pound there, maybe a Euro thrown in with a Renminbi, makes the   global Ponzi scheme go round.

James Hall – August 19, 2015

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