What keeps happening over & over?
Government spends more than it can afford.
It kills the economy.
Government refuses to cut back on spending.
It prints money to kick start jobs and cheapen the currency to payoff the debt.
Printing money doesn’t create any jobs so more & more printing is done.
Eventually the currency collapses from devaluation or hyperinflation.
When many governments are doing this at the same, the money printing kicks off a currency war. Each country needs exports to lower the unemployment so it deliberately weakens its currency to make its products cheaper. In response, other countries weaken their currency to get exports and eventually the currency war turns into a trade war with tariffs and limitations on capital and trade. Ultimately, resulting in an economy collapse where the economy can finally start anew in a sustainable manner.
This scenario has played out countless times over the last few hundred years.
Where are we today?
- Governments around the world are overspending.
- “Austerity” is defined by politicians as a speck of a reduction in the growth of government spending.
- Governments around the world are printing money.
- Economies are weak and unemployment is high so money printing keeps increasing.
Some details?
Japan announced in December that they were going to sharply drive their currency down to increase exports.
The Yen has fallen 15% against the dollar and even more against the Euro.
Then S. Korea weakened their currency, then Taiwan weakened their currency, Britain devalued by 25% in 2008, but since it didn’t help their economy, they are expected to devalue again soon.
It is less than a zero-sum game: mis-allocation of resources from politicians leaves us all much worse off. How? A giant problem is large global companies with expensive plants setup in countries based on raw materials, gov’t policies, and relative currency values get whip-sawed in these currency wars and trade wars. Bill Gates recently said that Microsoft is hoarding cash and cannot grow because of the currency war.