Whether we like to admit it or not, central banks worldwide have embarked on a global currency war since the economic collapse. It isn’t a war to determine who has the soundest and most valued currency, but rather a race to the bottom to diminish the fiat currency’s value as much as possible. This is what the global currency war is.
Nouriel Roubini, a New York University economist and identified as Dr. Doom, wrote in Project Syndicate that the United States has officially entered the international currency war, despite the various notions that the Federal Reserve has sidelined itself from this type of war since the financial crisis.
Roubini begs to differ. Although the greenback has appreciated against other currencies around the world, he believes the U.S. has become an active participant in order to prevent any further appreciation.
“But things look different today, and U.S. officials’ exchange-rate jitters are becoming increasingly pronounced,” averred Roubini. “The dollar appreciated much faster than anyone expected. And the impact on net exports, inflation, and growth has been larger and more rapid than that implied by policymakers’ statistical models.”
He opined that U.S. central bank officials have openly spoken about how the dollar has been an important factor to inflation, growth and net exports. This will later lead to action through the means of policy directives.
“Verbal intervention will be followed by policy action, because slower growth and low inflation — partly triggered by a strong dollar — will induce the Fed to exit zero policy rates later and more slowly than expected,” stated Roubini.
When it comes to interest rates, it remains unclear as to when the Fed will begin to raise rates.
For an entire year, it was suggested by economists, and hinted by the Fed, that rates would be hiked in June. However, due to weak economic data and tepid inflation levels, a rate hike could be delayed to September. Some Fed officials, like Charles Evans, suggest a rate hike should transpire in 2016, while some contrarian investors, like Peter Schiff, think a rate hike won’t happen at all.
No matter what happens, a global currency war will only affect the general population, a populace that will experience the ramifications of a failed experimental fiat hegemony.
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