Currency War

We know that our money is really just paper. It's backed by faith in the U.S. government. It can go up or down in value based on a lot of factors...one of which is how much faith investors have in OTHER governments.

Let's face it, if you had a crystal ball and you knew that Government A was still going to be in existence in 10 years and Government B was already fiscally broke and was heading for collapse and anarchy...whose paper money would you rather hold? It really is that simple. You would naturally desire to hold more Government A paper...and would pay more to get it....thereby increasing the value of that currency.

Now here is a problem; most of the major governments of the world (especially the Western world...which has lived WAY beyond our means issuing IOU's) are already broke. Furthermore, their economies are in recession...meaning that their business aren't selling anything...so they lay off workers...who then have less money to buy anything....so businesses aren't selling anything....and the government can't collect taxes from unemployed workers and unprofitable businesses....so they go further down bankruptcy road. It really is a vicious circle.

So what do governments WANT to do to attempt to stop this vicious cycle? One plan is to make your money worth less against other foreign currencies....that way the goods and services of U.S. companies will be cheaper to foreigners...and they will buy more stuff here than at home because the German Mark buys more U.S. dollars...which in turn buys more U.S. products....which in turn makes U.S. companies hire more workers to fill the orders...and then we emerge out of the recession.

So what if Japan, Brazil, China, France, Spain, etc... all come up with the same idea at the same time? In other words,...what if they ALL try and devalue their currency in a race to see who can make their money worth the least...in the quickest time?

The world is in the grip of a currency "war", with leading nations using devaluation to solve economic problems, Brazilian Finance Minister Guido Mantega has warned in remarks reported from Sao Paulo.

"We're in the midst of an international currency war, a general weakening of currency," he said in remarks reported by the Financial Times newspaper.

Japan, South Korea and Taiwan have intervened recently to pull down the value of their currencies, the newspaper noted, and the dollar has fallen by about 25 percent so far this year against the Brazilian real. Such a fall increases the price of Brazilian exports on the US market.

NOW PAY SPECIAL ATTENTION TO THIS:

The United States has complained for years that China has held down artificially the value of its currency, preventing it from rising to reflect the strength of China's foreign exchange earnings from exporting, notably to the US market.

This came to a head at the end of last week while the UN General Assembly meeting was being held when China's Premier Wen Jiabao told a business forum in New York that voiced fears of social unrest if Beijing bowed to US pressure.

"If the (yuan) appreciates by 20 to 40 percent according to requests of the US government, we do not know how many Chinese companies will go bankrupt and how many Chinese workers will be laid off and how many rural workers will go back to their homes and there will be major turbulence in Chinese society," he said.

See it here; http://www.breitbart.com/article.php?id=CNG.6ba18dcc0082babe1fb010468f2dd977.291&show_article=1

So there you have it. The USA wants the Chinese yuan to be worth 20-40% more so it will help the U.S. economy...but the Chinese are saying if they allowed that to happen it could crash the Chinese economy and cause "major turbulence in Chinese society."

And we owe the Chinese $1 Trillion dollars...all of which may soon have to be refinanced.

Can you spell the word P-I-C-K-L-E?

One final thing...I remember this from history class....most wars start out as trade wars and evolve into fighting wars.