Posts Tagged ‘euro’
Many central banks within the global economy are involved in printing more of their paper money (often referred to as “fiat” currencies). There’s a race to devalue currencies in hopes to revive economies and maintain a competitive stance. Countries believe that by printing more of their fiat currency, they can improve their exports to the global economy, because the goods will be cheaper for those countries that have a stronger currency.
Recently, we heard from the central bank of Brazil that it will commence a program “with the aim of providing FX ‘hedge’ (protection) to the economic agents and liquidity to the FX market…” (Source: Banco Central Do Brasil, August 22, 2013.) In simple words: Brazil’s central bank is going to make sure the country’s currency stays low compared to the currencies of its trading partners.
Through this program, the central bank plans to sell US$500 million on Mondays, Tuesdays, Wednesdays, and Thursdays of every week. This intervention is expected to last until the end of this year, but the central bank also made it very clear that it will continue with its plan as long as necessary.
Similarly, Columbia’s central bank is taking steps to lower the value of its currency. It has bought significant amounts of U.S. dollars and printed pesos. The finance minister of the country, who also represents the government on the central bank’s board, stated that the government wants to keep the country’s currency value between 1,900 and 1,950 pesos per U.S. dollar. (Source: Reuters, August 20, 2013.)
Our own central bank, the Federal Reserve, has been putting pressures on the U.S. dollar. Though we … Read More
Back in late 2011, I created a widely circulated video that included six predictions. I hit it on the head with five of those predictions. But the winners are not what are important to my readers today; it’s the prediction I didn’t get right that’s vital now
Back then, I said the U.S. dollar was “dead” and wouldn’t go anywhere. I pointed out that if it were not for the continued crisis in the eurozone, the greenback would fall flat on its face. The dollar hasn’t gone anywhere since. And if it were not for investors taking their money out of European banks and moving them into U.S. dollars, our dollar could have collapsed.
My second prediction back then was that the euro would decline in value. And it has. Prediction three was that both interest rates and inflation would rise. The yield on the 10-year U.S. Treasury has risen about 50% since then. As for inflation, if we calculate it the way the Consumer Price Index (CPI) was calculated when Jimmy Carter was president, it would be almost three times the rate the government tells us it is today.
I compared the rally in stocks that started in 2009 to the period following the 1929 stock market crash (1934 to 1937) and warned that stock prices would eventually follow the same fate they did after the “fake” stock market rally that followed the 1929 crash. I still have that opinion today.
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