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Forget All Currencies

5 May 2010 One Comment

Playing the currency game is tough.  Maybe you’re bearish on the dollar, or maybe you’re bearish on the Euro.  The problem is to short the Euro, you might be long the dollar.  Well, what if you are negative on all currencies?

I’m negative on all currencies, because the current global economic trend is a competitive devaluation.  A race to the bottom.  Many major economies around the world are attempting to devalue their currencies in an effort to drive exports.  Unfortunately, when the other guy is doing the same, isn’t it basically just a lose-lose scenario?

As Peter Schiff says in one of his recent posts:

At the risk of beating a dead horse, let me reiterate my central thesis with respect to currency valuation: just as it is always better to be rich than to be poor, it is always better to have a strong currency than a weak one. Although this simple maxim puts me into conflict with much of the economic establishment

As Schiff says, the economic establishment is solidly in the camp of devaluing currencies.  As such, you should short all currencies.  And the only way to short all currencies it to own gold.

One Comment »

  • Stephan said:

    i think in the long run economies are better off with a strong currency, but short term is a different picture. The countries that want to devalue are stuck in a horrible financial position because of the recession. An easy way to speed up economic growth, decrease unemployment, and score political points! is to increase exports. The easiest way to do this is to devalue the home currency. Once the economy rebounds, it tends to be better for the home country to have a strong currency.

  • 20smoney said:

    Couple points… 1st, remember that you are devaluing a currency AGAINST another currency. So for you to successfully devalue you need the other currencies to stay stable. The result is a competitive devaluation or a race to the bottom.

    2nd… the european countries don't have this "luxury" and can't devalue their currency since they're stuck as being a member of the EU. Greece can't devalue, even tho the Euro is getting hammered anyways by the markets.

    Devaluations has never led to prosperity. Most people will always say its only short term and its necessary now, altho the dollar has lost 95%+ of its value since the Federal Reserve was created in early 1900s. There's a nice track record for you.

    Own gold.