Will governments drive prices higher and higher?
*Dow Theory Letters, Richard Russell, October 15, 2007:
"The point I'm making is that we're dealing with a situation that
has no precedent in world history. We have a situation where 20 central
banks on the planet are all under political pressure to keep their
respective currencies competitive. No nation (despite what they may
state for publication) wants a strong currency. A "cheap" currency
allows for competitive exporting. A cheap currency also places a
nation's assets on the bargain table. And that, of course, is the case
with the US today. The "bargain" dollar has turned the US into a
veritable "candy store" for much of the rest of the world. In terms of
real estate, corporations, tangibles located in the US, everything
looks like a bargain to a businessman or an overseas investor.
The fact that the world is now operating on a fiat currency basis has
placed the planet on an endless inflationary escalator. The culprit is
the phenomenon of "competitive devaluations." If a given nation's
currency becomes noncompetitive ("too strong"), that nation's central
bank creates more of its own currency and with that newly created
currency -- it buys dollars. This strengthens the dollar in terms of
the nation's own currency, rendering that nation's currency competitive
again, at least in terms of dollars.
However, this process has no automatic brake which would serve to bring
this endless currency production to a halt. As a result, the world has
become an ever-expanding ocean of fiat currency. The term for this
process is well-know in financial circles, it's called -- monetary
inflation. If this process continues (and it is continuing), monetary
inflation always produces price inflation."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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