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Will massive stimulus by a few governments cause competitive currency devaluation?

*The Wall Street Journal, September 20, 2012

”Massive injections of stimulus into financial markets by the world’s largest central banks are creating a domino effect around the globe, prompting governments from Brazil to Turkey to take steps to keep easy money from flooding in and driving up their currencies.

The Bank of Japan Wednesday became the latest central bank to ease monetary policy.  That follows bold pledges by the world’s two biggest central banks to launch open-ended programs to bolster their economies.

The BOJ’s efforts were largely designed to stimulate Japan’s moribund economy, in part by adding money to financial markets as well as driving down the value of the yen to help the nation’s exporters.  The bank increased the size of its asset-purchase program to 80 trillion yen ($1 trillion) from 70 trillion yen, and extended the program by six months until the end of 2013.

The European Central Bank said earlier this month that it is prepared to buy debt from euro-zone countries that need help in controlling their borrowing costs.  The Federal Reserve last week announced a program to buy $40 billion a month in mortgage-backed securities until the economy recovers.  Many investors expect the Bank of England to announce its own additional measures to stimulate growth.”

*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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