Author of Currency Wars, Jim Rickards explains that the Fed’s easing programs have thus far failed to create their desired inflation, which, in their view, is required to boost US exports. Although Japan will be allowed to weaken their currency, all the other currencies of the world will be strengthened as the US strives to further weaken the US dollar. Of course, gold is still the currency of choice to preserve wealth.
- The economy has failed to recover despite the Fed’s actions so far because the consumer has not been willing to spend or invest. Hence money velocity has remained nil.
- The Fed is trying to induce more spending by: (1) Forcing a negative interest rate as an incentive for more borrowing, and (2) Scaring the public into buying stuff through the threat of future inflation.
- The inflation, they hope, will be the result of all the currency wars with other nations, especially China – cheapening the dollar will make imports more expensive.
“It’s a race between the Fed trying to achieve their goals and the whole system imploading because of a loss of confidence in the dollar.”
