We think this is one of the most important warnings we have posted. Please read it carefully.
We posted an item months ago about the way that tariff wars can deteriorate into currency wars.
A currency war is about to break out.
A currency war occurs when nations deliberately weaken the value of their currencies in order to stimulate their economies. When trading partners impose tariffs on a country’s incoming goods, that exporting nation will often depreciate or devalue its currency so that its goods become cheaper to foreign buyers. In this way, it hopes to offset the additional cost imposed on its goods by the tariffs or taxes imposed on them.
It is a deranged strategy. Countries devalue their currencies by manipulating interest rates lower and printing money – or to use the euphemisms of the day, by “quantitative easing.”
While it can make its manufactured goods cheaper for foreign buyers with these manipulations, it makes everything its own citizens buy from foreign producers more expensive. So, if a country like China drives the yuan down, the Chinese pay more for raw materials, gasoline, food, and anything else that comes from abroad.
When China devalues its currency, it makes the Chinese people poorer.
When America devalues its currency, it makes the American people poorer.
A country the devalues its currency is saying that it wants its people to get less for their money.
Now Trump, expecting China to devalue its currency in the new trade war, is challenging the Fed to do the same thing: print, PRINT, PRINT!
Here’s an early Tuesday morning tweet from Trump:
“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win! In any event, China wants a deal!”
The President and his advisors have been calling for the Fed to lower interest rates a full-percentage point and to start another round of Quantitative Easing anyway, for domestic economic reasons. And to help Trump get reelected.
Now they are calling for it as a tool in the trade war with China.
There policies are unreservedly bullish for gold. All paper currencies are discredited as they each fight their way to be the cheapest. Since they can’t all be the cheapest, successive rounds of devaluation can become quite frantic as the all fight their way to the bottom.
When countries devalue their currencies, they are ultimately devaluing them against gold, the true supra-sovereign global currency
That means the price of gold goes up!
The best way to protect yourself from a currency war is to own gold!
We hope you will re-read this post and share it with your family and friends. It is timely and extremely important.
Please contact your RME Gold professional if you have any questions.