It Does Not Exist, If We Say So

There is no currency war stemming from all the global quantitative easing, proclaims The Economist.  And if there was, it wouldn’t be bad.  The Economist’s Free Exchange columnist has written: “QE’s impact on its trading partners may be positive or negative; it depends on a country’s trade intensity, the substitutability between its and its competitors’ products, and how sensitive domestic demand is to lower rates. The point is that this is not a zero sum game; QE raises a country’s GDP by more than any improvement in the trade balance.

Writing in the Financial Times, BlackRock Vice Chairman Phillip Hildebrand argued “there is no such thing as a currency war.”  The former chairman of the Swiss National Bank wrote: “The monetary policy battles that have been fought and continue to be fought in so many economies are domestic ones.  They are fights against weak demand, high unemployment and deflationary pressures.  A greater danger to the world economy would in fact arise if central banks did not engage in these internal battles.”

Then why, one wonders, is the Group of Seven trying so hard to pretend there isn’t one or prevent one from growing. Meeting in London in mid-February, the G-7 published a statement: “We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.” The markets, reported the Financial Times, were “roiled” in the face of such reassurance. Apparently, the markets believe there is gambling going on in the casino.

It seems strange that some financial analysts should go to such lengths to proclaim that there is no gambling gone on in the casino.  Writing earlier in the Financial Times, Chile Finance Minister Felipe Larrain took a very different tact: “The surge of quantitative easy around the world should be a reason to worry for many emerging economies....Developed countries are acting to support their economies, but it is the emerging markets that have absorbed the bulk of the severe currency appreciation that follows every round of QE – and in particular those countries committed to flexible exchange rate regimes and open markets. This is particularly true in a world where China continues to manage its exchange rates.”

Whatever analysts call it and however they choose to suggest that it is an isolated case, the fall of the yen in recent months is clearly designed to be the foundation of Japan’s recovery from economic stagnation.  Even the Financial Times’ Martin Wolf called it “a beggar-my-neighbour devaluation.”  He added that “the policy will encourage more aggressive monetary policy elsewhere, which should be helpful to the world economy, if anything.”

Apparently, French President Francois Hollande has not gotten the message regarding the lack of a currency war as the value of the euro has appreciated.  “The euro should not fluctuate according to the mood of the markets,” Hollande told the European Parliament on February 5.  “A monetary zone must have an exchange rate policy. If not, it will be subjected to an exchange rate that does not reflect the real state of the economy.”

The temptation is to believe that central bank tinkerers can magically set the right exchange rates without other central bankers taking countervailing actions.  In advance of the G-20 meeting in Moscow, the Independent’s Russell Lynch reported: “IMF chief Christine Lagarde and Russia's deputy finance minister Sergei Storchak also denied the existence of currency wars, labelling recent swings in the yen as ‘market reaction to exclusively internal decision making.’” It sounds like the finance chiefs have decided to deny the obvious in hopes that the obvious will disappear.

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The Most Important Thing Holding Up the US Dollar

by Ron Paul

Today’s economic conditions reflect a fiat monetary system held together by many tricks and luck over the past 40 years. The world has been awash in paper money since removal of the last vestige of the gold standard by Richard Nixon when he buried the Bretton Woods agreement — the gold exchange standard — on August 15, 1971.

Since then we’ve been on a worldwide paper dollar standard. Quite possibly we are seeing the beginning of the end of that system. If so, tough times are ahead for the United States and the world economy.

Piketty’s Gold?

April 21, 2014

In terms of public policy, though, we favor honest money. It works out better for more people. And there is a moral dimension to the question of honest money. This was a matter that was understood — and keenly felt — by the Founders of America, who almost to a man (Benjamin Franklin, a printer of paper notes, was a holdout), cringed with humiliation at the thought of fiat paper money. They’d tried it in the revolution, and it had been the one embarrassment of the struggle. They eventually gave us a Constitution that they hoped would bar us from ever making the same mistake.

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The Rueffian SynthesisJohn D. Mueller

Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.

By John D. Mueller

Rueff Restates the Quantity Theory of Money

... Rueff argued that the real problem with the monetarists is not that they focus too much, but rather too little on the supply of money; namely, they assign too little importance to the concrete mechanisms by which money is actually created. Most monetarists adopt the convention that the government can control the nominal supply of money, while demanders of money control its value. Rueff pointed out that under a properly functioning monetary system, even the nominal supply of money is determined by people’s demand for it.

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Excerpts From:

by Lewis E. Lehrman

"The economist defines money as a medium of exchange. It is the token we supply in order to effect payments for the goods we demand. Money is especially a standard like a yardstick – a unit of measure by which we value and price economic goods. Money units express prices which are the vital information necessary for efficient exchange. Money is surely a store of value."

Learn More


Laksmi, The Goddess of Prosperity

Ralph J. Benko  |  Apr 24, 2014
Indian culture long has held a high appreciation for gold.  The Vedic faith records four historical ages, the highest being the Satya Yuga.  Per Wikipedia, "when humanity is governed by gods, and every manifestation or work is close to the purest ideal and humanity will allow intrinsic goodness to rule supreme.

So Long, So Slow: IMF Not So Optimistic on World Recovery

Kathleen Packard  |  Apr 23, 2014
“Here’s the short story: The U.S. has exited from financial crisis: Asia and Europe have not,” wrote Rana Foroohar in TIME at the beginning of this year. “China, the second largest economy in the world, is pretty much where the U.S. was five years ago – deeply in debt...Japan, where...
Apr 22, 2014
World Press
George Melloan

In Going Long, the Fed Is Short-Sighted

Stock and bond traders spent most of last year in a state of high anxiety over what would happen when...
Feb 24, 1989
Key Monetary Writings
John D. Mueller

CPI at 7%? Bet Your Reserve Dollar

The "surprise" jump in producer and consumer price inflation is not a surprise when you understand the political and...
Prosperity Through Gold
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John Tamny and Frank Trotta

In Memoriam
Professor Jacques Rueff

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