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Tuesday, March 06, 2018

Jim Rickards: "Now, A Trade War - Next, A Shooting War"

A popular thesis since the 1930s is that a natural progression exists from currency wars to trade wars to shooting wars. Both history and analysis support this thesis.

Currency wars do not exist all the time; they arise under certain conditions and persist until there is either systemic reform or systemic collapse. The conditions that give rise to currency wars are too much debt and too little growth.

In those circumstances, countries try to steal growth from trading partners by cheapening their currencies to promote exports and create export-related jobs.

The problem with currency wars is that they are zero-sum or negative-sum games. It is true that countries can obtain short-term relief by cheapening their currencies, but sooner than later, their trading partners also cheapen their currencies to regain the export advantage.

This process of tit-for-tat devaluations feeds on itself with the pendulum of short-term trade advantage swinging back and forth and no one getting any further ahead.

After a few years, the futility of currency wars becomes apparent, and countries resort to trade wars. This consists of punitive tariffs, export subsidies and nontariff barriers to trade.

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3 comments:

Anonymous said...

That's a leap.

Anonymous said...

Bull Hockey.

The currency is debased by PRINTING IT!
They "inflate the currency" which devalues the existing currency.
The international bankers are stealing our wages since they are paying us in devalued currency.
The currency simply loses its purchasing power. Since we traded our labor in exchange for this currency, we are being robbed.

Anonymous said...

1055
Excellent points made by the great Ron Paul.
Thank you