Friday, 22 January 2010

the race for the weakest currency...

has only just begun!

We live in a globalised world where all have access to the same means and tools to compete in what is running for labour, market shares and hopefully heaps of money.

While the US very openly seek an advantage in keeping the greenback at the low side the Chinese just piggybacked their paper money called Renminbi to ensure their exports staying competitive which at the same time enables them to massively import labour; the trick with holding more than two trillion soft bucks in cash is not really that bad as those dollars buy access to energy and plenty of shares in i.e. African countries and companies that are used to even weaker currencies.

What is likely to happen in the not so far future is the EURO, which so far endured and tolerated - of course, lacking an alternative - the dominant but weakening world currency ending is some kind of programmed implosion.

With Greece more than insolvent, Spain, Portugal, Italy and Belgium not far behind and in general terms very overstressed French and German budgets and economies the once so-called hoard of stability, the EURO, is about to fail dramatically. And if it is not failing in one go we will see it stretched until it does.

A scenario where one EURO country goes bust has not been taken into any kind of consideration in Maastricht when the artificial currency was imposed not to mention an ugly event where a number of EURO economies are becoming insolvent in a matter of months. What a coincidence, at the same time the once leading and ever so strong economies like France and above all Germany are virtually running out of paper to print the buckets of money they need to bail out or rather pump up banks, run scrappage schemes or fill up tax revenue holes.

A bursting EURO will automatically open the currencies' race downwards; the battle to export what is produced and to minimise cost but still put people into jobs is fought at the low end of a currency's value, see China. With only two plus two major and globally traded currencies left - $, €, and
¥, £ - it will be interesting to see who will win that race.

I dare say we will all loose.

Carpe diem!


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