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SGM Metals: The Great Currency War of 2012 is Now at DEFCON4 After QE3 Announced!
The normalcy bias is quickly fading as the currency war QE3 retaliations by central banks around the world are debasing all currencies at lighting speed. This will cause a stampede into precious metals as they will be impervious to fiat devaluation.
It’s a race to the bottom, & the losers are the 99.9% of us who aren’t being kept in the loop.
QE is really another word for currency war. A weak U.S. currency puts continued pressure on the Yen, Yuan, S Korean Won, Aussie dollar & other currencies. Cheap money also fuels speculation & this money quickly drifts into commodity markets & the ETFs that help propel commodity market speculation. This is inflationary for food prices.
The lower the USD the greater the intensity of currency wars.The break below the key uptrend line on the Dollar Index chart was an early warning of the third round of quantitative easing (QE3).
The most important question now is to use the chart to examine the potential downside of a QE3 weakened U.S. dollar.The weekly close below this uptrend line was the first sign of a major change in the trend direction. It came before the announcement of QE3, last week.
The 3rd significant feature is historical support near 74.5. This is the upper edge of a consolidation band between 73.5 & 74.5. This is the downside target for the Dollar Index following a fall below 79. This target can be reached very rapidly over 3-4 weeks. A rapid collapse of the U.S. dollar puts immediate pressure on other dollar-linked currencies.
There is a very low probability the USD will resume its uptrend. The move below the value of the uptrend line & a fall below 79 confirm that a new downtrend has developed. The weakness in the USD will hurt export dependent economies & companies.
There are two ways this may end – neither of which is going to be good for the average Joe:
The Fed et. al. continue to print, so much so that prices for food, gas, utilities & other key commodities that are linked to USD movements will rise exponentially. This rise in prices will accelerate the pressure on consumers as more jobs are lost in an ever progressing, self reinforcing economic death spiral. The pressure of rising prices, even though the DOW may reach 20,000 or 50,000 pts, will be so great that US consumers simply won’t be able to pay their bills or put food on the table.
The FED & their brethren around the world won’t be able to print fast enough to maintain stable financial markets, leading to stock market crashes globally, which then leads to a shift of capital to US Treasury bonds, ironically strengthening the dollar. A weak US economy that isn’t creating jobs & adding tens of thousands of people to an already overburdened social safety net every week will eventually lead to confidence being lost in the US ability to repay its debts. As we noted in 2012 Predictions of a Mad Tin Foilist, the end result will be a currency crisis, or de facto default by way of hyperinflating away our debt. Both scenarios are virtually the same, as both will end with complete & utter destruction of Americans’ wealth.
Despite the notion that inflation is under control & most of the money is sitting on the sidelines with banks, just look at the price increases for consumers since private & public bailouts begin in late 2008. Gas has doubled. Food is up over 25%. Electricity costs & the cost of just about every other non-debt based asset has steadily risen. This is not going to stop.
While timelines remain elusive because of never ending government intervention into financial markets & economies, the policies being instituted by central banks around the world can only lead to continued degradation of paper currencies & the rise in prices of all goods linked to those currencies.
The trend for fiat paper money & physical assets has not changed & is more pronounced now than ever before. The US dollar is being systematically weakened until it no longer exists as a viable means of exchange. When this happens you’d better be prepared to operate in a society where traditional money is replaced with mechanisms of exchange like precious metals, food, critical supplies & production skills.]
Why isn’t anyone up in arms about an OPEN ENDED QE? This means there is no end in sight & that the fed will continue to print money indefinitely until they feel they have resolved the issue? Why isn’t anyone remembering that what has been done this far has not worked at all nor have they accomplished a single thing they told us they were targeting?
What will it take for the people to get uncomfortable?
When the US announces they intend to print endless money as a last ditch effort, the rest of the world has no choice but to defend their currencies as all global currencies are based upon the USD. So when the FED is warning the world they intend to destroy dollar value in an attempt to inflate our way out, the other nations must equally print the same volume of money to maintain the exchange rate parody or their export markets will be flipped upside down & their national revenue will dry up over night. Enter the undeniable currency war that always mows down the middle class who is caught in the cross fire. The wealthiest 10% who capture great profits in their investments (the wealthiest 10% own roughly 80% of stocks) will spend their money quickly as not to lose purchasing power & we see inflation in high end luxury goods such as sports cars & yachts (HAPPENING AT RECORD PACE NOW) Then there is the middle class who has everything to lose as they see the cost of living thinning out their liquidity just to buy groceries & fill up their car to get to work. Their net worth is shrinking due to the costs of necessities are rising ever quicker forcing them dangerously closer to needing federal handouts themselves.
The “Great Currency War of 2012” has officially just been kicked into high gear & those who heed this ominous & foreboding event as motivation to finally move into a wealth protection strategy with inflation hedges such as gold & silver bullion they will be rewarded by not only being able to manage the coming inflationary crisis but will also be in a position to profit. CURRENCY WARS LEAD TO ACTUAL WARS! This is why you will see every nation go down this path too as the reserve currency is in full debasement mode & they must counterattack to level the playing field. As the FEDs moves are counteracted they will be forced to launch a new round of currency destruction, to which these other nations will respond with more of the same until the paper currencies of the world are worth the paper they are printed on. You don’t want to be in dollars nor dollar denominated paper assets such as stocks, bonds annuities & cash when this happens. You only want to own physical gold & silver bullion in this scenario, but don’t think you will wait until the last moment as you will have lost half or more of your net worth & will be buying the precious metals at 2 or 3 times their current price. Remember that it is a far better strategy to PREPARE your portfolio than to attempt to REPAIR your portfolio once the damage has begun. Tick, tock the first shot has been fired in the Great Currency War of 2012!