By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
Within the space of a few days in mid-September 2012 the European Central Bank, the Federal Reserve Bank, and the Bank of Japan all announced plans to inflate their respective currencies. This represented a scale of inflation never before experienced in world history.
I discussed the impact of these currency wars in the October 3, 2012 issue of Liberty’s Outlook (http://www.libertycoinservice.com/images/stories/lcsnewsletter/2012/october.pdf). My essay even included a quote from Charles Prosser, president of the Federal Reserve Bank of Philadelphia where he admitted that increasing global money supplies by more than $2 trillion per year “could be highly inflationary.”
These announcements were not secret in any way. But, for whatever reason, the mainstream media and the general public didn’t pay much attention to this extraordinary news. This ignorance persisted even though the recently elected prime minister of Japan ran on a platform promising to ramp up the Japanese government’s inflation of the money supply and fulfilled that promise since he took office.
Instead, the news has slowly seeped into the public consciousness.
Public awareness reached such a degree that early last week the G-7 Group of Ministers and Governors acknowledged that a currency war, meaning the rampant inflation of the money supplies, was occurring. However, in the very same announcement, the G-7 Group of Ministers contradicted itself by explicitly denying that there is a currency war.
Last Friday and Saturday, Finance Ministers from the G-20 Group of Nations met in Moscow. This organization includes the world’s leading industrial and developing countries. At the conclusion, a joint communique was issued that promised that the members would “refrain from competitive devaluation” and “resist all forms of protectionism and keep our markets open.” The agreement did not single out any country as engaging in the competitive devaluation currency war.
In the Sunday edition of my local newspaper were two major articles discussing the G-20 meeting and how the risk of currency wars could harm the global economy. Curiously, both of them stated that Japan faces charges that it is trying to lower the value of the yen. What was peculiar was that this was written as if the Japanese government had not repeatedly stated this as explicit policy, with the result that the yen now trades at a three-year low.
The US government also received flak from several developing countries for its participation in the currency war through having the Federal Reserve Bank purchase Treasury debt. Federal Reserve Chair Bernanke gave a speech at the meeting defending the inflation of the US money supply through quantitative easing.
What the world faces today is an official denial that a currency war exists at the same time that various governments continue to cripple the value of their national money by engaging in this so-called non-existent currency war.
If you missed my report last October about the currency war, you cannot feign ignorance any longer since the subject has now received major mainstream media coverage. Of course, you would have been further ahead at protecting your financial health if you had read and heeded my warning several months ago. But, better to take action now rather than wait until later.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com
Currency wars should never be a surprise. Mainstream economists are Keynesians. If they lower the value of their currency, their country looks and is cheaper to produce in, and therefore manufacturing tends to locate there more than before the currency devaluation. Right now the most scarce thing is employment for “other than top-skilled” labor. If a country can entice a manufacturing plant with jobs for low skilled workers into that country by devaluing their currency, THEY’RE GOING TO DO IT EVERY TIME. Those workers will ramp up domestic economic activity. Even hungry people spend more than starving people. As long as there is a scarcity of low skilled jobs, expect currency wars to continue unabated.
Or in other words, given a choice between protecting the value of the accumulated wealth of the now-retired de-savers who spent their whole earning careers as savers, and protecting the interests of people who are having a hard time earning much of anything today, governments are EVERY TIME going to go with the latter. It’s just what they HAVE TO DO. The people relying on past savings are not numerous enough to be taken as the critically important voice. I offer November 6, 2012 as evidence.