In lesson one, we learned that devaluing the dollar would have much more serious consequences to America today compared to devaluing the yen in 1990s Japan.
In lesson two, we learn that even though you may be printing currency, if your neighbor is printing faster than you, then you should expect the dollar to get stronger relative to other currencies. Currency strength is measured in a variety of ways, but the most practical is to measure one currency against another. One dollar gets you half a pound. It takes 100 yen to make a dollar.
Currency is simply a claim check for goods and services. We trade based on perceived relative currency value, and as a result, comparing relative currency values between each other is the best way to determine the strength of a currency. If you are a material girl, if you have enough money, you can pretty much get all the material you want from anywhere in the world.
I am constantly hearing from all the gold bugs that pretty soon the dollar will be worthless and the only thing you will be able to do with it is blow your nose. That may be the case, but it will likely still be a lot stronger than other currencies out there in material world......
As I stated in a previous blog, if the US tries to devalue its currency, you think other countries are going to sit idly by and watch?...NOT A CHANCE.
Look what Japan did tonight:
Bank of Japan cuts interest rate to 0.1% from 0.3%
Japan approves 43 trillion yen emergency stimulus.......wan't Obama's package about $750 Billion over two years.........now who is really stimulating here relative to their population size?
It looks like the world is now trying to stimulate and devalue currencies at a faster rate than America. If that is the case, which it seems to be, than the dollar should start getting stronger soon against other currencies and the price of oil and other commodities continue to fall in terms of dollars.
Since we live in a material world, and our world is priced in dollars, as the economy continues to slow, expect your dollars to buy you more material as long as our neighbors own faster printing presses than we do.....