Enlightened Economics

Economics for an Enlightened Age

• Currency Battle Is Tethered to Obama Trade Agenda

Posted by Ron Robins on February 17, 2015

“If members of Congress are to be believed, unless the president’s trade negotiator includes strict, enforceable prohibitions on policies to intentionally hold down the value of currencies, any completed trade accord will die on Capitol Hill. But, administration officials say, demanding the inclusion of such prohibitions would kill the trade deals before they were completed… Some 230 members of the House have pledged in writing to oppose future trade deals without action on currency, more than enough to stop the president’s agenda.”
— Currency Battle Is Tethered to Obama Trade Agenda , by Jonathan Weisman, February 16, 2015, The New York Times, U.S.A.

Commentary: Ron Robins
Many astute observers in the financial world are deeply concerned about ‘currency wars.’ I share their concern. Furthermore, I have long argued that central bank activities such QE and interest rate manipulations — though seemingly a relatively easy antidote to immediate economic ills — eventually lead to the breakdown of the very economic system it seeks to preserve. And one of the main reasons for that will be their knock-on effects on currencies.

To gain economic advantage or even just to maintain one’s present standing, nations are being forced into QE of various types as well as manipulating lower their interest rates, thereby increasing monetary aggregates and forcing down their currency values. Competitive currency wars are ensuing and economic distress is spreading. In the end, most, if not all nations will be forced to agree to abandon QE and interest rate manipulations.

Nature itself, is cyclic. So it seems is economic thinking with regard to manipulating or not economic activities. At this time the cyclic pendulum’s return to either truly free enlightened trading between nations, or to one that’s highly restrictive, is in our future. I believe in and hope for the former!

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