A Race For The Bottom – Who Cares Who Wins

There will be no discussion of the “potencial outcomes and implications” of the U.S elections results here….short of this. Obama wins hands down, and the entire planet breathes a huge sigh of relief  that the U.S didn’t revert back to the previous policies/leadership that put them in this position in the first place. Trust me, political views aside (myself being Canadian and now living in Mexico – go figure) global financial markets are not interested in ” upsetting the apple cart” of continued money printing and easing – now being adopted worldwide.

Nothing will change regardless of the outcome – as the wheels are now set in motion for the endless printing of dollars ( and Euro…and Yen etc..) as the global  “race for the bottom”  – begins to pick up speed.

At risk of sounding like a broken record – as the value of the U.S dollar continues to fall – gold/silver ( and the commodity related currencies ) stand to be the largest benefactors – as money gets cheaper……..and “things” become more expensive.

Last I looked  – I believe its called inflation.

Watch for real time trading here  – via the twitter feed on the right hand column. I expect the week to be “profitable”….. to say the least.

Kong……..gone.

The Currency Debasement Playbook: Trading the Global Race to Zero

Dollar Weakness Creates Cross-Currency Opportunities

While everyone’s fixated on USD direction, the real money sits in understanding how dollar weakness ripples through the entire forex ecosystem. When the Fed commits to keeping rates artificially suppressed, it doesn’t just weaken the dollar in isolation – it forces every other central bank into defensive positioning. The Bank of Japan can’t allow USD/JPY to collapse below critical support levels without intervening. The European Central Bank faces the nightmare scenario of a strengthening Euro killing their already anemic export recovery. This creates predictable patterns in currency crosses that smart traders exploit.

Look at commodity currencies like AUD, NZD, and CAD. These aren’t just benefiting from dollar weakness – they’re getting a double boost from rising commodity prices driven by inflation expectations and actual supply constraints. AUD/USD doesn’t just move on Fed policy anymore; it moves on Chinese infrastructure spending, iron ore futures, and the Reserve Bank of Australia’s willingness to let their currency appreciate against a debasing dollar. The correlation trades here are crystal clear for anyone paying attention.

Central Bank Policy Divergence: The New Trading Reality

Here’s what the mainstream financial media won’t tell you: central banks are now locked in a coordination game where nobody can afford to be the responsible adult. The moment one major central bank starts raising rates or reducing monetary accommodation, their currency strengthens, their exports become uncompetitive, and their domestic recovery stalls. It’s a prisoner’s dilemma where the optimal strategy is continued debasement.

This creates opportunities in carry trades that seemed dead after 2008. When all major currencies are being debased simultaneously, the relative interest rate differentials become more important than absolute rate levels. Countries with slightly higher yields – even if those yields are historically low – become magnets for capital flows. The Turkish Lira, Mexican Peso, and Brazilian Real start looking attractive not because their economies are necessarily stronger, but because their central banks are offering marginally better returns in a world starved for yield.

Inflation Hedging Through Currency Selection

Smart money isn’t just buying gold and silver – they’re positioning in currencies of countries with hard asset bases and responsible fiscal policies. The Norwegian Krone benefits from oil reserves. The Canadian Dollar gets support from natural resources and a banking system that didn’t implode. The Australian Dollar correlates with Chinese growth and commodity demand. These aren’t just currency trades; they’re inflation hedges disguised as forex positions.

The key insight most traders miss: inflation doesn’t hit all currencies equally. Countries with strong current account surpluses, low debt-to-GDP ratios, and diverse commodity exports can maintain purchasing power even as reserve currencies debase. This creates long-term structural trends that persist regardless of short-term volatility. EUR/CHF, USD/NOK, and USD/CAD aren’t just currency pairs – they’re expressions of relative economic health and monetary policy credibility.

Positioning for the Inevitable Endgame

The mathematics of this situation are inescapable. You cannot solve a debt crisis by creating more debt. You cannot restore economic health by suppressing price discovery in capital markets. You cannot maintain currency credibility while explicitly targeting currency weakness. Every quantitative easing program, every “emergency” rate cut, every forward guidance statement promising extended accommodation moves us closer to a currency crisis that makes 2008 look like a practice round.

The winning strategy isn’t predicting exactly when this unravels – it’s positioning for the inevitable outcome. Long precious metals, long commodity currencies, short paper currencies backed by nothing but central bank promises and political rhetoric. The trade isn’t complicated; it just requires the discipline to ignore short-term noise and focus on the underlying fundamentals driving this entire charade.

When the history of this period gets written, it’ll be clear that the smart money recognized the signs early and positioned accordingly. Currency debasement isn’t a policy choice – it’s the only choice left when you’ve painted yourself into a corner with decades of fiscal irresponsibility and monetary manipulation. Trade accordingly.