As we’ve all seen outlined in the previous series of posts – the value if the US Dollar against other currencies/other assets clearly has a direct correlation to the “price of things” ( or commodities ). In its simplest form – if the USD is worth less, then you are going to need a lot more of them to purchase that barrel of oil , and those lean pork bellies getting loaded in the back.
Domestically ( if indeed you live in the United States) this obviously starts to become a problem, as the cost of things you and your family need, continue to climb higher – because the dollars in your pocket are worth less and less. Oddly, in the current “repressed” economic environment you are somehow going to need to make more money – a lot more money.
However, if you are currently living outside the United States and are holding currencies such as the Euro or Great British Pound, the Loonie or the Kiwi – everything at the farmers market is on sale! Goods and services for sale in our “global commodities market” become far less expensive ( when you come to see Kong at the currency exchange window out front) because the money in your pocket is worth more!
This is the double-edged sword of the Fed’s current QE plans – as further money printing puts the crimp on people living in the U.S , but in turn promotes exports to those living outside the U.S (due to the “incentive” given with better exchange rates and the perception of value therein.)
A person from Australia very well may book a flight to go on vacation in the U.S with the knowledge that their currency is worth considerably more – and with the perception that “things are cheaper over there”.
I don’t see QE creating jobs at all, but if the desired effect is to increase exports and “incentivize” foreign money to be spent in the U.S well…….you can now see that other countries can get in on that game as well.
It’s called a currency war.
This may seem like common sense to some of you but I thought it important to point out with the analogy of the farmers market and the significance of the U.S dollar exchange rate around the globe.Imagining yourself outside my exchange window, standing next to a group of people with happy smiley faces – ready to go in and buy – with a lot more money than you.