Competitive Devaluation of Forex Currencies
Today in the world of Forex exchange trading there appears to be a competitive devaluation of Forex currencies. That is to say, more and more central banks are buying other currencies, setting low interest rates, or running up debt as a means of reducing the value of the home currency. To understand how this competitive devaluation of Forex currencies will play out let us first look back in history. As Japan rose from the ashes of World War Two it built its economy on exports to North America and Europe and later to the rest of the world. Cheap and poorly made products were the first wave and then Japan emerged as a maker of high end electronics, automobiles and more. When Made in Japan was and meant cheap it was easy to sell low priced goods to willing customers in the USA especially. When Japanese goods improved and become more expensive Japan had to find a way to keep prices down and exports up. Thus Japan bought foreign currencies, primarily US dollars and by way of currency manipulation kept the Yen low and kept its exports flowing. To a great degree the current competitive devaluation of foreign currencies is an attempt to follow the Japanese model. But, how is that going to work out? And what should someone who speculates on foreign currency rates do, to profit in the coming weeks, months, and years?