O autor é o que se chama de "especulador virtual", ou seja, um currency trader, o homem que aposta o dinheiro dos outros, arrisca com algum conhecimento do mercado. Pena que, no plano internacional, todo esse ganho acaba sendo desvalorizado pela queda do dólar, já que as autoridades insistem em inundar o mercado de dólares.
Paulo Roberto de Almeida
The Fed’s Most Dangerous “Currency Shock” Yet
This so-called “independent” entity is supposed to keep our currency stable, along with our banking system and the rest of economy.
That’s what many investors were expecting at this past weekend’s Jackson Hole meeting. Yet, they were disappointed. The Fed decided to hold off a little longer on QE.
But setting QE aside, the Fed has still repeatedly overstepped their bounds since its founding in 1913. In doing so, they have continually sacrificed your dollars’ value.
What cost $1 in 1913 – when the Fed was created – now costs $20. That’s a 95% devaluation of your money. And it’s only going to get worse.
Over the years, the Fed’s well-meaning actions have led to a series of quiet “currency shocks” that have rippled through our economy, starting all the way back in the 1920s. And the worst is coming next (more on that in a moment).
First let’s take a quick look at the Fed’s impressively bad track record of “keeping our currency stable” over the last century.
Currency Shock #1: The Fed’s Stunt Back in the 1920s
Back in the 1920s, the British pound was king. The pound was the world’s reserve currency similar to how the dollar is today, only you could redeem pounds for gold.That’s why French authorities were making trouble for the Brits back in the ‘20s. At the time, the French threatened to redeem their “credits” (a.k.a. pounds) with the Bank of England and seriously deplete England’s gold stock.
Of course, this was giving the British pound fits and forcing it to fall. Again, this was all happening on the other side of the world.
But the Fed still got involved.
What did the Fed do? They sacrificed our dollar to prop up the pound. The Fed quickly slashed our interest rates and agreed to make U.S. gold available to the French.
Well, you can imagine how the dollar tanked as the Fed cut rates and gave away our gold reserves at the same time. (Keep in mind, back then our money was actually backed by gold.)
That’s just one example of how our Fed loves to sink the dollar for the sake of other currencies. But these days they seem to sacrifice our dollar’s value for our stock market.
Let’s fast forward about 60 years…
Currency Shock #2: Sinking Dollar Causes Market Crash
If you ask me, the “crashing dollar” ultimately caused the 1987 market crash. And it’s all thanks to the Fed.At the time, the dollar had been falling since March of 1985. Our currency had been stuck in a steep decline for two years straight. Traders were losing faith in the dollar and many investors were starting to reassess risks.
By the time the crashing dollar started affecting stocks, a new way of trading had just become popular on Wall Street. It was called “computerized trading.” This meant computers monitored stocks, while setting and adjusting stop-loss levels.
The computers triggered the first line of stops, and then it just kept going. It was a vicious cycle. Stop-loss after stop-loss hit. Suddenly you had a panic on your hands.
When all was said and done, stocks had fallen over 500 points or just over 22% on that one day alone! It became known as the “biggest one-day drop in history.”
At the time, everyone naturally blamed this new computerized form of trading. Indeed, the computers played their part. But for the 60 years prior, the Fed had also been undermining our dollar.
The sinking currency cut the legs out from under our stocks. The computers took over from there. It was ugly! Thanks once again, Federal Reserve!
Currency Shock #3: The Fed Becomes the “Lender of Last Resort”
Back on September 23, 1998 the Fed engineered its first bailout based on “systemic risk.” Before that time, no one thought of the Fed as the lender of last resort.I’m sure you know this story. The now infamous $4 billion hedge fund Long Term Capital Management (LTCM) caused the market panic.
This fund was so leveraged. They controlled over $100 billion through swaps, emerging markets and mortgage-backed securities (MBS).
As Long Term Capital’s bets went wrong, their assets shrank from $4 billion to under $500 million in a very short time. This was enough to shake up every single asset LTCM invested in.
So what happened? The Fed orchestrated a massive bailout. Even though it was funded by other banks, bailing out this “too big to fail” hedge fund still caused the dollar to fall for several months straight.
The Fed’s position as the “lender of last resort” has just grown in the past three years.
From 2007, to present, the Fed has cut interest rates to practically 0% and has poured billions of dollars into the market to buy up toxic assets all over the place. As you know, they now even buy our own debt, or Treasuries.
That has already caused its own serious jolts to the buck once again. However, the next shock will be the one that truly unravels the dollar…
The Next Currency Shock Coming Soon
GDPs are dropping all over the world. Countries are struggling to get by and possibly stave off new recessions.So leaders around the world are trying anything and everything that will give them an added advantage over other countries. The easiest way to do that is to devalue/cheapen your currency.
This makes your exports look less expensive than your competitors. So more foreign nations buy up your cheaper goods, and more money flows into your country.
America doesn’t want to be left out. The government can do one of two things to make us look competitive. They can either devalue our currency or cut wages.
Which do you think the elected officials of our country will impose? If your paycheck starts shrinking, Americans will not only complain – we’ll strike back by voting those politicians out of office.
But very few Americans understand purchasing power. Most people don’t realize that every time the dollar falls 50%, your real cost of living goes up at least 100%. When it falls 75%, your cost of living goes up 300%.
So politicians (the “independent” Fed included) will capitalize on this ignorance, and will choose to devalue your dollars.
Now here’s the problem. In order to remain competitive with the rest of the world, it’s estimated the dollar will have to fall ANOTHER 50%.
So by now I guess you’ve guessed what’s coming next…one of the biggest devaluations of our currency that we’ve ever seen!
Your Quick Escape Route
The Fed has already ensured our disastrous currency will continue to fall. As victims of any disaster, you need to plan to your escape route now before its too late.This includes investing in things that go up as the cost of goods rise, namely commodities. Or even better yet, commodity-currencies which can rise even more during those periods.
You see, inflation is simply the rise in the cost of goods. However, if you invest in the goods that are going up in price, or you invest in the country’s currencies that export these very necessary commodities, then you will profit (instead of suffer) from the Fed’s next move.
As a long-term investor, you can buy more fundamentally strong currencies like gold, the Australian dollar, and the New Zealand dollar. These are the long-term currencies that will prosper over the next few years. (Although gold will likely perform best in the short-term.)
Remember: the Fed isn’t in the business to protect your dollar’s value. Only you can do that. Take action now to protect yourself and your family.
Have a Nice Day!
Sean Hyman
Editor, Currency Cross Trader
P.S. With the Fed keeping interest rates near 0%, it’s almost impossible to earn income for your long-term portfolio. (That’s not even counting how the dollar continues to drop each year). It’s time to take matters into your own hands.
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