Dollar Devaluation or a Global Currency War?

Is a global currency war in our future?
 
Recently, President Trump and Peter Navarro, head of the National Trade Council, noticed that the Japanese Yen, Chinese Yuan and Euro were significantly undervalued. Trump and Navarro speculated that this was intentional — part of a currency war on the global stage and against the United States in particular.
 
Are Trump’s fears justified? If so, what does it mean for the American economy and what does it mean for gold?
 Dollar Devaluation
What Is a Global Currency War?
 
A currency war is a situation where a country intentionally allows its currency to devalue. The effect is that it bolsters foreign investment in the country and reduces the likelihood that natives will spend their money elsewhere. A weak yen relative to the dollar, means dollars have much more buying power in Japan, so Americans are more likely to come to Japan to spend money, while the Japanese are likely to stay and spend money where they are.
 
This can bolster a country domestically, but by the same token, it hurts the opposing country’s desire to increase imports vs. exports and boost the domestic economy.
 
What Are the Pros and Cons of a Currency War?
 
Generally, countries prefer to keep their currency strong. A strong currency boosts confidence in the nation, both externally and internally, and in itself can lead to a healthy economy. In contrast, a currency war can devalue a country’s currency so much that it leaves them poverty-stricken before any significant change comes.
 
In fact, this is partially what happened to the United States in the Great Depression of the 1930′s.
 
How Will Trump Respond to Threats of a Currency War?
 
Some might suspect that the correct response would be to devalue the dollar, figuring the dollar can lose some buying power and still remain strong while reducing the impact of currency devaluation by other countries. But Trump is no ordinary President, and with his reputation for not backing down, devaluing the dollar doesn’t seem to be in character.
 
Early signs suggest that this is the case. Trump’s first salvo in this currency war has been to sign the “Buy American, Hire American” executive order, reducing the number of guest worker visas the U.S. issues and requiring agencies to buy goods and services internally. This suggests Trump’s attitude towards the threat of currency war is, “go ahead, I dare you,” which is fairly consistent with his behavior so far.
 
What Does All This Mean for Gold?
 
As it happens, whether Trump moves to devalue the dollar or not, gold can benefit. Gold’s greatest value is in its stability. No matter how different currencies in the world fluctuate, gold remains gold — and the more uncertainty there is in other markets, the better gold looks.
 
Therefore, although the future is impossible to predict, one might expect gold to rise both as a hedge against a falling dollar and a haven against the fallout of Trump going head-to-head with other global currencies.
 
Either way, gold seems to be a smart choice when it comes to investing today.
 
Protecting Your Future With Gold
 
If you’re interested in protecting your future with gold, Fortress Gold Group can help. We can move your retirement account into a gold-backed IRA, which works just like a traditional IRA except it’s supported by the power of gold.
 
Give our precious metals specialists a call at 1-800-777-6177 or request more information now.

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