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Why Currencies Lose Value

Why would a government want to weaken its currency? The answer to this question creates a 50% currency profit potential over the next two years.   If you are living in Ecuador right now, the strong US dollar helps make European, Asian and Latin  imports cheap, though that strength is hurting Ecuador businesses a lot.   This strength also creates opportunity if you act, because the dollar will fall.

Governments as a whole might not want to weaken their currency. Politicians as individuals do, inadvertently perhaps, because promising something for nothing attracts votes. The way such promises are kept is through deficit financing. Politicians treat voters in a similar way to how I train our dogs.

Ma & Chuk

Mah and Chuk.

Merri and I have two dogs. Training them and maintaining their obedience requires a lot of carrot (dog treats, play or affection actually) and a little stick (the word “No” should suffice). Dogs need to want to obey their master because it feels good, not because of fear. Training should be easy, gentle, fun but firm, without fear.

Sometimes training requires a little trick because hounds have short memories and when together they can become less obedient. The pack mentality makes them more likely to ignore commands such as the “Do not dig under the fence”.

electric

Digging under the fence is a problem because our hounds cannot be watched all the time. They cannot be punished for coming to a call when they are outside the fence. They need fear of the fence not fear of me. Enter the Haveahart eFence (e is for electricity). One wire, a little juice and one touch of the wire solves the problem. Fear of the fence (not Merri or me) is created. The juice can then be removed. The problem is solved.

electric

Politicians treat voters like dogs. They offer voters something for nothing. Politicians may deliver the promise, but with dollars borrowed. The politicians look great. They are recognized for keeping the promise. The voters do not connect them to the debt. The debt is government debt and voters fail to note that this debt is theirs and mine and every person who holds dollars. We will pay it, one way or the other, through increased taxes, reduced government services in the future or a currency that has reduced purchasing power.

The dogs do not fear me because I am not directly related to the eFence. The voters do not fear or hate the politician because the politician is not directly related to the debt. It’s a neat but terrible trick that can help destroy the integrity of a currency.

Currency devaluation is not totally the politician’s fault. Human nature is the real driving force. George Orwell captured this fact nicely in Animal Farm. Power corrupts and as long as a system exists there are some who will take advantage. Voters vote for promises without asking, “Who will pay and how?” Politicians promise something for nothing because they want to be elected. This entire process is paid for with borrowed money.

Debt reduces the rarity of money.

Politicians everywhere use this trick and the strength of a currency is enforced or reduced, in part, by the sum total of politicians using the currency to keep promises of something for nothing.

We saw this scenario play out last week in Greece’s elections. Contender Alexis Tsipras promised to end tough bailout conditions, which he said had locked Greece into “a straitjacket of debt, unemployment and stagnation”. The President Antonis Samaras ran on the stance that Greece had little choice to enforce austerity because “the ship was sinking”. The President’s platform was shaky because Greek youth unemployment is running at almost 60% and general unemployment over 27%.

Greek voters want better conditions. The promise of something for nothing sounded pretty good. The contender swept away the President and formed a new government. How is he going to pay for an austerity cut back? Tsipras will try to renegotiate debt or have the country default on some of their debt. This will not solve the problem. In fact conditions will grow worse and Greece may end up losing the euro as its currency. If Greece creates a new Drachma the currency will have a serious devaluation because the voters bought into a “Something for nothing promise”.

The Greek election also reduced the purchasing power of the Euro. A Reuters article “Euro hits fresh 11-year lows versus dollar following ECB move” tells the tale and tells how the euro fell to fresh 11-year lows against the dollar and is down over 7 percent since the start of the year. The article explained how the Greek elections could add uncertainty to the euro’s weakness.

This in turn creates difficulties with the US dollar and America’s economic growth as evidenced by a Wall Street Journal article “Euro’s Big Drop Puts U.S. Economy, Federal Reserve to the Test Strengthening Dollar Will Make American Goods More Expensive Abroad and Could Slow Both U.S. Growth and Inflation”. This article says: U.S. officials have been playing down that scenario, and, more broadly, resisting talk of a global currency war—competitive devaluations by countries eager to keep their currencies as low as possible to protect exports.

Preserving the purchasing power of your earnings, savings and wealth requires currency diversification.

Three events including the US dollar’s rise contain remarkable similarities to similar positions 30 years ago. These similarities reveal three patterns that in 1982 created the best opportunity investors have seen in 32 years. The first profit came two years after when the dollar dropped, like a stone, by 51% in just two years. A repeat of this pattern is growing and could create up to 50% extra profit in the next two years for investors who understand these currency, market and economic conditions.

This is the most exciting opportunity I have seen since we started sending our reports and conducting our Multi Currency International Investing seminars over three decades ago. The trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.” This report shows how to earn an extra 50% from currency shifts with even small investments.

I’ll be marketing this shortly and have set a price of $29.95, but want to try a test. The report shows 22 good value investments and a way to invest very small amounts (even $5,000). There is extra profit potential of 50% so the report is worth a lot. Similar advice 30 years ago helped some readers become millionaires.

I’ll be marketing the report for $29.95 but right now you can order this report for any amount you wish to pay. Order the report here for whatever price you choose.

Gary

(1) Euro hits fresh 11-year lows versus dollar following ECB move

(2) Euro’s Big Drop Puts U.S. Economy, Federal Reserve to the Test