It really doesn’t matter where the funds go; the majority of western governments are still critically on debt on which they are doubtful on repaying. In addition to unrealistic payment policies, the indebted governments still have unfunded liabilities which many are still unaccounted for. It’s really a staggering concern and some governments have made policies about budget cuts while others took less radical actions. Therefore the most feasible and preferred means to devalue debt is the insidious process of currency debasement.
Nobody is against a weaker currency. Every central bank is doing whatever they can at their disposal to conceal the bludgeoning rate of inflation. In the last few months, there has been a change of leadership in Japan and the abrupt submission of the yen. Moreover, tensions have been high between US and China over currency issues. The ECB chairman has already amended some policies to bail out weaker countries under his jurisdiction.
The dollar against the pound
The currency wars between developed countries speculate the UK is well-equipped to finish first. From its high of $2.11 in the later part of 207 to its lowest in of $1.36 in early 2009, the pound in general has lost about one third of its overall value. It has since rebounded and locked for nearly four years between $1.40 and $1.70 and that rate is continues to be in tight position. This type of narrowing range generally foretells a significant move which could be in either direction. It will definitely take something very big and influential to get back to parity (the pound being equal of worth to the US dollar), which some of the more radical speculators are hoping for.
As of the moment, the range is fairly in the $1.50 and $1.65 and if would be investors trying to start a business in foreign exchange, the best option would be to sell sterling anywhere the $1.65 mark if it rallies back below that level.
The euro against the pound
In other currencies, the euro situation is particularly finicky. The German economy and several others in Northern Europe might prove to be valuable but that is not the case in its southern neighbours. The ECB chairman has already made it known that he doesn’t want a strong euro but rather having his eyes set on his other central banks. Because of the ongoing political strife and many Euro based countries are seeking bailout mechanisms, the situation will eventually lead to further weakening of the euro.
Similarly, the pound also has traded in a much narrow range versus the euro over the last three years. €0.78 is support and €0.90 is resistance, the tout range suggests that an impending move is inevitable.
Another good reason to trade using gold
There is of course a safer alternative in the currency war. The precious yellow metal can be undermined in many ways but it cannot be subjected to the stress of debasement of which national currencies are always at risk of undergoing. In terms of rigidity gold, it has been struck severely for the last 18 months. With $1,500 an ounce is support and $1,900 is resistance. Such tight movements cannot last long as this position may have something big in the global currency battle.