Who will win the current Currency War?

Dear PGM Capital Blog readers,
This weekend, we want to talk with you about the Currency War that is currently taking place.

Currency war definition:

  • Currency War, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency, in order to support their export.
  • The consequence of this is that their imports become more expensive too, which will affect their domestic industry, and thus employment.
  • For a widespread Currency War to occur a large proportion of significant economies must wish to devalue their currencies at once.

It was Brazilian Finance Minister Guido Mantega, who made headlines when he raised the alarm about a Global Currency War in September 2010.

Approximately 26 months later, on Wednesday November 21st 2012, Brazil’s Real fell to a three-year low after President Dilma Rousseff told Valor Economico that the Brazilian Real is “overvalued,” spurring speculation that the government will allow it to depreciate further.


The recent money-pumping measure by the US has been criticised by Brazil as a protectionist move which will adversely affect developing countries.

The recent announcement by US FED Chairman Mr. Ben Bernanke that the U.S.A. would be renewing its pumping of money into the banking system has been acclaimed by some parties as a move to revive its faltering economy.

But the Fed’s measure to revive “Quantitative Easing” is not being welcomed by all. It has instead caused anxiety in some developing countries.

The debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are unmistakably signs that we are experiencing the start of a New Currency War. Fought as a series of competitive devaluations of one country’s currency against others, currency wars are one of the most destructive and feared outcomes in international economics. Left unchecked, the new currency wars could lead to a crisis worse than the panic of 2008.

In the interview seen below, Mr. James Rickards, the author of the book
Currency Wars“, provides us with an in-depth analysis of the currently developing Currency War, and the possible consequences for, the world Economy.


Currency War during the Great Depression:

  • During the Great Depression of the 1930s, most countries abandoned the gold standard, resulting in currencies that no longer had intrinsic values. With widespread high unemployment, devaluations became common. Effectively, nations were competing to export unemployment.
  • During this currency war the three principal parties were Great Britain, France, and the United States. After the Wall Street Crash of 1929, France lost faith in the Pound Sterling as a source of value and began selling it heavily on the markets. From Britain’s perspective both France and the US were no longer playing by the rules of the Gold Standard, resulting in Britain leaving the Gold Standard
  • These factors contributed to the Sterling crisis of 1931; in September of that year Great Britain substantially devalued and took the Pound off the Gold Standard. For several years after this, global trade was disrupted by competitive devaluation. The currency war of the 1930’s is generally considered to have ended with the Tripartite monetary agreement of 1936

After World Word II, the USA replaced Great Britain as the
World Economic Super Power.

History has proven that today’s Currency War may be Tomorrow’s Global Crisis with subsequent change in Global Economic power stucture and monitary system.

History has proven also that a FIAT MONEY system will sooner or later Fail, and that no FIAT Currency system has lasted more than 45 years.

Due to the above we can conclude that the current Currency War will not be won by any Fiat Currency, but that Gold & Silver will be the only winners.

So if you want to win this currency war, you have to get rid of your paper (Fiat) currency and put your savings into something tangible like Gold & Silver, which cannot be printed by Central Bankers and which have a history of over 5000 years of being real Money and a storage of value.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Commodities, Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Yours Sincerely,

Eric Panneflek

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