Just recently, Dawn J Bennett of Financial Myth Busting interviewed Tres Knippa who has been trading futures in currency markets for 17 years, and became a member of the Chicago Mercantile Exchange in 1996. Bennett believes there is a currency war going on that most have no even recognized, much less understand. Bennett stated, ” I believe most economists and analysts and investors out there believe that the currency war that we are in refers only to the competitive devaluations that nations engage in to boost their economies. At this time, I’m beginning to see that it’s much more profound than I think people are giving it credit for. I believe there are differing agendas out there that revolve around one goal, which is the demise of the US dollar as the international reserve currency of choice.”
Knippa responded with the fact that the Chinese devalued the yuan in August, an offensive move – they’re trying to spur exports. “But weakness in other currencies can be a side-effect of a government that is mired in debt,” said Knippa. “Now, clearly that will dovetail into the U.S. dollar discussion, but in a situation like Japan, the Japanese are not devaluing the yen because they’re trying to make something positive happen. The Yen is devaluing because they have so much debt that the market does not want their bonds. And here, if you start with politicians, you and I can probably agree that there is a massive disincentive for politicians to cut spending. So it’s not going to happen; we can forget that. The politicians are not going to cut spending, ergo more debt will be on the balance sheet. They’re going to issue more debt to pay for that spending, right?”
Now the savior is the central banks.
Bennett asked Knippa if he believes that a currency should be policy neutral without any regard to any party to it, so that it can be a true medium of exchange and whether or not that is what is currently going on in the United States.
Knippa replied, “Well, like I said, currency movements tend to be side effects of those decisions, you know. But by the same token, they can also be policy tools. Governments can say, ‘Oh, I don’t want to cut spending, so I will go this other route,’ and, ‘A devaluation of your currency, why is that any different to a tax?’ Things like that. This will clearly dovetail into a discussion about inflation. So if we want to talk about policy decisions, how odd do we think it is, from a policy standpoint, that Janet Yellen and other central bankers continue to target inflation as a specific policy goal? I find that a little weird. Inflation is a negative side effect. Now, it can be a positive side effect of growth, but in this case, just targeting inflation seems rather odd; why wouldn’t you want to target growth?”
Read the full interview between Dawn J Bennett and Tres Knippa here: http://www.releasewire.com/press-releases/dawn-bennett-host-of-radio-show-financial-myth-busting-interviews-tres-knippa-member-of-the-chicago-mercantile-exchange-629882.htm.