Liquidity – The Game Of Money and How To Win Currency Wars

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Devaluations must be the furthest thing on everyone’s minds right one with the rapid inflation of all asset classes except bonds in the world right now.

I cannot imagine a more morbid subject to talk about at any dinner table than to suggest that our money is devaluing away as we eat, sleep and breathe. Yet it cannot be more than true in the relative value sense.

Inflation of goods is relative to deflation of money.

For all the critics of the stock market, oil and commodity boom, you have to acknowledge that perhaps its the basic human survival instinct that has got them running to anything they can get their hands on in times like these.

Inflation is driven by demand/supply but these days, it can also be driven by sentiment. The sentiment is Fear.

I am not particularly attuned to undercurrent trends but I think I may have touched the baseline this time.

For all my ramblings of the past weeks, the common recurring themes has been the following.

1. excess liquidity from QEs, LTROs, BOJ, BOE and PBOC that is not available to the masses,

2. decreased purchasing power,

3. increasing youth unemployment,

4. increased household debt,

5. slowing growth globally now spreading to the BRICs,

6. increasing minimum wages in EM,

Central to this discussion tonight I notice, is a lively debate on Twitter in the UK sparked by Robert Peston‘s Re-Tweet

FT analysis shows real disposable incomes of those in 20s stagnating for 10 years, oldies richer. Generation war to replace class war ?

The 2 FT articles are here : Rift grows between old and young – and, Generations See Fortunes Reversed –

More to be found in the US with an article of similar nature in The Washington Post

Coming up on 30 – with $100,000 in student debt

Are we still laughing off the Occupy WallStreet and other streets movements ?

Nothing is about to happen. Lets face it. We are in a golden age of prosperity, to quote Lee Kuan Yew. No major wars, disease or famine in our neighborhoods. Life is good and the “Generation Why Bother” kids are escaping into their IPAD worlds.

Yet the Global Misery Index seems to have done a double take this year. People are just unhappy about their situations with the exception of Bhutan, or was it Vanuatu ?

…. sorry the article got deleted here .. so I will have to rely on the memory of  my original trail of thoughts…

Following my previous post Liquidity – The Game Of Money and How To Win Part 1, it strikes me that we are living in a currency war for all the Ponzi, bless his soul, that the central banks are over indulging themselves in. This is not the first time for that matter and there is a wikipedia section

How odd that the mainstream media did not catch up on this sooner, for the taboo nature of the topic and potential mass hysteria that it can potentially  summon ?

For the month, I only managed to find 2 headlines.

FT (2 Mar)

Brazil declares new “currency war”

DJ (17 Mar)

Norges Bank Gov : Has No Intention Of A Currency War

Currency wars are not officially declared and do not lead to loss of lives, directly. It may be a long while eroding spending power lead people to come to that conclusion. It is not something many governments have control over, in the “beggar my neighbor” game. It is to beggar or be beggared.

Well, this could be the largest one on a global scale in history led by Admiral Bernanke.

I feel a stirring of fear when I read articles like the one below.

You’ve been warned : My Uncle Just Bought Gold

Not to mention China importing exponential quantities in the past year and India to raise gold taxes.

So yes, things are not going to get cheaper from here. And yes, borrow money. Borrow as much as you can afford because it will only be cheaper to pay back tomorrow. If you are as lucky as Greece, you may not even need to.

Buy as much assets that do not have anything to do with money, and that probably excludes banking shares, which leads me to conclude that Gold and Silver are as good a bet as any.

I think I may have to write a Part 3……