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Beggar-Thy-Neighbor Currency Devaluations Proved Ruinous For The Global Economy In The 1930s ... Here We Go Again!

George Washington's picture




 

burning money Beggar Thy Neighbor Currency Devaluations Proved Ruinous For The Global Economy In The 1930s,  But The World Is Setting Off Down The Same Slippery Slope Again

 

According to numerous high-level insiders, we’re in a dangerous global currency war:

Actually, we’ve been in a global currency war for years.

As the Wall Street Journal asked in 2010:

Beggar-thy-neighbor currency devaluations proved ruinous for the global economy in the 1930s. Is the world setting off down the same slippery slope again?

Yes, we are.

Indeed, Japan’s escalation of the currency war has caused leaders in the Eurozone, Norway, Sweden, South Korea and many other regions to consider further devaluing their currencies.

(And James Rickard and Reggie Middleton think that Germany’s demand for its gold is part of the currency war.)

And it’s not just conservative voices such as the Journal slamming the currency wars.  For example, former Secretary of Labor Robert Reich points out that a weak dollar makes everyone poorer, and any new jobs created by a a policy of devaluation are low-wage jobs.

 

 

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Wed, 02/06/2013 - 19:35 | 3221678 davidsmith
davidsmith's picture

After FDR bailed out the banks in 1933 and depreciated the dollar (he didn't devalue anything as money has no value), the US economy began to recover. As it did so, there was a push by the banking interests to restrain the US money supply again in 1937 the result was another round of business failures and more depression.

 

Anyone who believes there is something to be gained in a modern economy by constraining the money supply is either an idiot or a crook. It is always the banksters who want to constrain money because they have an ownership interest, they believe they and no one else owns the public's money.

 

"the US economy began to recover."

 

Yeah, it was going great guns in 1938, which is why, until Obama screwed up in 2010, FDR held the record for most seats lost in an off-year election.  Ha ha!

 

"there was a push by the banking interests to restrain the US money supply again in 1937 the result was another round of business failures and more depression."

 

What push?  The money supply was entirely under the control of the U.S. government in 1937.  The problem was that FDR used all the money to prop up the financial system.  As JFK said (and he should know!), "There was a lot of the charlatan about FDR."  Keynesian is not about economic growth (Keynes had no notion of economic growth).  It is SOLELY about propping up the financial "system," even when as in 1937 and now, the financial "system" is simply a criminal conspiracy.  Off with their heads.

 

 

Wed, 02/06/2013 - 18:36 | 3221525 new game
new game's picture

somewhat miffed at pm's performa

this consolidation has me consolidated.

closed above 1677-nice as the wedge is wedging

it'll break one way or the other- being forced by time.

well see...

Wed, 02/06/2013 - 18:27 | 3221486 Panafrican Funk...
Panafrican Funktron Robot's picture

Currency devaluation = taxation.

I have no representation at the Federal Reserve.  Yet, they are taxing me.  That is taxation without representation.

Addendum:

Government spending in excess of revenues = taxation.

Wed, 02/06/2013 - 18:10 | 3221444 johnQpublic
johnQpublic's picture

article summary:

everything is fine and going according to plan

now lets get a sixpack of beer in you, then straight to bed

Wed, 02/06/2013 - 17:36 | 3221363 steve from virginia
steve from virginia's picture

 

 

This article is flat-out wrong.

 

What was ruinous was a gold standard that was impossible to defend as it cost too much in way of interest payments ... which in turn did not offer anything in the way of returns, even for the banks!

 

The gold standard in the early 1930s wound up destroying most of the world's banking systems including the banking system in the United States.

 

The damage was averted only when countries abandoned the destructive gold standard and let their currencies float and interest rates decline. The countries that defended gold until the bitter end like France and the Weimar Republic ... opened the door to Frenchman Laval and Adolf Hitler!

 

After FDR bailed out the banks in 1933 and depreciated the dollar (he didn't devalue anything as money has no value), the US economy began to recover. As it did so, there was a push by the banking interests to restrain the US money supply again in 1937 the result was another round of business failures and more depression.

 

Anyone who believes there is something to be gained in a modern economy by constraining the money supply is either an idiot or a crook. It is always the banksters who want to constrain money because they have an ownership interest, they believe they and no one else owns the public's money.

 

!!!

Thu, 02/07/2013 - 16:58 | 3224119 BigJim
BigJim's picture

Ah Steve, you never fail to get even your basic facts right, so it's hardly surprising your analyses are so laughable.

The gold standard came to an end in 1914. What we had from 1923 was the gold exchange standard. Just because they share the words 'gold' and 'standard' doesn't mean they're the same thing.

As it happens, a gold standard and fractional reserve banking are incompatible... or, at least lead to real problems. Why don't you do some basic research on the topic?

Wed, 02/06/2013 - 18:46 | 3221554 eXMachina
eXMachina's picture

I've read this post twice now to figure out if it is was intended as sarcasm but you know what, I'm not sure it is. Hows your savings account and retirement fund looking Mr. Ctrl + P? 

Wed, 02/06/2013 - 18:06 | 3221429 A. Magnus
A. Magnus's picture

Tim Geithner? Is that you? Don't you have some bankers to bail out or something? Your attempt at humor and obfuscation was mildly amusing until it became irritating from the lack of facts and reliance on pro-banker hearsay...

Wed, 02/06/2013 - 17:53 | 3221398 Clowns on Acid
Clowns on Acid's picture

steve - your post is thin gruel...not wait a min...thinner. Indeed you have no idea regarding basic eco- finance or Int'l trade.

No comment is necessary, your are completely wrong on just about all your points. Do a basic google search before you waste everybody's time with nonsensical drivel.

Wed, 02/06/2013 - 18:56 | 3221581 thewhitelion
thewhitelion's picture

And if you want to be THAT wrong, try to stick with just one paragraph.  "Brevity is the soul of wit."  WS

Wed, 02/06/2013 - 18:07 | 3221435 johnQpublic
johnQpublic's picture

even clowns on acid realize how wrong steve is

Wed, 02/06/2013 - 18:18 | 3221462 de3de8
de3de8's picture

But not MDBogus!

Wed, 02/06/2013 - 16:45 | 3221181 NeedtoSecede
NeedtoSecede's picture

Berspankme and Krudmann say it will be different this time.

I say: Beggar-they-neighbor Bitchez!

Wed, 02/06/2013 - 16:04 | 3221028 smartstrike
smartstrike's picture

Neo-liberals love FREE TRADE which is nothing more than trade as a result of wage-arbitrage.  This is not even trade: this is slavery.

They puff and huff when you mention what the world needs is SMOOT-HAWLEY, because they're  incapable to think outside the box as they were led to believe that Smoot-Hawley caused the depression.

Currency wars are doomed to failure because you can't compete with goods made by slaves.

Thu, 02/07/2013 - 16:51 | 3224080 BigJim
BigJim's picture

If protectionism is so great, why not implement it in smaller areas? Why not tax inter-county trade, too? or between cities? Neighbourhoods?

India is a great example of a protectionist country. They've done really well out of it, haven't they?

Wed, 02/06/2013 - 18:51 | 3221569 plata pura
plata pura's picture

proper post; protectionism be good flat earth free trade be bad.

Wed, 02/06/2013 - 15:46 | 3220976 THE DORK OF CORK
THE DORK OF CORK's picture

ONS economic review Jan 2013

 

 

Summary

Contrasting pictures of the strength of the UK economy are on offer from the latest economic

statistics.  Buoyant labour market figures show employment rising at one of the fastest year-on-year

rates since the early 1980s, while output fell by 0.3 per cent in the final quarter of 2012, continuing

the stagnation that has been a feature of the past 18 months.

Part of the resulting weakness in productivity is attributable to the first rise in manufacturing

employment in 2012 for more than a decade, despite the fact that manufacturing output itself has

been falling.

An important factor in understanding UK productivity performance lies in the behaviour of earnings. 

Average pay growth has been remarkably muted during the period since the 2008-09 recession, and

has failed to keep pace with price inflation.  The squeeze on households’ real pay, even though price

inflation has remained within the Bank of England’s target range for the past nine months, has had a

negative impact on household expenditure

 

 

http://www.ons.gov.uk/ons/dcp171766_298132.pdf

 

Wed, 02/06/2013 - 15:45 | 3220970 DoChenRollingBearing
DoChenRollingBearing's picture

Korea has so far resisted the tide, even though that is hurting their exports (and hence our imports of their bearings into Peru).  Do not expect this to go on forever though.  If China, Japan and the USA keep up their debasement, Korea will follow.  Korea, a small but real player, cannot be expected to be a paragon of virtue in a world gone mad.

Wed, 02/06/2013 - 15:41 | 3220958 NoWayJose
NoWayJose's picture

If the US hiked rates, made some spending cuts with the promise of moar, and gave verbal support for the dollar, US companies would have cheaper raw materials and energy costs, they could use their stronger dollars to buy foreign companies and foreign assets cheaply, and US consumers would have moar purchasing power to buy US (and foreign) products.  The only ones this would hurt are the leveraged banks and the stock market, while it would benefit the sub-class that holds 95% of the American people.

Wed, 02/06/2013 - 15:02 | 3220803 JustObserving
JustObserving's picture

WTF is the only real currency, precious metals (gold and silver chiefly), not going up as everyone devalues? It is a bizarro world of corruption and control.

Wed, 02/06/2013 - 16:51 | 3221214 e-recep
e-recep's picture

be patient.

Wed, 02/06/2013 - 15:29 | 3220912 flacorps
flacorps's picture

Precious metals will experience suppression. And when that stops working it will change to repression, with owners of them being demonized as hoarders and required to turn in their precious metals for a below-market price paid in fiat by the government. FDR did it. And to the extent precious metals devolve into the hands of the ordinary people, it will be done again as yet another means of stealing from them.

Wed, 02/06/2013 - 17:29 | 3221345 Clowns on Acid
Clowns on Acid's picture

flacorps - Yes FDR did it, and the current crop of facsists will try to do it again...However - in todays world for the "gold embargo" to work , it will require Europe, Canada, indeed all of developed economies in Asis to go along with the embargo.

It is going to be a lot harder to implement than when FDR did it.

Some might mention "BitCoin"....but that can be blasted off of the Internet very quickly.

Wed, 02/06/2013 - 20:03 | 3221732 Bastiat
Bastiat's picture

There was a lot more out there when FDR did it:  gold was the currency.  US citizens own very little now.  Much better to "borrow" it from GLD.

Thu, 02/07/2013 - 08:14 | 3222489 onthesquare
onthesquare's picture

I went to Mexico a few years ago and tried to use a 500 peso bill to pay for something.  They laughed and said that bill was useless and was done away with a few years earlier.  So like Mexico and some other countries all we need to do is defunck the current note and make a new one.  The Chinese can use all their US$ to melt down scrap steel.

Can the west live without China?

Wed, 02/06/2013 - 20:03 | 3221728 philipat
philipat's picture

And the number of tragic boating accidents will rise exponentially......

Wed, 02/06/2013 - 14:43 | 3220729 disabledvet
disabledvet's picture

Nothing stands out more than this Administration's support of free trade IN SPITE of the Great Recession. Good luck getting the "expensive product" with which to devalue "and therefor make money with."

Wed, 02/06/2013 - 14:28 | 3220662 diogeneslaertius
diogeneslaertius's picture

currency wars > trade wars > real wars

new world order playbook hasnt changed in centuries

 

much respect to the GW from behind enemy lines in FEMA Region 5 

Wed, 02/06/2013 - 19:59 | 3221723 philipat
philipat's picture

If they can't pay down the debt in devalued Fiat as they all race to the bottom, default is the only other alternative. Coming soon to a country near you.......

Wed, 02/06/2013 - 18:34 | 3221521 Piranhanoia
Piranhanoia's picture

Folks trusted FDR,  we have a different tone these days.  I live in sector R and they never come up in the hills after dark.

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