In "Despite What You Don't Hear In The Media, It's ALL OUT (Currency) WAR! Pt. 1 [20]" I detailed what happened the only other time in modern history we've had a global currency war:
... currency war broke out in the 1930s. As countries abandoned the Gold Standard during the Great Depression, they used currency devaluations to stimulate their economies. Since this effectively pushes unemployment overseas, trading partners quickly retaliated with their own devaluations. The period is considered to have been an adverse situation for all concerned, as unpredictable changes in exchange rates reduced overall international trade [21].
May I remind all that thinking nationally instead of internationally in the 1930s drastically exacerbated the depression to go on to make it the GREAT Depression. Excerpted from Wikipedia [22]:
The Great Depression was a severe worldwide economic depression [25] in the decade preceding World War II [26]. The timing of the Great Depression varied across nations, but in most countries it started in 1930 and lasted until the late 1930s or middle 1940s.[1] [27] It was the longest, deepest, and most widespread depression of the 20th century.[2] [28]
Worldwide GDP fell by 15%, 1929-32.[3] [29] In the 21st century, the Great Depression is commonly used as an example of how far the world's economy can decline.[4] [30] The depression originated in the United States [31], after the fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash [32] of October 29, 1929 (known as Black Tuesday).
The Great Depression had devastating effects in countries rich [33] and poor [34]. Personal income [35], tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%.[5] [36]
Cities all around the world [37] were hit hard, especially those dependent on heavy industry [38]. Construction was virtually halted in many countries. Farming communities and rural areas suffered as crop prices fell by approximately 60%.[6] [39][7] [40][8] [41] Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries [42] such as mining and logging suffered the most.[9] [43]
Some economies started to recover by the mid-1930s. In many countries, the negative effects of the Great Depression lasted until after the end of World War II.[10] [44]
This is the graphic that Wikipedia posts to represent the poverty from the 1930s:
[45]
Dorothea Lange [46]'s Migrant Mother [47] depicts destitute pea pickers [48] in California [49], centering on Florence Owens Thompson [50], age 32, a mother of seven children, in Nipomo, California [51], March 1936
For the more academically leaning, this is what it looked like back then. Take note the foreign trade delta and realize the significantly increased correlation be between employment and foreign trade now as compared to back then, due primarily to the fact that information and value much more easily passes through borders via the means of digital currency (you know, the stuff the less informed love to hate), the internet, etc...
In "Stab, er... I Mean... Beggar Thy Neighbor - It's ALL OUT (Currency) WAR! Pt 2 [52]" I detailed the fact that despite the fact we all know a global currency war destroyes global trade, every nation is looking to stab the others in their deflationary backs by exporting unemployment/deflation to them...
Well, in this quick update shows that math still works. Reuters reports [53]:
- * Strong dollar may cut up to $12 bln from Q4 U.S. revenue -FireApps
- * Dupont sees 2015 $0.60/share impact, Bristol-Myers $0.12-$0.14/share
From Microsofts latest Q2 2105 results:
As we discussed last quarter, FX movement first impact of bookings growth and unearned revenue on our balance sheet are contracted but not billed balance was adjusted down to reflect current FX rates. Therefore our bookings were flat this quarter.
Unearned revenue was up 9% year-over-year to $21.2 billion, but the sequential decline was slightly larger -- slightly higher than we expected due to the larger than anticipated impact from FX. Adjusting for that FX impact our commercial unearned balance is in line with historical trends and our expectations.
...Our transactional revenue declined over 15%, slightly more than we expected primarily in Office and mostly due to our performance in China and Japan, which I detailed earlier. Additionally, FX had a greater negative impact on commercial revenue than we had anticipated.
In total, we expect that FX will negatively impact revenue growth by approximately four points in Q3. The majority of this impact is in our commercial business.
We currently expect that these geographic dynamics, challenging comparables from XP and FX headwinds will be in place throughout the remainder of our fiscal year.
And Tim Cook in Apples latest conference call?
And it's a fact of life if the U.S. dollar strengthens, that creates a headwind for us both in revenue and margins for our business outside the United States.
Russia is also pushed to devalue: Russia faces wave of bankruptcies if interest rates don't fall [54]
The pressure is building on Vladimir Putin: Russia will be hit by a wave of bankruptcies unless it cuts interest rates very soon, a top financial official warned Monday.
I ask you, what do you think the US is going to do? Raise rates to strengthen the dollar (to skewer its own powerful multinations such as Caterpillar, Apple, MSFT, et. al.), or drop rates and weaken the dollar to re-export this unemployment back overseas? What do you think Russia is going to do, raise rates? Do nothing? Buy gold? Fail to hoard gold [55]? How about China's other major trading competitors/partners (you know, the ones besides the EU who fired back at it) Korea, India and the QE experienced Japan? It's on!
It is said that world trade rose from 12% to 32% of world GNP in little over 20 years. I haven't verified these numbers but they seem about right because as I have stated earlier, the international linkages of information and value transmission have strengthened considerable over the last... 20 years or so. Why? Look what happened 20 years ago!
The Internet and the World Wide Web greased international commerce and supercharged it. This increased efficiency in value and information transmission leverages movement down as quickly as it leverages movement up. Leverage is leverage, after all and is not uni-directional!
On the topic of currency debasement and digital currencies and value transmissions, I think many will see the value of currency that can't be debased at will by a central authority and will see said value very, very soon.
I will publish specific companies and their specific weak points, hopefully in time to purchase options with 4-5 months or more on them (enough time value to catch movement deep into the next quarterly reporting cycle) that are priced cheaply, simply because nobody sees the gravity of the situation. These companies will be available to my premium research subscribers and/or verified volume users of our UltraCoin trading client. The Veritaseum team is working hard to implement internal leverage by next week before things truly start popping off. Due to the inherent capabilites of Blockchain technologies and smart contracts [56], we will be offering up to 10,000:1 leverage, without credit/counterparty/default risk. Yes, it does sound amazing doesn't it? Controlling up to $10,000,000 of price action and purchasing power with just $1,000 without the ability to default. Remember, that doesn't mean you can't lose everythying, you just can't lose more than everything. Give it a try - no registration or account opening needed. Download it along with tutorials and related research, for free, here. [57]