What’s a Good Currency Play?

While I feel 100% confident about my belief in precious metals, especially gold bullion, as basic financial insurance, I would not consider myself qualified to make currency trading recommendations.

OK – that was the disclaimer – now here’s my take on currencies. Trading currencies looking for short term gains is not something I am interested in personally. Too much work keeping track of what’s happening day to day.

Also, today, all the worlds currencies, not just the dollar, are based on nothing but a lick and a promise from some government. They are all fiat currencies and can be manipulated  by politicians looking for ways to finance their agenda, whatever that might be. Mostly this means robbing the savings of older generations by devaluing their savings and mortgaging their children’s future by borrowing with the intent of paying back with cheaper dollars, euros, etc.. As such, all currencies are infected with the inflation virus which could get out of control at any time.

That being said, the Asian economies are a good bet for growth and strong currencies over the longer term. There have been many naysayers who forecast the fall of Asia as a result of the loss of their markets in the west. This domino effect hasn’t happened. Instead we see the decoupling of these economies from the west and the growth of internal markets and regional trade.

Asians have been working hard and consuming less than they produced for many years and have thus accumulated a large pool of savings. This is the position the United States was in after World War II. Those savings, that capital, financed many decades of growth in the U.S. and Europe. Asia is now ready to do the same.

Asian governments are spending their increasingly worthless dollars on stimulus projects. Their populations are sitting on a pile of money. Sales to the west is less and less important as Asia exports more and more to itself.

As these trends grow there will be less need for Asian governments to keep their currencies cheap relative to the dollar and the euro. (ie: their currencies will rise against the dollar and the euro).

There you have it.