Global Currency Reset

JulieW · Apr 13, 2014

An issue widely spread across the blogosphere. A thoughtful piece.

http://ftmdaily.com/daily-briefing/041114/

We do receive this question about a "coming global currency revaluation" or "reset" fairly often and so I appreciate the opportunity to address it in today's Daily Briefing.

First, what is a global currency revaluation? Put simply, it would be a return to a new currency standard that all nations would agree upon, such as a gold standard. The last major global currency agreement occurred in the wake of World War II and was known as the Bretton Woods agreement. Under this agreement, the world's allied nations agreed to a fixed international gold standard attached to the U.S. dollar. Because the U.S. dollar operated as the primary global medium of exchange under this post-war agreement, the U.S. economy greatly benefited at the expense of other nations. I have written extensively on the history and meaning of the Bretton Woods agreement both in my book and on this website.

Now, in the wake of the 2008 economic crisis, some are promoting the idea that we are on the cusp of yet another major 'global currency revaluation.' (A 'Bretton Woods Part Two,' if you will.)

However, there are still a few obstacles that stand in the way of such a 'reset' that should be considered:

1. A true 'global currency revaluation' would require an insurmountable amount of cooperation and the surrender of monetary policy control on the part of many nations. Because the 1944 Bretton Woods agreement only became acceptable in the wake of a devastating world war, it is difficult to imagine nations voluntarily surrendering their monetary policy tools in our current time of relative peace.

2. A global currency revaluation would require central banks to willingly impose constraints upon their ability to conduct monetary policy. Under Bretton Woods, the constraint was a fixed price of gold, which forced central banks to operate within the realm of reason. Who honestly believes that foreign central banks are 'chomping at the bit' to willingly impose a new set of constraints upon themselves amid today's volatile global economic environment?

This is not to say that a new global monetary regime will not eventually be implemented. I believe that such a shift is all but certain. But a quick Google search of the topic reveals that those who are promoting the idea of a 'global currency reset' as a current and imminent reality are usually looking to make a quick buck off of people's fears.

As an economist who warned about the 2008 economic crisis, and who moved my own investments out of the markets prior to the 2008 market crash, I have been fascinated by all of the sudden 'armchair economists' who have set up shop, created a blog, and are touting themselves as economic 'experts.' Many of them tell fantastic tales that fail when confronted with basic logic.

Today, nearly half of Americans have less than one month of savings. Most don't have a will and even fewer have a simple guardianship plan for their children. These are real problems that need to be addressed and are 100% within our own control.

A coming 'global currency reset' is a future problem that does not currently exist and is completely out of our control.

Perhaps some of those who have failed to create a financial plan secretly long for a 'global currency reset' which will level the playing field. But I wouldn't hold my breath.

Instead, I would get busy solving those financial issues that I can personally control and spend less time worrying about things that are out of my control.

But let's say I am wrong and a 'global currency reset' suddenly occurs tomorrow. (This is highly unlikely, but let's just pretend.)

What can you do?

You would want your investments highly diversified, including some gold and silver.

You would want a minimum of six months in liquid savings.

You would want multiple streams of income.

Ironically, these are things that you can begin doing right now. There's no need to wait

So, Patty, my advice is to spend more time on actions that can improve your finances today and to spend less time on worrying about the "what-ifs" that will only paralyze you from taking action.
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Global Currency Reset

JulieW Well-Known Member Silver Stacker

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Global Currency Reset

JulieW Well-Known Member Silver Stacker

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