Cash crisis: national currencies sink in the wake of the coronavirus
Fiat currencies worldwide have seen sharp declines in the wake of the coronavirus panic, with the Norwegian krone falling more than 30% lately last week. The Mexican peso and Australian dollar fell behind during the same period, with multiple fiat currencies also plummeting. Although the USD remains strong, some speculate that this is due to the flight from other markets, and that the fiduciary strength bastion may not be able to resist endless printing and reckless QE (quantitative easing) credit creation. for much longer.
Announcing an unprecedented open asset purchase program on Monday, the US Federal Reserve. USA It has pledged to buy assets “in the necessary amounts,” signaling the start of a virtually limitless easing effort that will include moving to corporate bonds for the first time.
As forced closure orders in shopping malls and travel bans continue to destroy economies, world currencies are reeling from the massive shock caused by the coronavirus panic and containment measures. The Fed and other Central Banks around the world may have their sights set on unlimited support, but many fiat currencies tell a different story.
Norwegian krone and others knocked down by virus-ridden markets
The Norwegian krone has hit a record low against the US dollar, falling 25% since late December and more than 20% in just under two weeks from March 9-20. Other currencies have taken the same trajectory in that 11-day period, time frame, with the Mexican peso and the Australian dollar falling 17% and 13% respectively.
NZD, GBP, SEK, and other fiat currencies are not much better. The British pound has fallen this in levels not seen since 1985, falling against the euro.
Quoted in a March 19 report by Bloomberg, the European head of currency strategy at Toronto-Dominion Bank, Ned Rumpeltin, had the following opinion:
“At the very least, we believe there is strong momentum to liquidate what it can, before it cannot, as London’s trading floors are likely to be closed in a short time.”
The fear of circuit breakers and commercial suspensions are not unwarranted. In March, stock exchanges around the world tightened restrictions and tightened trading rules, with a temporary suspension of all transactions in the Philippines on March 17, and the opening of the New York Stock Exchange yesterday for the first time in 228 years with an empty apartment with no buyers.
But what about the US dollar?
Amid all the chaos, the US dollar is emerging against other world currencies. Although the dollar remains strong at the moment, some are not sure that the situation can continue, especially with the unadulterated market intervention that is currently taking place, and there is talk of huge stimulus packages. US Democratic Senator Chuck Schumer described his plan for “steroid unemployment” on Sunday:
“He loses his job due to this crisis or for any other reason, the federal government will pay him his full salary for 4-6 months.”
While many imagine that hyperinflation is an abnormal economic phenomenon reserved only for non-US countries, an Art Cashin piece from October 15, 2011 notes that “Hyperinflation requires a Central Bank to commit economic suicide voluntarily.”
Although Cashin thought this was unlikely for the United States almost a decade ago, his descriptions of hyperinflation in the Weimar Republic of Germany now sound eerily familiar to some:
“Things didn’t go wrong instantly. Yes, the deficit soared, but much of it was taken over by buyers of foreign and domestic bonds. That means that foreign bond buyers said, “Hey, this is a great nation and this is probably just a speed bump in the economy.”
“When things started to disintegrate, no one dared take the punch away from him,” Cashin continues. “They feared that closing the monetary heroin THAT would lead to riots, civil war and, worst of all, communism. So realizing that what they were doing was destructive, they did it for fear that stopping would be even more destructive. “
Fiat’s future is uncertain, as governments avoid painful economic realities
While it is still uncertain whether such a destination awaits the USD, it is interesting to note the similarities. The Weimar Republic was the product of the devastating and prolonged effects of the First World War in Germany.
With a war-torn economy that it failed to produce, the answer was simply to print more money. Observing the recent proclamation of the President of the United States, Donald Trump, that he is a “president in times of war” and that fighting against the Covid-19 virus is now “a war, a type of war different from the one we have had “it raises suspicions about the forced closure of economies currently witnessed. Unemployment rates are expected to skyrocket in the coming months. However, there are no concerns according to the US leader. USA, Who maintains:
“First of all, you never have to stop paying because the money will print, I hate to say it, do we agree?”
As savvy economists are quick to point out, you can print money endlessly, but you cannot print the meager assets, resources, labor, and experience that money must represent. This is one reason why some are now transferring value to more secure and limited supply assets like bitcoins or physical gold. The economy is on its way to a cliff. New announcements awaited.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.