Albert Edwards: The US Is About To Take Global Currency War To A Whole New Level | WHAT REALLY HAPPENED

Albert Edwards: The US Is About To Take Global Currency War To A Whole New Level

One person who has no fear in defying Wall Street convention is also one of its biggest perma-bears (which it comes to equities, and the opposite for bonds), SocGen's Albert Edwards, who in his latest letter brings attention to the barrage of recent tweets from President Trump indicating that "his tolerance for the strong dollar has just about run out."

As we observed roughly two weeks ago, the dollar had resumed its rise even ahead of the stellar payrolls report, largely due to the prospect of yet another round of Draghi "whatever it takes" jawboning and even easier ECB policy - sending eurozone bond yields to record lows.

So as the global economy falls ever closer towards outright deflation, Edwards predicts that "the global currency war will explode into life. Countries will fight to avoid deflation in the next recession and competitive devaluation will be the tool of choice." Indeed this was the solution Ben Bernanke suggested in his famous 2002 speech about how to avoid ending up like Japan, to wit:

“Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today (ie 2002), it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from US history is Franklin Roosevelt's 40% devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly.