by James Rickards
Currency wars are like real wars in more ways than one. They can last longer than the combatants expect, and produce unexpected victories and losses. Real wars do not involve all fighting, all the time. There are quiet periods, punctuated by major battles, followed by new quiet periods as the armies rest and regroup.
In the currency wars, it looks like a recent quiet period is over and war is entering a new major battle. The U.S. dollar went from an all-time low in August 2011 to a 10-year high in mid-2015. This dollar rally was fueled by the Fed’s tightening policy that began in May 2013 with Bernanke’s “taper talk” and continued through December 2015 with Yellen’s “liftoff.”
But the strong dollar finally caught up with the U.S. economy, which has been slowing down precipitously.