Financial Contagions Spread Global Investment Dysfunction
By Daniel R. Amerman, CFA
Wednesday, 5 June 2013
Australia and New Zealand, as well as many other nations around the world, have caught an economic virus of sorts. This contagion is primarily being spread by Japan, the United States and the European Monetary Union, all of whom have undertaken increasingly irresponsible monetary and financial policies whose effects are proving communicable.
People are used to goods being in global competition, where the prize goes to those nations who produce the best goods at the lowest cost. However, there is a loophole in this simple relationship, whereby cost depends on the relative value of a nation’s currency, and that can be deliberately altered by a nation.
What we are now seeing among many nations is a rather twisted kind of competition. That is, whoever does the best job of cheating their own citizens out of the value of their savings and investments gains a competitive currency advantage, and thus a business and employment advantage.
And in this tightly interlinked world of globalized economies, a necessary byproduct of these competitive currency devaluations is collateral damage to the more or less innocent bystanders around the rest of the world. Which then forces these nations into defensive measures.
As we’ll explore herein, one of the most powerful countermeasures is currently being deployed by Australia, which is essentially to strip wealth from its own savers and investors, as a defensive measure against the United States, Japan, Europe and other nations who are effectively stripping wealth from their own savers and investors.