Its All Relative

The quote regarding the dollar from then Treasury Secretary John Connally as ” The dollar may be our currency, but it is your problem”, may  have yet to be surpassed in the annals of currency commentary, but hold unto your seats because we are about ready to  experience a good old fashioned currency war. Forget the trade war, the most critical clash we are about to undergo will involve the relative value of ones currency. While the ECB and The Fed may discuss the finer points of monetary policy, $17 Trillion of debt instruments worldwide sit at negative yields and the message they are screaming to us all is, interest rates don’t matter, trade flows do, and in the absence of real fiscal stimulus, trade flows are dictated by relative currency valuations. So, you can read between the lines from any Central Bank commentary, with the understanding that in a deflationary world, the only way to compete is to actively devalue your currency, and one subtle way to do this is through monetary policy.