124 THE BiG DROP
stand the cross rates are a zero sum game, then you can look at
all of the cross rates effectively. I think of gold as money, too, so
I put gold into the cross rate mix. It’s just another currency.
The difference between when we’re in a currency war and
when we’re not is that normally there’s stability. I don’t mean
that we have fixed exchange rates. We don’t, we have float-
ing exchange rates. But the central banks agree to keep their
currencies within a certain range when the currency wars are
off. When the currency wars are on, however, all bets are off.
Anything can happen.
They’re very dynamic, very complicated and we watch
them very closely in Strategic Intelligence. There are a lot of
ways for investors to win.■ The Difference Between Currency Wars and
Financial Wars
People sometimes conflate currency wars with financial wars
— but they are not the same things.
A currency war is a battle, but it’s primarily economic. It’s
about economic policy. The basic idea is that countries want to
cheapen their currency. Now, they say they want to cheapen
their currency to promote exports. Maybe it makes a Boeing
more competitive internationally with Airbus.
But the real reason, the one that’s less talked about, is that
countries actually want to import inflation. Take the United
States for example. We have a trade deficit, not a surplus. If
the dollar’s cheaper it may make our exports slightly more at-
tractive. But it’s going to increase the price of the goods we buy
— whether it’s manufactured good, textiles, electronics, etc. —
and that inflation then feeds into the supply chain in the U.S.
So, currency wars are actually a way of creating monetary
ease and importing inflation. It’s part of why Japan is doing
Abenomics.