As the U.S. dollar continues its slump, central banks around the world are questioning the value of their own currencies. The reasons for this are very simple. As the greenback declines in value, other countries are experiencing higher American prices for their exports, stunting demand. To fight the falling U.S. dollar, world central banks are taking matters into their own hands. They are either printing more of their own money or buying U.S. dollars using reverse-dollar swaps. But no matter what technique these central banks choose to devalue their currency, inflation is the ultimate destination for their country. The Central Bank of Brazil is continually intervening in its currency market. Brazil’s central bank is holding its country’s currency, the Brazilian real, below the two-reais-per-dollar level. The central bank believes that this level is sufficient to see continued growth in its exports. (Source: Reuters, October 23, 2012.) Similarly, the Central Bank of Peru made a big U.S. dollar purchase over the past six weeks to fight the rising value of the its currency, the Peruvian sol. This central bank bought $130 million in U.S. dollars to keep the sol from appreciating. (Source: Bloomberg, October 15, 2012.) This is aside from its $158-billion purchase of U.S. .dollars near the end of August. On the other side of the world, the Hong Kong dollar has also been feeling pressures due to the falling U.S. dollar, even though the currency is pegged at 7.80 Hong Kong dollars to one U.S. dollar. The Hong Kong Monetary Authority, Hong Kong’s central bank, has flooded the currency market with 14.3 Hong Kong dollars to keep the currency from rising. (Source: BBC, October 24, 2012.) Along with these central banks continuing to devalue their currencies, the South Korean central bank is being warned by think-tank Hyundai Research Institute (HRI) to intervene in the currency market. The reason for intervention? The rising U.S. dollar will destroy profits for the local exporters. (Source: China Daily , October 24, 2012.) What we are seeing is an ongoing debasement of world currencies. This looks like the beginning; more central banks will certainly follow suit. Unfortunately, they are forgetting that inflation will become a huge problem as they print more fiat money. There is no end to the problem of currencies being created out of thin air. The world will pay dearly for the decision of President Nixon’s Administration to leave the gold standard for the Bretton Woods agreement. Michael’s Personal Notes : As we witness one of the worst earnings seasons in years, fear is starting to creep into the key stock indices . Companies in key stock indices, such as the S&P 500, are on track to ... Read More