Forex Training Blog

Forexmentor.com Forex Trading Price Action

According to James Grant, the editor of Grant’s Interest Rate Observer, the problem with the current economic picture in the U.S. is that there is no mere credit crunch. It’s a debt problem overlaid on a long-simmering monetary problem. And, the likely outcome is more inflation and a continuing decline in the value of the greenback.

The underlying cause on both scores is the Fed’s penchant for printing money. One of the founding principals in the creation of the Fed was the adherence to proper collateral, which of course, all went out the window with the abandonment of the gold standard as the basis of collateral. Instead, the Fed has adopted a policy of printing money as needed and using central bank levers to fix things. No problem if you own the world’s reserve currency, but what if creditors no longer want it?

After all, foreign dollar holders are not endeared to the currency by low rates, but the Fed can’t really raise rates to appease them because of the credit crunch and economic weakness. The dollar could very well go the way of the British pound, and be replaced by something else.

When you are learning to trade forex, you should learn as much as you can about world economic events that shape currency movements.

–Peter
forexmentor.com

See recent video AM Reviews at: http://www.forexmentor.com/sampler/