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“Does currency depreciation finally have consequences?” (translated from elliottwave com)


For years – no, decades – there were rumors that the “US dollar was about to collapse.” Since 1999, when the euro was first introduced, the main competitor to the dollar, these rumors have intensified every time the euro takes over for an extended period of time. And every time the dollar recovers, skeptics are disappointed. But currency depreciation can take time. As for the consequences, they can be very serious. “When empires fall, it is usually accompanied by currency corruption,” says our head of global research, Murray Gunn.

Well, 2021 started off impressively, and we expect even deeper changes in the next few months. Let me set aside two minutes of your time to bring you through perhaps the most important thing. A changing world order. Does currency depreciation finally have consequences?

When empires fall, it is usually accompanied by currency corruption. This chart shows the decline in the silver content of imperial coins during the decline of the Roman Empire. Notice how the degradation intensified as Rome approached collapse. In fact, the whole process can be interpreted as fitting neatly into the Elliott impulse wave, where the third wave has five sub-waves. Governments around the world finally abandoned any connection their currencies had with precious metals in the early 1970s when the Bretton Woods monetary system collapsed in 1944. Since then, paper money has been printed ruthlessly and recklessly, especially by Western governments. With the dubious honor of owning the world’s favorite reserve currency, the US has been the leading expert in currency depreciation, and its money printing has gone hyperactive over the past year. Could this be compatible with the gradual fading of the American century?

Well, it is certainly interesting to note the message on this chart that shows the relative performance of the S&P 500 relative to the rest of the world, as shown by the avant-garde global FTSE ex-us ETF (ticker VEU). Japan peaked in 1989, Europe in 2000, and China in 2007, and the US was the only supercycle wave (v) embers smoldering in the past decade. This has translated into the overwhelming relative dominance of the US stock market since 2010 (helped, of course, by the depreciated currency through quantitative easing).2021: However, a five-wave rally can be interpreted with wave (5) weaker than wave (3), as is often the case, as measured by bearish divergence between relative efficiency and 36-month rate of change. This is evidence that the trend of America’s outperforming performance over the past decade may be about to turn into a lagging trend. The question arises, which country can become a world leader? Tune in next time to find out.

translation from here

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