Actualidad nacional e internacionalNov. 24, 2011
Lo que la guerra y el caos internacional podría significar para el peso chileno
Currency manipulation is illegal unless you are a government or multinational corporation. Right now it appears that Chile may be tucked away geographically but it’s not completely immune to the international market, Photo: smokedsalmon major groups of speculators are trying to kill the Euro and strengthen the US dollar.
That’s what the rumor mill is generating and it would be a good idea to wonder why and what the effect would be if it’s true.
The PIIGS (Portugal, Italy, Ireland, Greece and Spain) have been causing havoc with the Euro because of their lack of reasonable management. On top of all that, the drumbeat for war with Iran continues and the Arab League just put sanctions on Syria, which can be considered an act of war.
It seems that the whole Western world is in turmoil. Why is there such an interest in going to war? Money and lots of it.
There is a whole military/industrial complex that profits enormously from war. You might say that they are the pirates that have taken over the USA “ship-of-state” bridge and the passengers (citizens) don’t even know that criminals are steering the boat.
At times like these, it’s nice to be down here in our corner of the world. However, we won’t be untouched. If there is war with Iran and/or Syria, expect fuel prices to jump up a lot. You should also expect copper prices to skyrocket.
War machines need a lot of copper (witness the steel pennies in the USA during the years of 1942, 1943 and 1944.)
Throughout all this, our central bank will try to maintain the conversion ratios of Chilean pesos to the US dollar at about CLP$500 pesos to US$1. If the speculator cartel is successful in killing the Euro, the dollar will at least appear stronger and the central bank will be able to sell all those dollars it bought (with money created from thin air) and, if they are wise, retire those pesos returning to Chile into the black hole from which they emerged. They would keep inflation down, maybe even reversing the UF rate climb some. That adds stability to an economy. Will they be wise? You tell me.
There is another problem though and that is the (probable) war. If there is war, the US dollar will be inflated enormously and Chile will have to buy a lot of dollars to maintain the target exchange rate. The pesos that are used to buy up dollars are just created by whim and cause inflation in Chile which causes purchasing power to be lost by the people who can least afford to lose it.
So, war will cause fuel to increase and purchasing power to be lost largely by the poor people. That means the people of Chile will help to finance a war in the Middle East with the secret tax called inflation. Is this any way to run an economy?
The goal of Chile’s currency manipulation is to help exports grow or, at least, remain steady. The price of such is too high. Chile is the world’s largest producer of copper, and I contend the exports will continue to grow even if the price shoots up because of war demand.
An additional push to prices would come from currency trade differences if the central bank stopped trying to maintain a 500 to 1 ratio with the US dollar causing the price of copper to surge even more but the copper would still be bought.
Chile also produces enough food and timber to meet all internal needs and have plenty to export – which will still be purchased by a world at war regardless of price.
I suggest that the central bank leave the exchange rate to the dollar alone, let the free market determine the exchange rate and let the countries declaring war pay the bill in lost purchasing power (through inflated currencies,) not Chile. Maybe, just maybe, the fantastic loss of exchange rate (which is sure to follow) will awaken enough US citizens to what’s going on and they will throw the pirates overboard and put good people back in control and things will settle down and peace and prosperity will break.