In a world where the currency market is the major mover and shaker of global politics and the world economy, it’s fascinating when we recognize that it is the least known global market, and it’s filled with misnomers and misconceptions about investing, forex charts, and the art of currency trading.
The economic food chain is like a regular food chain. The food chain has bottom feeders and it has middle level feeders, and then big time predators rule the chain. The economic food chain is structured in a similar fashion.
People who trade manual labor for money would be at the bottom of the economic food chain. Then the commodity and future traders enter the chain; they trade goods for money. Above them are information traders who sell information for money, and then we have the money for money traders like bankers, and ever since the Bretton Woods Treaty was abandoned in 1990, which was the system where a country maintained a fixed value exchange rate for its currency, the main predator or group of predators in the economic chain are the country currency values, which are measured against currencies in other countries, which is better known as the Foreign Exchange Currency Market.
The Foreign Exchange Market Affects Everyone
This economic food chain affects everyone in one way or another. When the dollar’s value drops, buying power decreases, which is the melting pot for inflation. Even though the Bretton Woods Treaty was put out to pasture, and we changed our worldwide financial books, new books have not been written to deal with these new mighty predators.
Most people believe inflation comes from a business cycle, but it comes from printing money and creating an excess supply. Since the new predators are connected by forex trading, there are elements in the system that didn’t exist before. Foreigners can buy local currency and dry up the supply. Local central banks then print more currency to compensate, and a new inflationary tool is created where currencies compete for their own destruction; this new game is called who can inflate more, and how fast can they do it.
In a global currency market filled with countries that are dependant on each other for goods and services, especially in industrialized nations, and in particular the G8, the value of a countries currency determines how many goods and services can be purchased and imported. The delicate balance of financial power is obvious in the forex market; there is a constant shift of value from one currency to another. When we need to exchange Dollars for Euros in order to buy products or use services from Europe we fuel a predator, and when Europe doesn’t return the favor by buying our goods and services, because the value of the Dollar has changed, we pay the price in higher costs, which is one of the elements of inflation.
Our lack of understanding of how the Foreign Exchange Market works is creating new global predators, which impact our modern lifestyle in some way. But in spite of all the risks, and the inflation threats that are associated with the currency market, investing in the currency market can be a low risk personal venture if you’re willing to do some research, and find a professional that can evaluate the performances of different strategies, and then choose one that fits your investment goals and risk profile.