This Big Myth is Set to Destroy the Australian Economy

There’s a big myth in the market.

It’s the myth most central banking institutions believe.

Governments believe it too.

Heck, even most investors can’t help but believe it’s true.

It’s a misconception that’s helping push the Aussie economy towards an inevitable recession…

Perhaps you’ve noticed. A war has raged for the past six years.

It was not a conventional war.

No one’s shooting, and no one’s being shot.

It’s not that kind of war. This is a different war. It’s a currency war. And after six many years of being mostly on the outside, Australia is now at the centre of the next battle in these currency wars.

The Currency Wars hit Australia

The US deliberately started the global forex wars when it decided to cut interest rates to zero and print trillions of dollars.

The plan was to make it’s products cheaper for international buyers.

But others soon realised what game the US was playing. So they started their very own ‘race to the bottom’.

Each nation has determined that if they can devalue their currency enough, they’ll export much more, and it will see them on the path to success.

The latest nation to fire a shot (more like a bazooka) was The far east.

It devalued the yuan in August. Many analysts blame this devaluation for sending the world’s marketplaces into a tailspin.

The result of all this is the fact that, as other currencies possess weakened, the US dollar has strengthened. That has forced down the prices of all US-dollar priced goods.

And that’s forcing down the worth of the Aussie dollar as well.

It’s that action which is getting the biggest impact on the Foreign economy. And unfortunately, many in the mainstream believe it will be good news for Australia. However it won’t be. Here’s why…

Why a lesser Aussie dollar won’t save Australia

The biggest problem for Sydney is that, aside from resources as well as agricultural products, the country does not export much.

And because commodities prices have fallen so much more than the Aussie dollar has fallen, a lower Australian dollar won’t help Australia’s exports.

Even a 5% increase in iron ore export volumes (a new record), isn’t enough to make upward for the sharply lower price associated with iron ore.

Here, this table explains what we mean:

You see, iron ore exports improve by 5%…and the Aussie dollar falls by 21%…but it nevertheless isn’t enough to counterbalance the 40% drop in the iron ore cost over the past year.

It means the Australian dollar value of iron ore exports is down by $700 zillion over the past year.

That’s a heck of a big difference. That’s $700 million less dollars entering the Foreign economy.

That’s less money deposited within Aussie banks. If the banking institutions miss out on these deposits, this potentially means the banks cannot lend as much to debtors.

$700 million fewer dollars coming into Australia potentially means fewer jobs or lower wages. And it’s no coincidence that Australia’s jobless rate has risen after the commodities boom led to 2011.

End of boom means end of jobs

The chart beneath shows the Aussie joblessness rate since then:

Source: Bloomberg

Whatever the popular dopes say, the Aussie economic climate is in trouble. Business expense is falling, and during the final quarter, the Aussie economic climate grew at a slower rate than the Greek economy!

That ain’t good.

That’s why it’s well-timed we’ve published Vern Gowdie’s new book, The End of Australia. You can find out how to get a copy of it here.

Vern lays out in precise detail how Australia got into this chaos, what the consequences will be, and the opportunities it will provide later on.

It’s a must-read, written in simple plain English that any investor from a complete novice to a seasoned veteran can understand.

The Aussie economy is in trouble. This is the time to find out why, and to observe what you can do to protect your wealth. Go here.

Cheers,
Kris