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Currency Wars - The Conflicts of the New Millennium

Posted on 12, Mar, 2013


Your parents and grandparents were all too accustomed to wars where massive armies marched across continents, destroying and liberating as they went. In the "modern" world we live in the conflicts that are being waged between countries are now based on the currency they use, rather than using bullets, bombs or weaponry of any kind. The weapon of choice for more countries now is to simply attack the currency of another, ruining their economy without having to fire a single shot. Proof of this is in how Germany has laid financial waste to the rest of Europe through their outright economic warfare on any country which dare oppose them.

What you might be surprised to learn is that currency wars have occurred in the past and the first recognized time this has happened previously is during The Great Depression of the 1920s and 1930s. What happened was that most countries abandoned the "gold standard" during this time, which meant their own currency no longer had any real value. What actually sparked the currency war was a hoarding of gold reserves by France and the United States, which then lead to Great Britain removing the pound from the gold standard, and causing a number of financial crises, which came about as a result.

Now the world finds itself in the same position again, with several countries actively participating in what's being called "World War C", where trade wars and even human conflict could be the final outcome of forcible devaluation of some country's currencies. The mass printing of their own currency by Japan and others involved in World War C could quite easily lead the world to a state of economic crisis caused by hyper-inflation; similar to what happened to Germany after the first great war - World War I.

So what effect might currency wars have on the taxes you wind up paying?

For the average Joe on the street the effects of a currency war won't be necessarily felt in your taxes per se, although you could expect to see personal income tax rates go through the roof. What you would notice is a decrease in your standard of living because the FIAT currency you own is literally worthless. This is why having at least some physical precious metals in your personal portfolio (not just precious metal certificates) is going to be so important over the next 10 or 20 years.

When it comes to the devaluation of any currency in a fiscal war of this kind where most people will notice a major change in how they're taxed is the closure of the vast majority of tax loopholes and incentives they're used to. This would include foreign companies having unnaturally low rates of corporate tax and paying only roughly 1/50th of what they should be paying back to their host country.

Another area where taxes and income could be directly affected by a currency war of any kind is in the area of offshore investments - you can expect that loophole to be closed almost immediately and not to be opened again any time in the near future.

It does seem that a currency war is looming on the horizon and with the protagonists this time being China and Japan. One thing is certain however and it's that if a currency war does start it will spread more quickly than anyone can really foresee. 

Tags: #currency

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