David McAlvany to Moneynews: US in a 'Race to the Bottom' With Rest of Global Currencies

Friday, 24 May 2013 09:24 AM

By Glenn J. Kalinoski and John Bachman

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The world has two types of currency de-valuers -- the ones announcing their intentions such as the Japanese -- and those not announcing it, says David McAlvany, CEO of the McAlvany Financial Group.

"The dollar has been … rallying considerably," he told Newsmax TV in an exclusive interview.

"But we need to put 'strong' in quotes because it's strong relative to an extra-weak yen. It is strong but not of its own merits. What we have today is a very artificial market space and … there is a competitive devaluation; a race to the bottom."

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McAlvany elaborated on the topic of devaluation by stating that it puts a strain on trade relationships because it represents an effort to "snatch away" a percentage of global gross domestic product (GDP).

Forbes Columnist: ‘Who the Hell Cleared This?’

"The problem is when you do that, it's not as if the whole global pie is getting bigger," he said.

"You are taking from someone else. That's why devaluations have typically been called beggar-thy-neighbor policies because you are literally trying to steal GDP from others and this [is] done via making your exports that much more affordable," he said.

"You lower the value of your currency and now you have a competitive trade advantage and manufacturing countries the world over love that."

The challenges facing Japan's economy were also addressed.

"They're dealing with an overhang … a legacy issue where companies that should have been allowed to fail decades ago have still been allowed to sort of be propped up," he said.

"Now we're doing that same thing in the United States today, the too-big-to-fails. We'd see a radically different and improved banking sector had we allowed some bank failures to occur just a few years ago. What we're building into the system is a noncompetitive environment like the Japanese have had."

Also discussed was "money printing" by global central banks.

"I don’t think you fix an economy or fix a business environment via money printing and that's what they're now attempting to do," he said.

"This is where we see central bankers all playing by the same set of rules and, yes, there is a problem," he said.

"They assume that they can stimulate growth and they're stimulating something quite radically different, which is a spike in asset values and really bubble dynamics unparalleled in financial history."

Forbes Columnist: ‘Who the Hell Cleared This?’

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