Link: The Four Rules to Currency Intervention

David Merkel at the Aleph Blog takes an interesting approach to what might happen if the US Government or Federal Reserve decides to embark on a “Currency Intervention” to “save” the US Dollar, which is making new lows almost daily it seems.

Merkel lists four conditions – or rules – for what might happen for the government to embark on a successful currency intervention (read the rules at his site).

He notes that interventions will not ‘cure’ the underlying economic conditions that have resulted in the weakened dollar, but that – at some point – governmental officials might be compelled (or at least encouraged) to step in and support the ‘greenback’ as best they can.

Merkel concludes with the following potential investment advice for you:

“The investment implication is this, though. Until an intervention happens, the path of the US Dollar is down. After it happens, the path of the US Dollar is down, until a new equilibrium is found. Economies are bigger than governments, and in the long run, governments can’t affect exchange rates.

Just stay on your toes, and be ready to buy non-Dollar assets after the coming currency intervention.”

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