Central banks and debt
“Central banks have to avoid deflation at all costs and that’s really what they’re worried about. They’re worried about it in Europe, the U.K., the U.S. and all over the world. This would really make the sovereign debt crisis far worse that what we saw in 2010 and 2011,” said Rickards, who is author of Currency Wars: The Making of the Next Global Crisis.
At the G20 meeting two months ago, members pledged to “refrain from competitive devaluation.”
But the euro’s fall has left many countries worried about their exports.
The Czech central bank began selling its own currency last week, forcing the koruna down by 4.4 per cent against the euro.
Peru’s central bank cut borrowing costs on Nov. 4 for the first time in four years, citing slow export growth.
New Zealand’s central bank has delayed expected rate hikes and Australia’s Reserve Bank chairman says its currency is overvalued and it may be forced to cut rates.
The Bank of Japan cut rates six months ago, but is still struggling to meet its inflation targets. Rickards believes the yen may sink as low as 110 to the US dollar.
Rickards said cutting rates is the wrong way to boost export growth and stimulate economies.
Back off on stimulus, Rickards says