With the recent release of the Trans-Pacific Partnership (TPP), there is a great deal of uncertainty about the future of international relations, trade, and the valuation of domestic and foreign goods. The relationship that the United States of America maintains with its foreign partners is tenuous, and the interpretation of the TPP by the US Government may significantly impact a variety of domestic industries.
Some speculate that the TPP is another effort by the Obama administration to cripple domestic corporations, and move manufacturing overseas. The release of the TPP follows recent pressure to increase the minimum wage. While an increase in minimum wage would benefit the 2% of the workforce that is paid on an hourly basis, many fear that an increase in the minimum wage will incentivize US-based companies to outsource production internationally. Similarly, many fear that the stipulated phase-out of tariffs on imported goods will give a competitive advantage to goods produced overseas and incentivize companies to outsource production jobs.
Even if US manufacturing is able to remain competitive in the absence of long-standing tariffs and trade regulations, currency manipulation still stands to significantly impact trans-Pacific trade. Some economists hoped that the TPP would address currency manipulation, and give the World Trade Organization (WTO) recourse against offending nations. Manipulating national currencies, some argue, is a strategy used by foreign entities to make US exports inaccessible to foreign consumption.
Currency manipulation occurs when a country with a trade surplus invests the incoming revenue stream into purchasing foreign currencies. This keeps the value of foreign currency artificially high, and domestic currency artificially low, allowing the trade surplus and resultant revenue stream to continue. Many countries, most notably China, have engaged in currency manipulation in recent years, which has perpetuated the US trade deficit and cost the United States millions of jobs.
Not only can the manipulation of national currencies impact specific industries by restricting foreign consumption, it also has the potential to change global economic dynamics and investment strategies. Unfortunately, the value of domestic currency is measured relative to the strength of foreign currencies, which is used as an indicator of economic health. Perceptions of economic health may profoundly influence investor confidence and consumption.
Fortunately, there are safe haven investments that are largely immune to the effects of currency manipulation. The value of many commodities, such as precious metals, are not as likely to be affected by the valuation of currencies. Because gold and silver have intrinsic value, their valuation supersedes perceived value of domestic and foreign currencies. For similar reasons, precious metals have long been used in diversified investment portfolios as a hedge against inflation.
Provident Metals has a number of resources available to help investors protect their retirement funds. Please visit ProvidentMetals.com and learn how to use precious metals as a safe-haven investment, what the recommended ratio of gold and silver ought to be, and how to use metals as a hedge against inflation.
It’s always interesting read regarding currency manipulation and it’s affect on the US. I know the US doesn’t “directly” manipulate by buying other foreign currency, but the whole “QE” concept is essentially an indirect form of currency manipulation. We’re now seeing a “race to the bottom” mentality in that regard, and I can’t see it ending well.
I recently read a pretty interesting article on the commodity markets on the whole, including gold – a sector in general I think is completely oversold and should perform as a contrarian investment should traditional markets go pear shaped in the near term (as I think it’s looking likely):
http://thenudeinvestor.com/commodity-markets-time-to-buy-or-run/
Excellent article, however the figure stated about the percentage of the US workforce being hourly is radically off, the actual figure being 58.7 percent, not 2 percent….”Wage Workers, 2014. In 2014, 77.2 million workers age 16 and older in the United States were paid at hourly rates, representing 58.7 percent of all wage and salary workers.” Google.
Another point that should be mentioned regarding the purchasing of precious metals is that currently, because of the incredibly strong US dollar, it makes even more sense for US residents to buy PMs with those strong US dollars. People around the world are using currencies that have less (in some cases, much less) purchasing power than the dollar has. If you’re in the USA, stock up on precious metals while your dollars are strong!
The article could have been worded better, but I interpreted the 2 percent as being the percentage of hourly workers in the US earning minimum wage, not the total percentage of hourly workers in the US. In looking up the Bureau of Labor Statistics (BLS) Report for 2014, that 2 percent figure is correct, when rounded up. Roughly 2 percent of the workforce in the US, aged 16 years or older, who are paid hourly are being paid the minimum wage.
That being the case, one must wonder why there’s so much corporate angst and hand-wringing about raising the minimum wage when it would actually effect a relatively small number of workers nation-wide. I guess it’s just simply a matter of every dollar that’s in the pocket of a wage worker is a dollar that’s not in the corporation’s pocket…and they want that dollar.