TPP, Currency Manipulation, and Safe Investments

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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.

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