FOREX Trading Vs. Ron Paul
Kosoma LLC
An interesting question came up in a forum on trading. A Forex trader was asking how Ron Paul and his goal to end the FED might affect currency trading.
The man said that he actually liked what Ron Paul was saying but wondered how the end of the Federal Reserve would change the international currency markets. Especially since nearly all other countries of the world have followed the US pattern and set up fiat currencies of their own. You can understand how that might concern a FOREX trader, particularly someone who has been earning thier living from it as this man had!
First off, understand that if our fiat paper money were replaced with some sort of currency that is actually backed by something (maybe even gold and silver as laid out in the US constitution), the USD would no doubt become stronger. If other fiat currency nations did not quickly follow the US lead, the dollar would tower above them. Forex traders would simply go long the USD in any pairing available and ride it up!
How would the end of the Fed affect other markets? Think about this. With the current monetary set up, we really have no idea what the Fed may be doing behind the scenes. They can easily invest in whatever stock, currency, commoditiy, or whatever investment they choose to.
Have you ever been in the middle of a trade and for no reason (no news item or annoucement occurs) the market just turns around and heads the other way? Most of us have. Many times this could be the Fed in some secret room making bets for or against anything that assists or stands in their way.
Without the Fed we would still have DEEP pockets on Wall Street that can move markets, but the signals would be a better read without the unlimited pockets of the US central bank. Real traders are more predictable than a monster with a printing press. True, there would still be many "retail" investors that would allow their emotions to control their trading deceisions.
So, my guess is that trading would become a LOT better without the Federal Reserve. One thing is for sure, we would not need to be concerned with any more of their interest rate announcements (which have historically caused radical moves in the markets), and we could all live without another Bernanke speech!
Doug has taught and worked in the financial consulting industry for over 20 years.
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Article submitted Sunday, February 12, 2012 & read 161 times.
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