By Ashish Advani The U.S. Federal Reserve announced a while back that they will buy U.S. Treasuries. Now that is very nice and convenient. In order to fund the spending habit, the U.S. Treasury will issue IOU’s and the U.S. Federal Reserve will buy those IOU’s.

How will they get the money to buy those IOU’s? Print more money out of thin air… Nice! I want to start printing money to fund my habits too (it’s so much easier than breaking those bad habits)! But wait! If I do that, I will go to JAIL…..

The worst thing a country can do to its long term growth prospects and strength is to debase their currency. And yet the Fed and the Treasury are doing exactly that. And the world is stopping to take notice. This week, Angela Merkel the Chancellor of Germany blasted the Fed and the UK Central Bank for destroying their creditability and hurting the worlds prospects of recovering from the melt down sooner. Let’s see what she had to say:

“Unconventional monetary policies being pursued by the world’s main central banks could aggravate rather than ease the economic crisis. What other central banks have been doing must be reversed. I am very skeptical about the extent of the Fed’s actions and the way the Bank of England has carved its own little line in Europe. Even the European Central Bank has somewhat bowed to international pressure with its purchase of covered bonds. We must return to independent and sensible monetary policies, otherwise we will be back to where we are now in 10 years’ time.”

As you can see from the strong words (rather unexpected though), she is completely against such moves as is the Bundesbank (German Central Bank). I can only hope that better sense prevails in the world and that the FED and Bank of England halt their programs shortly. The ECB has gone down this route kicking and screaming. I will reserve my judgment on them till I see more action from them.

Quantitative Easing destroys a currency’s value as more notes go into circulation. Eventually that leads to inflation (perhaps not right away, but it happens), and inflation always leads to devaluation of a currency. While I hope that the Fed will stop, I am also a realist so I have to believe they probably won’t halt soon enough.

In the meanwhile sell the dollar and buy the Rest of the World that is least likely to introduce Quantitative Easing.

(EDITOR’S NOTE: Ashish and Chuck told all Currency Capitalist readers the easiest way to bet against any nation that deals with Quantitative Easing in the May issue of Currency Capitalist. Members, please be sure to check it out on our archives page. Not a member? Click here to find out how to become one.