The man who destroyed my previous employer (or at least he spearheaded the destruction) invented this illusion of 10% earnings growth every year. That kind of corporate BS is NOT what I’m talking about here. In my case, it’s a plain and simple truth: if I want to have about equal income every year that I’m in Peru, I have to work a good bit harder every year.
The reason is that most of my work as a contract pilot or consultant is paid in US dollars, but my groceries are paid in Peruvian Nuevos Soles.
And here’s how the US dollar has been fairing against the Nuevo Sol this year:
And 5 years:
View charts at XE.com.
Here’s an article about Peru’s central bank as well as the central banks of other so-called developing economies taking measures to prevent their currencies from rising too much:
And here are Peru’s foreign currency reserves over the past 10 years, standing at around $40 billion at this moment. Chart shamelessly robbed from IKN:
Now foreign currency rate swings are nothing new and I am not predicting the demise of the US dollar or the end of the world here. But it should come as no surprise that consistent near-zero interest rates and monetary easing (printing money) in the US will erode its currency’s value.
When I was a young boy in the early 1980s and Belgium developed large budget deficits and high unemployment, I could not understand why the government just didn’t put all the unemployed people to work printing more money, kill 2 birds with 1 stone.
No matter what the guys in stuffed suits tell you, how they saved the world and you owe them eternal gratitude all that, the fact remains that some future generation in the US (mostly) will have to deliver $40 billion of goods and services to future generations of Peruvians.