Eight months ago each Euro could be exchanged for $1.40; today, one Euro will bring only $1.05. This severe decline of the Euro is, in part, due to the European Central Bank’s announcement to kick off the European version of Quantitative Easing (“QE”) which in turn reduces interest rates in Europe. European exporters have suddenly become much more competitive due to the lower Euro.

Other export nations like China and South Korea will not stand still and watch the European exporters take market share through the lower Euro. China and South Korea have already reduced their interest rates thus attempting to make their currencies weaker, and more competitive against the weaker Euro. We can expect Brazil, Mexico and Canada to follow suit. The end result is a possibility of a worldwide currency war. What happens several years down the road is not clear, but the outcome is unlikely to be good.