Bloomberg’s Matthew Lynn makes the case why currency trading will be the place to make a fortune in the coming decade:
The sovereign-debt crisis, the demise of the dollar and the creation of new reserve currencies all mean that the great financial reputations and fortunes will be made in foreign exchange in the coming few years.
In any decade, one sector of the financial markets is usually dominant. There is one corner of the financial universe where so much new stuff is happening, and it is of such importance to the rest of the world, that it is far easier for a young, ambitious person to make their mark than anywhere else.
In the 1980s, it was mergers-and-acquisitions deals.
In the 1990s, it was the venture capitalist who backed technology companies, and the bankers who arranged initial public offerings for dot-com companies on the stock market.
In the 2000s, it was hedge funds, along with the derivatives traders that supplied them with products.
But in the 2010s, it will be currency trading.
He gives three reasons that this will be the case:
There are several good reasons for expecting currency trading to be the focus for financial markets this decade.
First, the sovereign-debt crisis. Governments took on huge debt to combat the financial meltdown. That didn’t really fix the problem. It just shifted it from one place to another. Now there are doubts about whether nations can service their obligations. The only way the markets can discipline governments, or pass a verdict on their performance, is via the currency markets. However the crisis eventually works out, it is the foreign-exchange markets that will be in the driver’s seat.
Second, the dollar is in long-term decline. Regardless of how well the U.S. recovers, the rise of new economies such as China, Brazil and India means America won’t be the dominant force in the world that it once was. The result? The dollar’s special status is coming to an end. That may be a good thing after some intense volatility as the world adjusts. Again, it is currency traders who will be in control of that transition.
Third, the advent of new reserve currencies. With the dollar on the way down, the world will need something as a reliable store of value. There are plenty of candidates: It might be gold, an International Monetary Fund-sponsored basket of currencies, or a new world currency. Who knows, it could be something nobody has thought of yet. Ultimately it will be foreign-exchange traders who decide what works and what doesn’t.
Maybe Lynn is right, maybe he is wrong. However, he makes some very logical arguments. Having the ability to invest in currencies may be increasingly important in the coming decade.
Posted by Andy Hyer 
