Replies

Nope. The Dollar should fall, but instead it will rise. This will confuse the eggheads in NYC and DC to no end.

What will fall is the Euro. For that matter, the very question of the EU is in play. It could fall as easily as did the CCCP.

Unemployment is already 18+% in Spain, officially. Greece is set to default on its soveriegn debt. Should Germany decide to not save all of the PIIGS, then the EU will break up faster than the Berlin Wall fell.

It’s all up to Germany.

On the other side of the world, Japan is falling from a 20 year Recession into a Depression. Its debt is out of control and its manufacturing is getting clobbered by China.

China, for its part, is overly dependent on exports (which are in turn dependent on propping up the Dollar) and vastly over-invested in real-estate+stocks.

In short, the world is staring at a replay of the Panic of 1893 (which was likewise started by a convergence of bad mortgage paper being left unbought by private investors + a shift in demographics due at that time to a dearth of immigration).

Then, as now, the monied class fought over devaluing the currency (William Jennings Bryan’s goal with his “cross of gold” speech) or letting the market sort out the problem (the view that ended the entire global crisis in a mere 3 years instead of the 20+ years of pain that the current global crisis is already in).

"The Dollar should fall, but instead it will rise."

That's interesting. What do you think will cause the dollar to rise?

My guess (so far) that it will fall is based on the following.

* As heavy manufacturing continues in countries like China, wages will go up, and consumer product prices up along with wages (taught in university Macro- classes in regards to inflation in our US past).

* How much will we be able to buy tomorrow? Even our local capable consumers (local government employees) are looking at a future without revenues. ...can't get blood from rocks. See the many pages of loan and tax foreclosures in our locales. If we spend too little on foreign products in the near future, we will become less significant to our trading partners. Visiting the USA ten years from now might be much like visiting small Mexican towns during the early 1960s.

* In order for the dollar to stay high, foreigners must be willing to pay plenty for our products (exchange more of their currency for our currency in order to pay high prices). Granted, there are T-bills and the like, too, which will be mentioned in the next point.

* Too much foreign debt in our national budget and lack of future foreign investor confidence in their investments in our Government. Our Government needs honest revenues from a large, US manufacturing base instead of the current debt-for-foreign-products regime supported by grand, periodical Ponzi schemes pushed into government by special interests. Investment advisors have been chasing their US clients toward BRIC countries for months, in part, even to intentionally break those special interests (import interests, government interests, government contractor interests and others).

...sorry about the mess. This is only written during a few breaks from a personal design task. Not being an investment advisor or economics academic, I am really interested in considerations that I'm probably missing out on and have respected your well-thought-out opinions over the years.