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European Tribune - LQD: "Debunking the Dumping the Dollar Conspiracy"

"The White House wants the dollar to decline anyway because it would improve the United States' trade balance", he adds. Baker concludes:

The dollar's value will likely fall over time (as it has been doing against the euro for the last nine years). But there is nothing in the cards to suggest a collapse, even if Saudi Arabia starts selling its oil for euros or yuan.

Personally as an American who once was able to afford to travel to Europe, I'd like the dollar would ideally be on a 1-to-1 parity with the euro. But the trade balance between the U.S. and Europe is not the balance I suspect the White House is worrying about. From a personal perspective, since the dollar will probably continue to decline in value my personal emergency savings in dollars will continue to decrease in value. So, it would be best to switch out of dollars into other assets.

Luis de Sousa's recent diary  A video on the future of the dollar (and money) seems relevant here. The US wants the dollar to drop (by half in 14 years - that would be 5% inflation annually) but it doesn't want it to drop precipitously (no more than a 1/3 drop against gold in real terms)
CNBC invited Jim Rickards, a senior managing director at a firm called Omnis to comment on the latest G-20 meeting and the future of the dollar. His testimony shows some rare lucidity about the present problems with our monetary system. Bearish on the dollar, bullish on gold, don't mistake him for a gold bug, for he is well aware of the consequences of a flight to the "barbarian's relic".

If gold goes to 1500$ [...] it has to with the fact that the dollar is imploding [...]

Rickards links an oped article at the Wall Street Journal penned by Federal Reserve governor Kevin Warsh to the G-20 meeting in an interesting way: it is a camouflaged warning against a fast drop of the dollar against other currencies, especially gold.

The Fed needs the dollar to get down by about half in the next 14 years, we have 60 trillion dollars of liabilities [...] there's no feasible combination of growth and taxes than can fund those liabilities. [...] They need to do that, but that's a dynamically instable process, they would like to do it gradually, and that's the plan, but if the market gets ahead of it, if the market sees this playing (which probably they will) you could have a very rapid collapse of the dollar [...]

The secular declining trend of the dollar has been resuming since early September, fueled by the carry trade proportionated by null interest rates in the US. This is leaving a lot of people uncomfortable, both those issuing the dollar as those pilling it up.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Carrie (migeru at eurotrib dot com) on Thu Oct 8th, 2009 at 06:56:56 AM EST
A strong dollar has typically been the policy of the US Republican party.  The Democrats have traditionally been comfortable with (and even pursued) a weak dollar.

"Beware of the man who does not talk, and the dog that does not bark." Cheyenne
by maracatu on Thu Nov 5th, 2009 at 08:40:38 AM EST
[ Parent ]
That seems accurate in a certain manner of speaking, but in the sense that looks at Clinton and Obama in terms of policies rather than rhetoric and notices that they are mostly from what used to be the moderate wing of the Republican party.

The Hedge Fund Democrats want an importers dollar, since it gives them more clout in foreign financial markets.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Nov 6th, 2009 at 06:08:00 PM EST
[ Parent ]


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