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"The dollar right now is the `persona non-grata' of the currency world,'' said Boris Schlossberg, senior currency strategist at DailyFX.com in New York...With China diversifying its reserves out of dollars, and the major Middle East players reevaluating their currency ties to the U.S., the greenback is starting to look more and more like what it is: a worthless promise of value. The world finally looked behind the curtain, and saw the great and powerful Oz for what he is: a scrawny, nervous mischief maker struggling desperately to keep up appearances. Get ready for an interesting adjustment period.
The U.S. currency has lost 12 percent against the euro and 8.1 percent versus the yen this year as the Fed cut rates twice to help revive economic growth amid the worst housing market slump in 16 years, and as companies reported losses on securities tied to U.S. subprime mortgages.
Tuesday, November 20, 2007
Getting away from Greenbacks
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2 comments:
If the dollar is up against foreign currencies then we can import cheaply but cannot support our own manufacturing.
If the dollar is down against foreign currencies then we can export more, but foreign goods become more expensive.
Being "down" is not always a bad thing. If we're willing to pay attention and Buy American.
Since our manufacturing base is but a shadow of itself, our ability to export isn't enhanced as much by a falling dollar as it used to be. Recent trade data, showing a slight narrowing of the trade deficit, seems to bear this out. I agree, though, we need to start "buying American" wherever possible. Of course, WalMart used to make that a point of pride, before turning Chinese.
All that said, the real concern here is WHY is the dollar falling. It's not just a currency market fluctuation. Deficits in government spending and trade, combined with record levels of personal debt (including the subprime mortgage slow-fuse bomb) are causing the rest of the world--our debt holders--to reassess our currency, and they don't like what they see. Structurally, we're not in an attractive position at all.
Thanks for stopping by -- always appreciate the comments!
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