Monday, August 3, 2009

Anybody Paying Attention to the Dollar?

Living overseas, I watch the dollar with a bit of invested interest and it's becoming somewhat of a hobby of mine. Thankfully, we are not completely vulnerable to the fluctuations but in some ways we are. For Americans with any degree of wealth or savings, it should be watched with concern. Students of history know that it wasn't once when a country woke to find it's "dollar" no longer existed and it took 10 of the old "dollars" to buy one of the new dollars. References are often made to the Weimar Republic and the wheelbarrows of cash needed to buy basic items such as bread. In more recent history look to the Mexican peso or the Argentinian 1994 peso crash.

The dollar dropped yesterday to it's lowest point against the Euro since last Fall. At the same time the 16-nation euro soared to $1.44 from $1.42 late Friday, peaking at $1.44, the highest point for the euro since last September. The Brit's pound, spiked up to $1.69 from $1.66, hitting its highest level since last October at $1.6.

The dollar is being debased because of all the deficit spending - the borrowing and printing of money. The world, much of it hostile to the United States, is making moves to diversify their holdings.

Until now, respect and power were the tools that ensured the U.S. dollar it's place as the world's reserve currency. The Chinese, and everyone else, need dollars to buy oil. When and if they don't need dollars to do that, then we have serious problems.

Iran, Venuzuela and Russia are continually trying to price oil in Euros or some alternative. In 2006 Iran stopped accepting dollars for oil and started an "oil bourse" to compete with NYMEX. Lucky for us, they don't control enough of the world's oil to threaten the status quo. Prior to the second Iraq war, Saddam Hussein started pricing his oil in Euros. Good news for Germany and France, but would have destroyed the United States if other OPEC countries followed. It's the reason why the second Gulf War is often referred to as the first currency war. A lot more complex than the vapid chants that the "no blood for oil crowd" would lead you to believe.

The difference today is we have an administration who is also hostile to the United States. Obama’s policies seem to be on a self inflicted suicide path to destroy our economy. The collapse of the dollar as a reserve currency would wipe out more wealth than we can imagine. He promised you change. This is certainly change.


  1. Yeah it is a real pain. We are trying to buy plane tickets from Australia to Indonesia, but the US dollar versus the Australian dollar keeps getting worse. Am I the only one looking at the Canadian dollar and saying wtf!?! 1 USD = 1.07 Canadian dollar. Look at any book you own in the states and it costs several DOLLARS more in Canada...not for long.

    Ditto on the US administrations policies making the problem as bad as they can. If you can make the whole country need the federal government then it is easy to control. That seems to be the plan. Create a crisis and never let it go to waste!

  2. Create a crisis and never let it go to waste!

    That's a direct quote, isn't it?

    The Canadian dollar has been stronger for about a year now. Which is great for people like your mom selling real estate, etc. in the states. Bad for exporters or travelers. ):

    There are ways to use the weaker currency to your benefit. I talked with a woman yesterday who used SEK to pay her daughter's college tuition in the US.