Hi, David - I have been following the debate about valuation of the US dollar for a while now. From the referenced article,
"The kindness of strangers has been an incredible gift to the US financial markets and economy over the last half decade. The most important question, though, is whether it will continue to be the gift that keeps on giving ahead as more and more of the signposts to the new era prove to be dead end streets."
To my mind, the question of future valuations in the US dollar is divisible into:
1 - Short-term (technical and/or opportunist) trading activities and capital flows, which may fly in the face of...
2 - The longer-term perception of the US economy.
We have seen the rise of Europe and Japan as engines of global growth, and everyone is aware of China's potential. We have yet to see the displacement of the US as the prime mover in the global economy.
More to the point, even if we pay heed to structural weaknesses in the US economy, which alternative(s) would be likely replacements? Which alternative would not have its own weaknesses revealed by the failure of the US economy?
It seems to me that we would have to see a true "flight to safety" (ie., a minimum-growth repository flight) in the face of global depression, to have a significant effect on the US dollar.
Even in the face of that flight, when the worm turns, as it always does, who, in the near-term future, would replace the United States as the leader out of the contraction?
I realize that I'm throwing out a whole series of unsubstantiated statements here, but to me they are sufficiently obvious as to justify that sort of argument.
In short, unless we see a severe global meltdown, that causes people to start squirreling their money away in no-growth cubbyholes, I expect the US dollar to maintain its relative strength.
Regards,
Jim |
