Sorry it took so long to respond, I have been busy with my business and the questions you asked are not easy to answer. After a bit of thought, it appears there is a market dichotomy forming around the dollar. First, as you pointed out, the dollar has become the closest thing to a world currency that exists with many people coveting dollars rather than their indigenous notes. On the other hand, you have the astute market watchers who cannot avoid some serious question concerning the dollar: 1) the trade balance cannot continue indefinitely at current levels, 2) the decline in the nasdaq and the dow is not likely to reverse in the near future, 3) if the US budget slides into deficit, it will compound the negatives of the trade deficit, 4) the continuing downsizing of the military cannot be underestimated. Since 1990 the world has been confident in the US prowness to maintain order in a world suffering the collapse of communism and investors have been willing to pay for the protection by supporting the dollar, and finally a declining dollar compounds loses suffered by foreigners in the stock market and reduces profits by foreign corporations in the US.
The big positive for the dollar, there are no alternatives, and I do not believe that the worlds bankers will allow a currency crisis to develop during the advent of Europe's conversion to the Euro in 2002. A controlled retreat of the dollar agreed on by the industrialized countries is the most likely scenario. To protect stability in the currency market, the bankers will utilize every tool at their disposal to prevent gold from rising in price thereby offering an alternative to currencies. For the new world order to continue, the euro must have a successful transition. That is my take. There may be pitfails along the way, but the bankers are not underestimating the import of maintaining stable markets.
Ken |
