re: weaker dollar:
"Weaker" is a relative term. If the dollar is to weaken, then you must answer the question: weaker than what?
If investors don't want to hold dollars or dollar-denominated assets, then there must be an alternative. If there is no alternative........then the dollar won't weaken.
Whatever recession the U.S. is going to have, it's going to be worse in Japan. Wherever unemployment crests in the U.S., it's going to be higher in Europe. And more Argentina-type events forces assets out of pesos and argentinos and other distrusted paper printed by distrusted governments, and moves those assets into..........dollars, the Safe Haven. So, there is really no currency which has any realistic chance of replacing the dollar. Not now, not next year, anyway.
Which leaves gold, and "hard" assets in general. And gold isn't going to take off until we get either large deflation or large inflation. Maybe that happens, but it hasn't happened yet, in spite of all the shocks since October 1998.
The dollar has been amazingly resilient. If I had listed for you, in early 1998, all the disasters that were going to happen in the next 4 years, you and the other DoomAndGloomers would have been sure the combination of all those stresses would have caused a Collapse Of Confidence, the Big Cahuna.
Yet I look around me, and I don't see any Collapse. The Storm is being weathered well. Almost everyone I know pays their taxes, goes to church, makes their kids do their homework, pays their mortgage, is employed, and generally lives a peaceful and productive life. And is very secure that they'll be doing the same next year, and the year after and the decade after. And I think they're right; it isn't just bravado.
I, too, see the endless trade deficits and ever-higher debt loads (government, corporate, and personal) as incompatible (in the longterm) with a strong dollar. But, given the total absence of any viable alternative, I think the dollar will stay strong, for the foreseable future, 2002 at least. |
