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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Secret_Agent_Man who wrote (169439)5/31/2002 5:34:30 PM
From: Ahda  Read Replies (1) of 436258
 
6. Tanking dollar

For a couple of years now the balance of trade has been
tipped towards foreign importers. In essence it has been
cheaper for Americans to buy imported goods rather than
domestically produced goods. Just look at all the “Made in
China” goods in your local Wal-Mart. Sounds fine I
suppose....until it starts to impact American workers and
jobs are lost. The government has accused foreign
governments of unfair dumping and attempted to redress
the balance by imposing trade barriers and tariffs against
foreign imported steel and softwood lumber, and has raised
American farm subsidies. European trade partners and
Canada have cried foul. Many of these same folks are allies
in the war against terrorism. Running a trade deficit year
after year is not a sustainable thing.

Foreigners have taken those dollars earned from exports
and put them in American equity markets. As American
companies report falling earnings and forecast poorer
outlooks those foreigners are getting nervous and selling
dollar denominated investments. What Greenspan can
NOT do is protect the dollar by hiking up interest rates,
because he would instantly plunge the US economy into
depression, and so with poor and risky (more and more
downgrades of bonds to junk status) returns on American
investments the dollar will continue to be jettisoned for
other options.

The dollar and gold price have been inextricably linked
since gold was allowed to float in the Nixon era.
Abandonment of the dollar - the economic lingua franca
of the world - without a viable alternative safe haven
currency in the Euro or the Yen, is precipitating a
stampede into gold.

With a tanking US dollar it may be worthwhile to purchase
your gold shares on foreign exchanges in non-US currency
to get a double bonus.

To me this is the only reason. To go into detail on this means that the dollar is not creating the value it use too. So then the question is what dollar.

It is nigh on impossible for not to question the dollars as my area is seeing inflation that severely limits investment opportunity. Simply put the dollar is loosing its power of purchase. Then a very large question forms, will the reward be adequate tomorrow for the risk that is taken today?
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