Taikun,
<Back in 1995 our care free Mr. Rubin declared a strong dollar policy that led to a massive 50% plus run up in the US dollar that lasted about 7 years.>
Was he merely posturing? Now how could anyone suddenly declare a strong dollar policy and make it so?
Van Eeden on ROBTV said that although the US government "declared a strong dollar policy" in the nineties, the dollar was merely reacting to various currency crises i.e. people purchasing US dollars as a refuge from currency failures all over the world.
I did some research tonight: East Asian economies were swept in a capital outflow led financial and currency crisis that began in Thailand in mid 1997. Currencies tumbled at varying rates in Russia in August 1998, Brazil in January 1999, Turkey in early 2001, and Argentina in December 2001. Mexico also experienced the same in 1995. Thus, money came out of those countries and sought refuge in the US dollar. So it appears that it was not the US governments decision at all to strengthen the dollar but rather it was the result of currency crises around the world.
Van Eeden also mentioned how Greenspan is doing the same type of posturing declaring a weaker dollar. I do not think Greenspan has a choice in the matter.
<and all signs point to a euro currency intervention that might just create a face off with the dollar. Truth be told, I fail to see the continued benefits of a much weaker dollar>
Apart from a technical bounce here I do not think anyone has a choice: the US dollar is going down (gradually). Also, I think that the cat is out of the bag concerning the US deficits and the overvalued dollar.
I'm not quite sure what he means or what the ramifications would b if the Euro has a <face off with the dollar>. Will they de-value the Euro? Then gold will rise! Will they suddenly raise the value of the American dollar? More than $600+ billion a year would be needed to finance the US deficits. Foreign countries seem to be buying less and less US treasuries.
But you are right. We must be cautious. But if we are too cautious or nervous then we often make bad decisions.
I'm still betting on my junior miners (mostly gold, some copper, silver, uranium, and maybe water!). I do own a few PM/ resource funds which I hardly ever look at in order to diversify.
Cheers,
John |
