Asbytec

Dollar Worm May Be Turning

I have been a dollar bear for the last year, despite the severe chastening here in SA. The latest developments do make one (re) think. But, we gotta remember, though, deflation is still afoot. So, who knows, really. Just gotta remember we're in a rally, not yet a recovery.

Of course this says the dollar should recover based on any flight to safety. But, as a fundamental, being a safe haven currency doesn't say much for the green back. It should have it's own intrinsic value.

It's not comforting to know our (fiat) store of wealth (and I use that term loosely) maintains its value based on fear of everything else. But, with near zero interest rates, fears of (hyper) inflation, and huge trade deficits...what else does it have? <sigh>

I'd be curious to know how the new global financial regulations affect global liquidity. I hope it tends to strengthen the dollar based on a smaller supply. That would be sweet.

Greenback's Slumped on the Canvas

Hmmm...the 19th century belonged to England because of it's economic and military empire. The sun never sat until the 20th century. The US, same economic and military empire in the 20th century. Will china have some global military reach this century?

I imagine China's resources are largely untapped and it has massive human resources. It's production is unequaled today. But, one problem is China has not a sufficient middle class, yet. And is still, best I can tell, a command economy (with a free market interface.)

Interesting thought, though...

Greenback's Slumped on the Canvas

The "beggar they neighbor" has begun. Has the eventual collapse of all (most) fiat currencies begun as well? "All fiat currencies fail, and all currencies are fiat."

It's like having that root canal, it'll hurt but not after it's over. And when it's over, my bet is the dollar will be on the top of the heap. I think most central banks believe that, too. I suspect that's why none bought into the euro in mass while it was $1.26. Sure, there is some diversification...but not a wholesale flight from the dollar some have speculated.

Scary times. The greenback is certainly on the canvas with the euro moving in for the choke hold. But, the euro just does not have the demographics or might to supplant the dollar. The EU could never support huge trade imbalances with China.

The Poor, Poor Dollar

Ozzy, yep. In a fractional banking system, fiat currency or not, eventually debt exceeds some level and the system comes under strain. The derivative markets have accelerated this money (debt) creation process and sent the money supply out of control to boot. This is the heart of the problem, the system is over leveraged and ready to collapse. It will collapse. It must. It's a built-in trait of fractional banking.

Leo and K9, certainly not the euro. The euro is soaring on yield and a flight from risk. A stronger euro in the face of global recession (or worse) will almost force the EU to ease along with the rest of the world. I believe they're supposed to be playing the game, anyway, as coordinated with the Fed...the global quarterback.

Sandspider and Euarte, yep, all fiat currencies fail and all currencies are fiat (mostly.) So, which currency will be on top of the trash heap? My bet is on the dollar. The euro just does not have the economic demographics nor the ability to support huge trade deficits to displace the dollar and become the world reserve currency.