U.S. Dollar Now Testing $1.50 Per Euro

Includes: UDN, UUP
by: Howard Richman

Usually when a currency or stock market collapses, it drifts lower for a while, until suddenly the fall gathers momentum.

The dollar has been drifting lower. It has just reached a nice round number, 2/3 of a euro, or in other words $1.50 buys 1 euro. If the European central bank is planning to intervene, this would be the type of point it would choose. If not, then the dollar will probably collapse, which would intensify the recession in the rest of the world.

The fate of the dollar and the world economy is in the European central bank's hands. So what are the European leaders saying? Breitbart reports:

The 16 countries that use the euro single currency are "worried" by the weakness of the dollar on currency markets, the head of the eurogroup said on Monday.

That's it. That's the whole article. They're worried. The many buyers who are driving up gold prices to record levels are worried too. But the American mainstream media is clueless. One year after the Great Recession began, they still haven't even figured out that world is in a recression caused by trade imbalances.

The world entered the recession because the American consumer could no longer borrow enough money to support the expanding exports of the trade surplus countries. There were three possible solutions:

  • 1. Chinese Action. China could have gotten the world out of the recession by stimulating its consumption of imports, but the Chinese government instead expanded their export subsidies and increased their protectionism.
  • 2. US Action. The United States could have gotten out of the Great Recession by balancing trade through import certificates that tied our imports to our exports, but Obama's incompetent advisors opted instead for a stimulus plan that would destabilize the dollar.
  • 3. Economic forces. The forces of economic nature could balance trade through a dollar collapse.

We may be about to see the third option in action. It won't be pretty. There would be a huge cut in U.S. living standards. Imports would become extremely expensive. U.S. interest rates would skyrocket. Even though American manufacturing would come roaring back, the Democrats would be dead meat for the next decade.

There are different ways to solve problems and different ways to not solve problems. President Obama picked incompetent economic advisors. It may soon become evident that he made a huge mistake.

Disclosure: I own gold mining stocks.