Looking on the bright side, there is more than one way to solve the illegal immigration problem. Once the peso becomes more valuable than the dollar the Mexicans will be forced to consider putting up a fence to stem the flow of illegal whettos looking for higher paying jobs.... Here is a link to some good reading on the future of the dollar. http://www.gloomboomdoom.com/marketcommentary/download/CONT_USD.pdf ....We assert that consistently excessive money and credit growth has taken the US economy past the point of no return. We think policymakers have been grappling with an economic Sophieâs Choice: should they constrict money and credit growth to save the US dollar or continue to promote the enlargement of public and private sector balance sheets in order to support US assets prices? We argue that what they have done consistently - and will continue to do - is to inflate the money supply and promote more credit, thereby sustaining asset prices at the expense of the purchasing power of the US dollar....
Let it crash sooner rather than later. 9 trillion $ debt, untold trillions behind M3, Asian countries with 2.5 trillion in reserve, >1 trillion/year extra flooding the petro market since oil went from $20 > $70+, far too many trillions out there today. I say wipe out the dollar, the Fed, the debt, and let the world economy hit the crapper for a decade (or two), and then bring on the Amero! http://en.wikipedia.org/wiki/Amero Oh and for those saying that everyone is too bearish on the dollar and therefore it must rally, I have two things to say: 1. Analysts, traders, bankers, the public, etc have been overly bearish on the dollar for years now, yet shorting the dollar has proven and continues to be incredibly profitable (baring the occasional short, weak bear rally). 2. The recent global rout and "flight to quality" (back to the dollar) only lifted the USDX from 80 to 82, and we're nearly back to 80 again. So much for a flight to quality..
Look at a chart of cash DX during the cycle of Fed cuts that followed the Oct '98 liquidity 'crisis' ... Interest rate differentials are not primary driver in FX just now. Short-term behaviour can frequently be counterintuitive, as others state. Cuts responding to a crisis may attract more repatriation flows from EMs. Conversely, cuts which re-ignite the bull market may lead to new inflation concerns early next year, and - as in '99- the reinstatement of tightening which underpins dollar from a rates and a recovering US economy perspective The 'it's different this time' wild card, though, are the existence of sovereign wealth funds and central bank diversification policies which may prompt dollar selling on rallies, putting a floor under the euro. Likewise, the same CBs holding USD assets may not wish to push that too far in the opposite direction Which might argue for rangebound .. though I admit to voting for the 10% dollar rise...
problem is, the trend was up then. there was no huge current account deficit. im getting very leery of using 'contrarian' indicators on fx, the market is so huge and liquid, plus most of the big money is from public institutions(china CB), they are not stopping their euro purchases because this or that magazine cover says the dollar will fall
All of the above assumes the euro is more sound than the dollar. Consider that you might be wrong on that. Yes, all currencies are inflating. Yes, the underpinnings of the USD are shaky. But are they really shakier than the euro, or even the yen, which isn't supported by either its people or its CB? I mean, when was the last time you saw the BOJ intervene to support the yen, rather than to drive it down? You're right, you never have.
Everyone expects dollar to crash, ain't gonna happen. US is still no. 1. When crisis hit particular country, what currency you think people will buy? That's right - dollar. What are your other choices for a safe currency? Swiss franc? Yea maybe, but come on...
That was THEN, This is NOW.....weak USA economy relative to China, Japan, Europe....burgeoning US deficit....weak government, no decisions made....no energy policy... The US is on a precipice... of monumental proportions. The Feds moves will only DELAY the inevitable. Massive inflation or deflation/depression. NO IN-BETWEEN. Uncle Ben is walking the tightrope of the century.