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The disaster in Europe should be pushing the U.S. dollar up more than it is
but it’s not, and that has me deeply worried. [I’m] worried that the next leg of the dollar’s decline may be right around the corner; worried that the loss of the dollar’s reserve-currency status could occur more quickly than even I had expected and worried that the “X&@!” may soon hit the fan, across the entire globe. [Let me explain.] Words: 600
So says Larry Edelson (www.UncommonWisdomDaily.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Edelson goes on to say, in part:
Don’t get me wrong. The dollar may, indeed, soon rally a tad more which is what I expected for this part of the year, as Europe’s sovereign-debt crisis continues nearly unabated. [Nevertheless,] the pathetic action in the dollar so far is very telling.
Since the first of the year the dollar has lost:
- 1.6% against the Aussie dollar,
- 5.5% against the New Zealand dollar,
- 1.3% against the Swedish krona,
- 3.2% against Norway’s krone,
- 1.9% against the Swiss franc,
- 6.4% against Hungary’s forint,
- 7.2% against Poland’s zloty,
- 7.9% against the Russian ruble,
- 5.5% against Mexico’s peso,
- 8.6% against Columbia’s peso,
- 3.3% against India’s rupee,
- 3.8% against Malaysia’s ringgit,
- 3.7% against the Singapore dollar,
- 2.9% against the Philippine peso,
- 2.5% against Taiwan’s dollar and,
- Against the euro, despite the European Central Bank’s (ECB) massive money-printing, the dollar has LOST 0.9% of its value!
- Moreover, consider that, measured by the widely monitored U.S. Dollar Index, the greenback is a mere 10.7% above its all-time record low of 70.7 made in March 2008…
At a time when the dollar should be staging a decent (although temporary) rally due to Europe’s MASSIVE economic and sovereign debt problems, the U.S. dollar’s performance is utterly terrible.
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Why Is the Dollar Performing so Miserably?
There are two chief reasons:
1. Another round of massive Fed money-printing…is probably coming our way a lot sooner than even I expected.
No matter how much money the ECB prints for Europe, it’s going to need help from Ben Bernanke and our Fed. Perhaps the Fed will print money and lend it to the ECB or, perhaps, there will be currency swaps, where the Fed prints money and swaps it for euros with the ECB but, no matter what, Europe’s problem is not just the ECB’s. You can rest assured that as Spain and Italy start to buckle — which they are now doing — the Fed will be in there, helping out the ECB and this means that both the euro and the dollar are going to suffer together.
Moreover, signs are coming to light that the U.S. economic recovery over the past few years has been nothing but smoke and mirrors. Stocks are starting to wobble and real estate prices are on the verge of falling again and the public isn’t buying the headline unemployment figures any more. The 8.2% official unemployment number is hogwash. The true unemployment figure is over 35% — and increasingly more and more people and investors realize it.
Furthermore, it’s an election year and no way, no how, is the Fed going to let the economy or the markets completely fall apart this year. Bernanke will print money at the drop of a hat.
2. Washington and Beijing are in cahoots with each other to further devalue the U.S. dollar is coming to pass.
In just the past month, Beijing has taken one step after another to boost the value of its yuan and to internationalize it — all at the expense of the dollar — without so much as a peep out of Washington. For example:
- Beijing has allowed JPMorgan to promote and make a market in yuan-based money-market funds in Hong Kong. To the best of my knowledge, the first foreign investment bank allowed to do so.
- Bejing has DOUBLED the amount of regulated foreign investment bank money allowed in mainland China.
- Beijing is working with authorities in London to make that city a major Western trading hub for the yuan and most important of all, just this past week, for the first time ever,
- China’s bank regulators have given the country’s commercial banks its blessings in allowing them to sell short U.S. dollars. That’s huge and yet hardly anyone in the West is talking about it. I am, because in my book, it confirms one of my recent warnings — that a major dollar devaluation is in the cards — and that both Washington and Beijing are in on it.
Conclusion
While there’s still a chance the dollar may stage a temporary rally, the end days for the dollar (and the euro) are not far off [and, therefore, you should] be prepared at any time to move into the best dollar-hedge-type investments under the sun like
- Inverse ETFs on the U.S. dollar that profit when the dollar loses value,
- Solid Asian-based income funds that offer good yields and the potential for currency appreciation as Asian currencies climb against the greenback and, of course,
- A solid diversified natural resource portfolio. The best hedges against a declining dollar are tangible assets, especially gold which, although not yet ready to break out again, that day appears to be coming ever closer.
Stay alert. While the markets may seem rather quiet, beneath the surface, there’s a heck of a lot going on.
*http://www.uncommonwisdomdaily.com/why-i%e2%80%99m-deeply-worried-about-the-u-s-dollar-14112?FIELD9=2 (To access the article please copy the URL and paste it into your browser.)
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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