Lifelines for the Drowning Dollar
November 10th, 2007Investing Very Close to Home: Shelter, Water, Food, Security/Community.
Collapsitalism: What I’d Keep in My Collapse Portfolio: Analysis on how to protect your assets (and profit) from this dire situation.
Investing in Oil, Food, Alternative Energy, Gold or Water? Yes, All of the Above: Many eggs, many baskets.
Cryptogon’s Strategic Bearish Call on the Dollar, April 2007: “I’m not trying to make traders out of you guys, or frighten anyone, but there is a good chance that we are about to lose cabin pressure on the U.S. Dollar.”
Via: Wall Street Journal:
Dollar weakness is neutralizing the positive effects of the Federal Reserve’s interest-rate cuts. As the dollar spirals downward, weakened by Washington’s indifference and market expectations of more rate cuts, liquidity drains from the U.S. into inflation hedges like gold and, in the case of entrepreneurship and risk-taking capital, to countries with strengthening currencies. This drain undercuts the growth impact of the Fed’s recent rate cuts, complicating the recovery from the August credit-market turbulence. Question: What’s harder to sell than a complex loan during a credit crunch? A dollar-denominated one.
Foreign countries are suffering the opposite phenomenon. Global investors want to buy more in strong-currency countries, heating up those countries’ economies, land values and stock markets. If their central banks hike rates, as China has been doing and Australia did on Nov. 7, it invites even more capital inflows in search of higher yields and currency appreciation, reinforcing the upward currency spiral.
