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Currency Reversal: Could the U. S. dollar be the next safe haven?
Today's Financial News - Posted October 14, 2008
As the financial crisis engulfs world markets, the dollar is soaring as commodities fall — or sputter. Could the United States become the next safe haven?
by J. Christoph Amberger
Baltimore - (TFN): The dollar bears should be celebrating. Their dire predictions about debt catching up with the financial markets are coming true. The markets are plunging. Some, like the venerable London stock exchange, saw their valuations drop by the largest amount ever.
The papers tell you it’s so bad, you feel like digging up those old Gary North Y2K newsletters from the water-stained boxes in the garage… to find that advertising supplement for the three-year supply of dried butter and canned red wheat.
After all, a man’s gotta eat.
But the bears are eerily quiet. Not only is the dollar SOARING against their favorite currencies. Gold is lagging behind.
Now, if you look at this right, gold ought to be trading at $2,000 an ounce right now. Or more. Because this is the Second Coming… when the mass media and leaders of nations are using the terms "abyss" and "free fall" to describe the state of the financial system, people should be piling into bullion.
And they are. Make no mistake about it. Mints can barely keep up with the demand for Maple Leafs and Eagles and what have you.
Yet despite the demand and the backbreaking labor of the mailman, physical gold is trading at just $860 today… 15% below its 2008 (and inflation-unadjusted all-time) peak!
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Worse even, the European central bankers who have been pointed out as veritable paragons of fiscal virtue for years are now in the same situation as everybody else. If not worse!
The Telegraph’s Ambrose Evans-Pritchard wrote last week:
"The risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets ‘delevers’ with a vengeance. This is a ’short squeeze’ on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed has to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies.
"The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again."
In fact, the Federal Reserve can now pump money into the economy without having to fear the swift revenge of the currency, debt, and commodity markets.
If you’re an investor holding stocks, these are the times to not look at your portfolio. It’s too late to sell now — so why cause yourself useless aggravation?
But the dollar has reversed the course it’s taken for the past 6 years. After oil, molybdenum and gold Ponzi schemes, chances are that the next asset bubble will be the U.S. dollar.
And that means fresh life-blood into the American economy.
Now is the time to break out your research into companies you always wanted to own but thought you couldn’t afford. We’re on the verge of an epic, once-in-a-lifetime wealth building opportunity!
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Next Article: Earnings season: Johnson & Johnson (JNJ) and PepsiCo (PEP) diverge
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Posted by J. Christoph Amberger · Filed Under Featured Video, Investment Strategies, Podcast, Videos
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