Tuesday, November 20, 2007

The dollar continues its drop

The dollar fell to 1.4814 dollars per Euro today.

Do not expect to hear as much about this from the mainstream media as it warrants. The erosion of the value of the dollar is a huge deal and is not good for America.

The dollar has dropped so far that it is now likely that both Japan and China will start shifting away from holding the massive amount of dollars they hold and switch to a "basket" of currencies. This will of course make the dollar fall even farther...

OPEC has again started talking about switching from the dollar. I do not expect this to happen; our government will put a lot of pressure on our allies in OPEC to keep using the dollar.

So do not expect this topic to get the attention it should from Presidential candidates, the mainstream media, etc...

Mike Sylvester

1 comment:

William Larsen said...

Mike,

I would not bet the US can put enough pressure on our OPEC allies to prevent this. We have a southern country rich in oil, that to put it mildly does not like the US. Then there is Iran, which has been pushing for this change for years.

The dollar has fallen in relationship to nearly every currency. When the value drops like this, the value of the US Treasuries they hold loose value as well. The only way they retain value is with the issuing country in our case the United States.

The problem is the United States does not produce as much in exports as we once did. It would take decades for these countries that hold US Treasuries to buy enough goods from us to exchange it all.

The problem with a falling dollar is that at some point our inflation will increase. We are seeing it in oil, but it will move to other commodities as well as imported goods. The bright side is it should help us export.