The dollar has recently fallen to an all time low against the euro and one of the
worst scenarios for the world economy for the last few years has involved a
dollar crash. Is it time to prepare for that crash now?
We must ask ourselves, what would cause a dollar crash? It would have to
involve America’s dependence on foreign capital it’s most dangerous vulnerability.
America’s dependence on foreign capital has lead to its large deficits. Do the US
deficits threaten its and global financial stability? So long as the US remains the
most attractive foreign investment destination in the world it can sustain such
large deficits. However, if some event would occur, like say a crisis in the
American financial markets that would spook foreign investors and cause them to
ditch the dollar fast then the dollar will tumble.
worst scenarios for the world economy for the last few years has involved a
dollar crash. Is it time to prepare for that crash now?
We must ask ourselves, what would cause a dollar crash? It would have to
involve America’s dependence on foreign capital it’s most dangerous vulnerability.
America’s dependence on foreign capital has lead to its large deficits. Do the US
deficits threaten its and global financial stability? So long as the US remains the
most attractive foreign investment destination in the world it can sustain such
large deficits. However, if some event would occur, like say a crisis in the
American financial markets that would spook foreign investors and cause them to
ditch the dollar fast then the dollar will tumble.
The sub-prime mortgage woes was just such a crisis and to be honest the dollar
held up pretty well. In fact this events showed clearly that if private investors
become frightened central banks will pick up the slack.
In order to abandon the dollar there would need to be an alternative choice for
foreign investment and there simply put is not.
The stability of the US politically and socially, in spite of its enormous deficit,
still leave the US the world's most stable and reliable economy. Although Europe
is stable politically, its slow growth make it an inadequate substitute for foreign
investors. And even though China's rapid growth is inviting, the threat of
political instability deters any long-term bets on its economy which in itself is still
very young and needs time to mature.
Long term outlook is to buy the dollar and sell the euro.
In the long term nobody has anything to gain from the decline of the dollar and
excessive volatility in exchange rates is damaging to the growth and economy of
all regions of the world. Especially China who currently owns a substantial
portion of the US debt. Also the euro's rise is beginning to hurt the
competitiveness of Europe's exports and there is the possibility of central bank
intervention to protect against the strong euro and weak dollar.
EUR/USD Forecast
In the near future the dollar decline and further weakness most likely will
continue. I am not about to stand in the way of such a strong trend as the
dollar is near all time lows against the euro. But as everyone is talking about the
weak dollar and my neighbors talk about hedging themselves against the weak
dollar I know one of those rare opportunities is beginning to present itself just
like it was obvious to me the bull market in US equities was coming to an end
once my mother and her "investment club" began buying and selling stocks online
or when a photographer at a wedding told me how he was going to begin flipping
houses I also knew we had reached a top in real estate prices.
A worldwide "ditching of the dollar" would bear astronomical consequences. I
don't believe anyone is ready to allow that to happen and I do believe there will
be intervention to prevent it.
Like I said though, I will not just jump in with this extremely strong trend in place
so I will use my strength and talents as a technician to get into this trade.
By Jordan Lindsey
held up pretty well. In fact this events showed clearly that if private investors
become frightened central banks will pick up the slack.
In order to abandon the dollar there would need to be an alternative choice for
foreign investment and there simply put is not.
The stability of the US politically and socially, in spite of its enormous deficit,
still leave the US the world's most stable and reliable economy. Although Europe
is stable politically, its slow growth make it an inadequate substitute for foreign
investors. And even though China's rapid growth is inviting, the threat of
political instability deters any long-term bets on its economy which in itself is still
very young and needs time to mature.
Long term outlook is to buy the dollar and sell the euro.
In the long term nobody has anything to gain from the decline of the dollar and
excessive volatility in exchange rates is damaging to the growth and economy of
all regions of the world. Especially China who currently owns a substantial
portion of the US debt. Also the euro's rise is beginning to hurt the
competitiveness of Europe's exports and there is the possibility of central bank
intervention to protect against the strong euro and weak dollar.
EUR/USD Forecast
In the near future the dollar decline and further weakness most likely will
continue. I am not about to stand in the way of such a strong trend as the
dollar is near all time lows against the euro. But as everyone is talking about the
weak dollar and my neighbors talk about hedging themselves against the weak
dollar I know one of those rare opportunities is beginning to present itself just
like it was obvious to me the bull market in US equities was coming to an end
once my mother and her "investment club" began buying and selling stocks online
or when a photographer at a wedding told me how he was going to begin flipping
houses I also knew we had reached a top in real estate prices.
A worldwide "ditching of the dollar" would bear astronomical consequences. I
don't believe anyone is ready to allow that to happen and I do believe there will
be intervention to prevent it.
Like I said though, I will not just jump in with this extremely strong trend in place
so I will use my strength and talents as a technician to get into this trade.
By Jordan Lindsey
Learn. Trade. Profit.
How to Profit from the Falling Dollar
 | |  | |  | |  |
2005-2008 JCL Capital Inc
©
 | |  | |  | |  | |  |