Have we lost

by | Jan 23, 2004 | Archives

Colonial breakfast in the tropics, outdoor dining under ancient ceiling fans that turn in lazy arcs and coax a gentle breeze. Shafts of morning sun, shining on crisp white linen and filtered through cool morning air. Traveler palms sway in soft harmony with grackles, katydids and all that is gracious and genteel.

Singapore, 1971-The Raffles Hotel-at an outdoor restaurant just next to the Long Bar. There was something comfortable in the old fashioned pots of thick cut marmalade and slightly burnt toast that stood in racks of sterling silver. This elegant setting, quiet service was an easy, wonderful way to start the day. I felt in place, relaxed and comfortable, part of an ancient tradition, the modern link in a rite that this hotel had offered for so many generations past. I sat back feeling that all was well. I felt in control and on top of that modern era.

All that suddenly changed. I opened the morning Straits Times and the headlines declared “U.S. Dollar Devalues”. That comfortable era had just come to an end.

The text above comes from chapter eight of the course International Currencies Made EZ. I recommend you take this free course at https://www.garyascott.com/news/currez/index.html

Pass this onto your friends as well because we have never faced such a serious negative currency fundamentals.

This course is vital because thirty-four years ago I was an American, traveling only with U.S. dollars. From centuries past, history had seemingly supported my financial well being up to that very moment. Britain's colonial days leading to the emergence of America, the World Wars, modern technology, Yankee know- how, puritan work ethics and unbounded natural resources had all worked on my behalf to form the greatest economy and currency history recorded time had ever known.

This history had created a world economy vastly dominated by the United States of America. Forces, building before and throughout the twentieth century, lead to incredible economic power within the United States. This domination made the U.S. Dollar the bastion of global currencies and made it the reserve currency of the world.

All that changed on that day and because I was a young man 12,000 miles from home with nothing but U.S. dollars, the lesson I learned has never been forgotten and I would like to share this here with you.

The lesson of this U.S. dollar history is that the U.S. dollar is just a figment of our imagination and the U.S. dollar is not to be trusted. Think about this reality. Even as our capital grows during this mini bull market we are really losing purchasing power!

According to the Economist magazine in the last 52 weeks the Dow Jones industrial average has risen 26%. Anyone who kept pace with this growth is probably pretty happy to see their assets grow this much.

However look at the dollar euro forex rate. At the same time the Dow rose 26%, U.S. dollar fell 35% versus the Euro. If you put your savings into the Dow to earn enough profit for a vacation in Europe, you have lost 9%!

This currency erosion is backed by enough economic fundamentals so we should this loss as real, not just some temporary fluke. Expect inflation to follow and invest accordingly.

Until next message, good investing!