Seven Fundamentals For a Dollar Fall

by | Jan 1, 2005 | Archives

A look at the history of the US dollar gives us an urgent and timely warning.

Dear International Friend,

We have looked in numerous messages over the past year at the unusual strength of the US dollar and have seen that much of this strength is by default. With a basket case Japanese economy and unknown Euro, where else is there to go? This question remains unanswered (though we will see one idea later here), but seven economic fundamentals we reviewed at our last International Business Made EZ course in Quito are so similar to those of the last great dollar crash, we should review them again.

In the early 70s when the US dollar dropped dramatically against the yen, Swiss franc, German mark etc. and gold, the following forces were at work.

  1. The US dollar was the reserve currency of the world.
  2. A US President from Texas was fighting a war at the same time he financed great social reform. (Guns and Butter).
  3. The US stock market had crashed after rising to all time highs. Overseas investors were looking for other markets that could rise.
  4. The US government shifted from having budget surpluses to huge deficits.
  5. The US economy was in a recession.
  6. Energy prices were rising.
  7. US dollar interest rates were very low.

The question is where to go? Japan and the Euro still pose problems, but now I am adding to my Euro position. More so I am increasing my Australian and Canadian dollar positions as well. Keep an eye on non Euro, European currencies, the Swiss franc (but not too much as there is danger here), plus the British pound, Danish kroner, Singapore and Hong Kong dollar.

Also keep an eye on silver and gold.

Until next message, good global investing and business!