The dollar is done

I read an article on Business Week saying that the dollar may be at a bottom.  Huh? 

I read the entire article, but I don’t see anything that suggests we’re going to quit borrowing $1.45 billion per day – and that’s at the national level alone.  Coupled with the American consumers’ ability to live beyond their means, and we continue to spend more than we produce.  Individually, and at the city, county, state, and national levels.

 Why’s that bad?  Because someone is forking over money when you charge something on your Visa card, someone is paying when you take out a second mortgage, someone is paying when you do a no money down deal on a new car….  Where is the money coming from?

Overseas.  We (Americans) are flooding the world markets with debt instruments.  It doesn’t matter if it’s  bonds sold by the US Government, or bonds sold by Citigroup, or bonds sold by AMBAC, someone has to have the money to lend – and that someone is overseas investors.

As long as “helicopter Ben” keeps printing money, and as long as Americans overall refuse to live within their means, the dollar will continue a downward spiral.  There will be days and weeks (like the last couple of weeks) in which the dollar rises, but nothing has changed regarding the long term fundamentals.

These articles where pundits are calling a bottom in the dollar remind me of the financials since last fall.  How many times have we heard that “this is a kitchen sink” quarter?  “All the bad news is out there now” and “this is the end of the writedowns” has been said countless times by the financial press.

Here’s the bottom line:  The financials ain’t done writing off losses, and the dollar ain’t done falling. 

gk

 

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