Tuesday, December 9, 2008

Have Dollars, Sell It OFF

US Economy is in problem, everyone knows it. First the sub-prime crisis, then the overall Financial Crisis due to liquidity crunch, and now overall economy in recession. No one should be unaware of this fact.

But are you following the Financial Markets? If yes, then you must be knowing that value of USD is increasing w.r.t. all major currencies of the World. Surprising huh!!
Earlier when the sub-prime crisis started people throughout the World just got panicked and lost their confidence in US Economy. They started doing transaction in other currencies, and selling whatever dollar they have. In this period, Indian Rupees went stronger against dollar from Rs. 45 per dollar to Rs. 39 per Dollar in 4 months window.
This was obvious as people had more confidence in Indian Economy than US. But suddenly dollar value started rising while the US Economy was going from Bad to Worse. Investment Banks collapsed, then the major banks went into crisis and now Auto Companies are in the verge of collapse, the employment scenario look gloomy; but still dollar rises.

Few argue that these things are obvious because by this time other World Economies went into crisis. But are other Economies worse off than US? It is not specially when I consider Indian Economy. Europe and Japan are in recession; but China and India are not. So, why does value of dollar increases against these currencies?

It is all because US Economy dominates the World, and specially whole of Asia is run by American Investments. When the American investors had bad time at home, all they could do is sell overseas operations or buy dollar from outside and fund their US operations. The impact is so huge that US Govt. had to sell hundreds of billions of dollars to few of the Economies to control the dollar shortage. Korea South, Taiwan and others took about 30 to 50 billion dollars each from US; but still the money market seems skewed towards dollar shortage.

This could lead to serious consequence of dollar collapse in coming days. And it can only get more serious if US govt. have actually pumped more dollar by printing it to fight the crisis. With more dollar floating in the market than it was a year back and patchy economy brought by sub-prime and mortgage crisis, all we can expect is a steep correction. I expect it to fall at-least by 30 to 40% against all major currencies as soon as the markets starts getting normal. This however wont be so bad news for US Economy and the US Companies; but it will hurt the general public, the consumers.

So my suggestions general US population is that, just sell the dollar off. Buy some Indian Rupees or Euros, and wait for one year to get a huge bonus. May be it will bring some cheer for you at the end of the crisis. Else you will again lose, lose the value of money you have, and lose the opportunity gain that you could have got.

Good luck!!

1 comment:

Anonymous said...

Interesting comments you make, although the timing is what is hard to predict. Currencies like the USD can remain strong if deflation remains. As soon as the money works its way into the system we will see reverse in currencies. If all countries are printing, woulden't one put at least 10-20% in gold/silver as an inflation hedge while it is still cheap? What will your money buy next year? Who do you trust these days? Check out my new site at www.naturalwaveconsulting.com and read my opinion on what to do. I think asia is a great place to put funds, but not quite yet.

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