|
|
|
Goodbye dollar, hello inflation
Finance
Trends Matter
Friday October 26, 2007
The dollar is no longer the world's reserve
currency. This is the statement you heard twice in one day if you were
checking out the news on Bloomberg over the past 24 hours.
First, we heard it from economist Clifford
Bennett of Sonray Capital, who said the Euro was the world's new reserve
currency and that this idea was now universally recognized.
Next we heard it from investor Jim
Rogers, who has been bearish on the dollar and the state of the US
economy/fiscal outlook for quite some time.
What's notable about Rogers' latest call on
the dollar is that he's once again backed his convictions with his actions;
yesterday, Rogers announced that he is shifting
his personal assets out of the dollar and into the Chinese renminbi.
Here's an excerpt from, "Jim
Rogers Shifts Assets Out of Dollars to Buy Yuan".
"Jim Rogers, chairman of Beeland
Interests Inc., said he is shifting all his assets out of the dollar and
buying Chinese yuan because the Federal Reserve has eroded the value of
the U.S. currency.
``I'm in the process of -- I hope in the next few months -- getting all
of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted
the commodities rally in 1999. ``I'm that pessimistic about what's happening
in the U.S.''
Rogers, delivering a presentation late yesterday at an investors' meeting
organized by ABN Amro Markets in Amsterdam, said he expects the Chinese
currency to quadruple in the next decade and that he is holding on to
commodities such as platinum, gold, silver and palladium."
If you'd like to listen to an excerpt from
Rogers'
presentation to investors in Amsterdam, it is reproduced here courtesy
of Bloomberg.
What's the rationale behind these calls for
the dollar's eventual demise?
As Marc Faber recently noted in a lengthy
interview
with Bloomberg (and in seperate interviews
with CNBC), the recent widespread bearishness might represent a contrarian
buy signal for the dollar in the short-term, but this does not exactly
cancel out the US currency's long-term problems.
In summary, expect continued deterioration
in the dollar's purchasing power and increases in inflation over the longer
term. Inflation will not be confined to the US; it has appeared and will
continue to appear in countries across the globe.
Every government will try their damnedest
to paper over their monetary inflation with ridiculous
explanations and reconfigured
price indexes which purport to show "low inflation". Still, worldwide
inflation is here and it is only a question of which fiat currency will
depreciate at the fastest rate against relatively hard currencies and
gold.
For more on inflation and government statistics,
see FSN
Broadcast of October 13, 2007 with guest John Williams of Shadow Government
Statistics.
Keep reading Finance
Trends Matter for more news and commentary.
|
