While I don't want for this thread to devolve into a discussion about macroeconomics, I thought I would also say a few words with regard to your "chicken little" fear mongering about "the dollar is falling!" You seem to have a decent grasp on economics, from what I can tell, to understand why this is not all bad and why market capitalism allows for making money with a strong OR a weak dollar.
Smart people can make money when the dollar is rising OR falling. For instance, over a year ago I too saw the trends that would bring the dollar lower. The tea leaves were not that hard to see since we all knew a real estate correction had to come at some time. At that time I shifted a LARGE chunk of my domestic stocks into international mutual funds. I believe a poster here highlighted a Goldman-Sachs analysis about the BRIC ecnonomies that my nephew brought to my attention. The result? Well, my rate of returns on those monies that I shifted has gone through the roof. I just checked one account at Vanguard last night and my 1-year return on one fund was over 20%, and the other fund's return was around 17%. Not bad, eh? My year-to-date returns on those two accounts are both above 9%, which is pretty darned good compared to S&P 500 performance this year. All of this capital expansion I have experienced is a result of seeing that the dollar would fall and shifting some (not all) investments into the economies of other countries through mutual funds. I have still kept a fair amount of blue-chip US stocks because most of those stocks are also multi-nationalized in terms of their capital holdings. Translation: They are invested elsewhere in the world to take advantage of a falling dollar.
But there are other ways that a falling dollar can be a boon. Selling American products overseas is another one. Falling dollar means our products become CHEAPER to foreign buyers. And in the endless battle of Airbus vs. Boeing, guess who is loving the falling dollar right now? Boeing not only has an edge over Airbus because of Airbus' performance problems on the A380, but now it is becoming cheaper to buy a Boeing than a comparable Airbus. Believe me, Euros do NOT like that! :D
Of course, it should go without saying that a falling dollar also means our US trade imbalance with other countries will fall at the same time.
The only "problem" is China. They don't seem to want to sign-up to full-blown market capitalism, as they still wish to keep the yuan artificially low against the dollar, rather than let it float. For everything we hear about the wisdom of the Chinese, they certainly have not studied their history on this issue. They should ask Argentina how their little tryst with currency manipulation against the dollar worked out for them. Far from all the stories you hear about how "the Fed is scared to death" about China, what has actually been happening is the Fed has been trying to explain to China how it will get burned if it does not begin allowing its currency to float with markets. Sure, they hold a lot of our debt (by design, if you understand how it HELPS the US), but they also need to sell product. If the US economy does happen to slide towards a recession, the party will be over for China... and you can take that to the bank!
And let's also not forget that China is investing for the Olympics. Once the Olympics come and go (as opposed to Titor's prediction, which was and is bogus), there is going to be an economic hit for China as their post-Olympic balloon deflates.
You can say you read it here first!
RMT
