Tuesday, December 28, 2010

Dollar Hits Record Low

It may be that the Federal Reserves plan to devalue the dollar...is working. The dollar hit a record low today vs. the Swiss Franc.

(Reuters) - The dollar fell broadly on Tuesday, hitting an all-time low against the Swiss franc, while the yen rallied after data showing Japanese factory output rose for the first time in six months in November.

"Dollar weakness is basically on the back of commodities," he said. "Both oil and gold are seeing robust demand. The market seems to have shrugged off the interest-rate hike in China over the weekend."

See it here; http://www.reuters.com/article/idUSTRE6BL1ZC20101228

What the Fed wants to do is make the dollar weaker against other currencies to make our products appear cheaper to the rest of the world. If it does, we can end up with a short term boost to the manufacturing segment as orders pour in to buy our relatively cheap products. More orders mean more jobs and more movement in our economy...which means more taxes collected. That sounds good but it punishes anyone who has savings...because your dollars are going to buy less of everything in the global marketplace.

Why is gas $3 per gallon today when 1 year ago it was $2 per gallon? Because oil is bought from foreign countries who demand more dollars because they aren't worth as much.

As we have said in the past, ask any 5 year old with a piggy bank, "Son, would you rather that the money in you bank buy MORE candy or less candy?" He will answer the obvious. So why is it a good strategy to continue making our money worth less and less...until one day it might literally be WORTHLESS?

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