U.S. Dollar Short-term Strength, Long-term Collapse

The Market Oracle ^ | March 4, 2009 | By John Browne

[Strategy]

When President Obama took over the reins of government just six weeks ago, he stood at a historic crossroads. His decision on which route to take will make a profound impact on the future of the American economy and its currency.

He could have persuaded a frightened Congress to initiate a structural change that would transform the U.S. economy from its dependence on debt-fueled personal consumption back to a path of productive growth. Instead, he took the easy route: attempting to delay the pain with stimulus and inflation, rewarding his benefactors without truly addressing our structural deficits. Disappointing for a man who campaigned on 'hope' and 'change.'

[geologist]

It is more than disappointing ... it is criminal and betrayal. MO

[datura]

The Brits see zero for what he really is.

[FightThePower!]

Its very simple supply and demand. As you create more dollars people demand less of them. For every dollar the government borrows the Federal Reserve has to print a dollar to buy the bond. The supply of dollars is going through the roof, so the value of the dollar must fall.

[Ev Reeman]

Before too long the only thing the dollar will be good for is toilet paper.

[expatpat]

....so the value of the dollar must fall

Compared to what? The fact is that the other currencies are in even worse shape, except perhaps the yuan. Compared to gold, it has already fallen quite a bit.

[FightThePower!]

I would say it will fall relative to the Yuan in in the long run. In the short run, I expect it to fall relative to gold, grains, even oil.

[2001convSVT]

This is the expected outcome of delinking the dollar from gold and silver. All real money needs to be backed by a real commodity, whatever that is, to maintain a stable value!

[Toddsterpatriot]

For every dollar the government borrows the Federal Reserve has to print a dollar to buy the bond.

The Fed buys every bond the Treasury issues? OMG! You're stupid!