HOW GOOD IS THE DOLLAR?

http://www.freemarketnews.com ^ | Feb 11, 2005 | by staff reports

[FreeMarket1]

HOW GOOD IS THE DOLLAR?

Feb 11, 2005 - FreeMarketNews.com

by staff reports

At the recent International Center for Economic Growth (ICEG) annual get together in Davos, Switzerland, speakers from various countries commented on global warming, politics, economics and foreign currency relationships. Bill Bonner of the Daily Reckoning notes Fan Gan, a mid-level government official from China had some stark opinions about his government’s lost faith in the dollar. Fan remarked. "The U.S. dollar is no longer (seen) as a stable currency.” He sees his country moving away from having so much of its holdings in dollars.

Bonner remarks, “As to why China hadn't done so already, he (Fan) explained that it was a bit like fixing a roof. When it rained heavily (such as last fall when the dollar was falling sharply) you can't do it ... and when the sun is shining, you don't have much interest in doing it: "High pressure...we don't do it. When pressure's gone, we forgot."

Then Fan stated, “This time, we won't forget.”

The trend of dollar diversification is well underway. The Eurodollar, once scorned when it traded in the low 80’s, has moved as high as 1.37. Chuck Butler, President of EverBank, notes that now “About 50 countries of the 200 that are recognized in the world use the Euro as their ‘anchor currency.’”

Investment newsletter writer Doug Casey observes that China has not only begun to diversity its dollar holdings into other currencies such as the Euro, but also is making purchasing forays into natural resources, as well as mining companies and large consumer interests. He credits the recent sale by IBM of its laptop division to a Chinese company and the attempt to acquire Canada’s Noranda mining company to this strategy.

While this is going on, the American consumer continues in his profligate ways. In Casey’s view there is a disconcerting precedent for such activity. The Chinese trade their huge surplus of dollars for tangibles, “while Americans are spending hundreds of billions on ..................Full Article www.FreeMarketNews.com

[Jack Black]

I think the real question is not dollar vs. euro, it is dollar and euro vs. gold.

[ILL]

I don't mind if you say or think that I don't find it inconsistent with the existing fiscal policies, but I'm no expert in that field anyhow.

[MadIvan]

The Euro has not been a benefit to most of the economies that adopted it. I can see a case for some diversification, as a hedge against risk, but that doesn't mean a wholesale abandonment of the dollar.

Regards, Ivan