US Citizens Overseas Hit With US Dollar’s Sinking Value

Monday, the Dow took another little hit – down just 55 points, but now below 13,000.  And barely had we warned dear readers that gold was ready to correct when the correction began. Gold lost US$27 yesterday…bringing it down to US$807.

The dollar fell. But even the dollar needs to correct sometime. The dollar index has lost 37% – just since 2001. It has fallen sharply as of late…which makes us wonder when it will correct – before falling more.

Thinking of ourselves, of course…we’d like to see a correction in gold and the dollar. It is just getting too expensive for us to live. Last night, we went again to see Maria’s play – ‘You Can’t Take it With You’. It’s gotten better in the time between our first visit and our last. The cast is more relaxed…more comfortable with their roles. Last night, the audience whooped and cheered…the cast came out for three curtain calls.

After the theatre, we took a 10-minute cab ride – US$21. Then, we went to dinner at a cheap Chinese restaurant. By then, we had gathered a party of eight people…the bill came to US$425.

Meanwhile, every day, we lose more than we earn. Our salary has not changed since 2001. But, living in Europe, it has been cut in half. And every day the dollar goes down, we lose a little more purchasing power.

Living in the United States, Americans are less alert to the dollar. Still, they see prices rising too…and eventually, they will realise how much they have lost.

In the meantime, we are hoping for corrections. Partly because we’d like to see our living costs go down…and partly because we’d like to use the opportunity to get out of the dollar even more.

Since the turn of the century, our approach has been very simple: buy the dips in gold…sell the rallies in stocks (and dollar-based assets, generally). That still looks like a winning formula.

“I put the US economy up against any in the world in terms of competitiveness,” says Henry Paulson. But this is the same man who said the United States was “strongly committed to a strong dollar”. If the US is strongly committed to a strong dollar, there is no evidence of it that we can see. A strong dollar would require a strong man at the Fed to raise rates. We don’t think there is anyone that strong ready to take the job. Instead, US financial policy has been in weak hands for many, many years. Deficits have been tolerated…excused…and then accepted. Now, “deficits don’t matter,” says Dick Cheney.

The dollar has been allowed to float…free from any connection to the real world of real things. The world has been saturated in them…drenched in them…up to its neck in them. That is why the value of the dollar goes down ; we see no one strong enough to reverse the policy.

Instead, government spending is out of control. The dollar is out of control. Debt is out of control. The trade balance is out of control. The Government Accounting Office says the IRS is out of control, too.

And get this…college presidents are now earning more than US$1 million a year. There was a time when running a college was seen as an honour. People enjoyed the prestige of it. They relished the ivy-covered campus…the great thinkers…the books…the coeds. They didn’t expect money.

But now…it’s money, money, money…everywhere you look – and the value of money itself is disappearing.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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1 Comment on "US Citizens Overseas Hit With US Dollar’s Sinking Value"

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In 2002, when the fed had US interest rates at extremely low figures, the dollar wasn’t a problem back then.

Seems to me, people just pick the latest ‘factor’ to attribute to the dollars falling. The dollar was falling long before the fed cut rates.

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