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Wednesday, March 17, 2010

The Euro May Be Sick, But the Dollar Is Dying

Back to the present…

The dollar has been rallying since currency traders decided to punish the euro. Even though long-term the dollar has its own crisis to face, traders all over the globe still consider the dollar the best flight to safety currency when markets fall apart. Frankly, it doesn’t make a lot of sense considering the dollar is just as sick in the long-run. But traders are just reacting to what the markets give them. Right now, that’s dollar strength and euro weakness. But again, it’s all a question of timing.

In the short-term, every single trader around the world is stalking the news. They’re waiting and watching to see if anyone will rescue the EU’s deadbeat nation, Greece.

Now Greece desperately needs a bailout otherwise the country is in danger of defaulting on its sovereign debt. That’s a black mark of shame for any country. But even if Germany or the ECB bails out Greece, it will still likely harm the euro in the coming months. (By the way, my colleague Eric Roseman will be speaking about the issue of sovereign defaults later today at FX University.)

Meanwhile, the U.S. is flat-out broke.

Long-term the U.S. dollar will have to pay for that $12 trillion in debt that we currently have on the books. Sadly, that debt doesn’t even include off-the-book liabilities like Social Security and Medicare – a HUGE chunk of debt that would make the guys from Enron blush.

The sad truth is our government has been betting your future on the dollar’s world reserve currency status. For years, politicians have been using the dollar as their own personal ATM to pay for all kinds of government initiatives. They also have been exporting inflation, by printing cheap dollars and trading them for cheap goods overseas.

But this system will only work as long as we hold the world’s reserve currency. In the last year, leaders from the UN, China, Russia, France and other nations have all publicly announced why the dollar does NOT deserve its status as the world reserve currency anymore.

Also, historically, world reserve currencies only last 70 years or so anyway. After that, another currency always takes its place. The dollar is about to hit that 70-year mark. In other words, the dollar’s golden age is coming a close. When it does, the dollar will plummet. It’s only a matter of time.

(Again, my friend Chuck Butler will be giving his greatest defense against this dying dollar this afternoon to kick off FX University.)

Enough with the Issues, Let’s Get to the Solution

As I mentioned before, there are plenty of strategies you can use to play both the dollar and euro crises in the currency markets.

Personally, I would use any short-term dollar weakness and start buying foreign currencies for the long-run. Also, you can always pad any dollar-based account with gold to protect your holdings. In the FX market, I know of at least a half dozen different ways to cash in on this short-term euro crisis.

This week, my currency colleagues at FX University are explaining how to do just that. Chuck Butler, Ashish Advani, Sean Hyman, Evaldo Albuquerque and others are all here in Scottsdale, AZ at the stunning Fairmont hotel to reveal how to short the best currencies for double or triple-digit gains, how to shield your long-term dollar assets, and cash in on these short-term EU crisis moves in the Forex market.

The event officially kicks off this afternoon. I’ll be there to report on as many currency secrets, strategies, and FX plays as I possibly can here in FX University Daily.

For more details, please be sure to check out my articles both tomorrow and Monday.

1 comment:

  1. This post is wrong. The Dollar always goes up and down and has to because of the global markets. The dollar is the currency that regulates all markets. And is used by more countries then any other currency. You need to get your facts right. If the American Dollar fails then all markets fail. So your idea of it failing is bonkers and cant happen. Because if it did it would be a global melt down that i am sure you wont want to see.