Friday, December 01, 2006
How the Dollar System works
Lately I have been trying to learn more about why the US dollar is declining and see if I can figure out a safe haven for my investments if the dollar continues to decline. While searching the web I came across this well written and SCARY article about how the dollar system works and how it might be at the end of its life. This is a very thought provoking article and it made me think beyond my current understanding of the US economy. I encourage you to read and provide comments.
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What happend when China deciedes to buy Euros instead of US dollars?
From a recent Ecomonist story
http://www.economist.com/finance/displaystory.cfm?story_id=8083036
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How that money is invested has big implications for the world economy, not just for China. Brad Setser, head of global research at Roubini Global Economics, estimates that about 70% of it is invested in dollars, mainly Treasury securities. This has propped up the dollar and reduced American bond yields—by up to 1.5 percentage points according to some estimates. A big shift out of dollars could therefore push up bond yields and hence mortgage rates, damaging America's already crumbling housing market
None other than the Oracle of Omaha, Warren Buffett is betting against the US dollar
From 1/10/05 Fobes article
"Now his Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies. "
http://www.forbes.com/free_forbes/2005/0110/036.html
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