Ok the jury is still out on this. Once the Pound was the main currency of world trade, then it slipped. It took a couple of world wars, a depression, huge geo-political changes – big parts of the world shifted out of the Pound’s control…and the dollar became the King.
However it was not easy for dollar too. It was a gold backed currency till the fateful day when the US decided it would go off the gold backed status. It immediately became the world’s biggest counterfeit currency manufacturer. Look at the Japanese history all the $ that they bought at Y 300 can now be sold back for only Y 88. This in real terms is cheating. Clearly a topic for “Conspiracy of the Rich” for Robert Kiyosaki. The Chinese are not likely to repeat the mistake of the Japanese – they will quickly move into a multi currency basket. It makes sense for say China to have some Australian Dollar – and use it to procure commodities from Australia.
In the Middle East there is no great love for Obama inspite of the fact that he is making some overtures towards the Middle Path muslims also. If the sheikhs decide that the Oil need’nt be quoted in $s, you have one more of the $ bastion falling. If the Japanese, the Sheikhs, Asean, and India decide that money could be held in each other’s currency, the importance of $ could only fall further.
If Obama and Ben do not stop printing and convert all their wood to currency the value of the $ can only go south. I think the directon of the dollar is clear – it is the speed that is worrying. The steepness of the curve could be much sharper – and this will hurt the dollar denominated incomes and assets. Beware of the $. If you must build dollar assets hedge yourself with Asian assets like China, Japan, India, Asean…makes sense you see!
And if you do have an international portfolio concentrating on China – selling in China, buying from China, rendering services to the Chinese economy are all great opportunities. In fact many American (true blue American) companies are looking to list in China. If a few of them shift their regional HQ to Singapore, recruit English speaking people from India, Sri Lanka and Indonesia and cater to the Chinese market, do not be surprised. Go to google and see how many of them are doing it already. If you are earning in dollars (hey that means all u folks in Singapore, Malaysia, Bahrain, UAE, …!!) at least keep your assets in Asian currencies, not in dollars. If you have dollar denominated assets (yes u guys who have those great variable annuities) and hoping to make money….think again real hard.
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