The Beautiful Sitting Duck

I saw an amazing vision of a very beautiful duck that was sitting down. I saw it for a long time, the color of its plumage and the feathers round its neck were in exceptional greens and really pretty blues. Then the vision panned out a bit and I saw the duck was sitting on a tall stack of hundred dollar bills. Cute.

I said back in December 2004, that the dollar would come under extreme pressure. It firmed up for a while but now it has started to drop dramatically, it really is a sitting duck for speculators, who seek to short the dollar betting on its fall. A falling dollar doesn’t immediately affect Americans if they don’t do business overseas, or if they don’t travel abroad very much. But it does puts up the cost of gas at the pumps and Chinese stuff at Walmart goes up a bit.

Where the drama lies is with the stock market and interest rates. Overseas investors holding American stocks and bonds see the value of their investment melt before their eyes. Interest rates have to rise to compensate foreign lenders in a depreciating asset. The American government needs to borrow over 2.5 billion every day to stay afloat, and foreign investors take up a large part of those loans.

If interest rates rise it will hurt ordinary people and property prices will fall. And if foreign investors suddenly leave the financial markets it will cause problems. The stock market crash of 1987 came after six months of the falling dollar and rising interest rates, just what is happening now. The dollar is trading at 1.29645 to the Euro as of today. It was 1.18 not very long ago, a fall of about 10%. Ten percent is a scary fall in currency markets.

If you want to track the value of currencies go to www.xe.com it is an excellent site. They show the minute-by-minute market value 24/7.