Thursday, July 12, 2007

Shrinking greenback

Several years ago, I received a U.S. dollar note with the denomination of one-dollar. The note was enclosed in a magazine sent to me as a way to say "thank you" in a massive readership loyalty drive. I accepted with heart-felt thanks - plus, of course, much admiration of the periodical's most innovative strategy.

At that time, the strong dollar policy still prevailed. I loved the note not because of its monetary value, but for the sentimental reason. So I decided to keep it as a constant reminder of the uniqueness of the loyalty drive.

Not long after the receipt, Bush took over the presidency from Clinton. In an apparent move to diverge from the Clinton's strong dollar policy, Bush indicated to the whole world that he favoured a weak greenback - apparently more for political than for economic reasons.

Since mid-2002, the dollar has been on a falling trend with no sign of bottoming out. This has kept the currency traders and punters alike crazy worldwide.

An email from U.S. this morning informed me that the politically-driven weakening of the greenback has a lot of hidden costs to the Americans in the long term.

The costs are going to impact the United States of America in its standing as the world's No. 1 power. This alarming wake-up call, I hope, is sufficient to send a cold chill down the Americans' spinal cords.

Well, it sounds unbelievable - but you may choose not to heed. However, if you have sizeable dollar-denominated assets on hand, it is worth your while to keep track of the dollar's movements.

In the foreseeable future, the dollar value of the note that I am still keeping as a souvenir is going to fade away some more- and, worse still, no one seems certain how far more the dollar is going to dip.

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