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Thursday, January 22, 2009

Why the dollar rises?

This currency should be plummeting like a stone, yet instead it rises!
The main reason is the "race to the bottom" in currencies, in which every nation/trading bloc is trying to devalue their currency faster than their rivals in order to support their exports.
Americans buy other countries´ goods to support their export/surplus model (mainly China), and they accept a dollar intrinsically worth less than the goods sold, and everyone walks away happy.
China is going to transition to a domestic economy, but that looks very far away.
This is what has created/supported the actual situation.
But it won’t last forever.
You cannot go on buying on credit, or you can do it as long as the people who produce can go on hoping in a "better future".
But when it is clear that no one is going to pay back, at least not in a near future, also the Bank of China is not wishful thinking anymore.
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