So with President Obama’s popularity waning, I thought I would take this opportunity to correlate the issues facing America right now and its affect on the all mighty Dollar.
As Forex online traders (and offline) we live and die, profit or lose, based on the Dollar, so this fine Tuesday morning in the latter part of June, 2009 is a great opportunity to reiterate that you cannot believe just words and that real knowledge truly is power in our business.
Yesterday internal polls in the US showed that Obama’s honeymoon is over. His social policies are unpopular and receiving criticism even amongst his own political party.
In his first six months as president of the largest economy in the world, he has virtually nationalized the banking sector, the auto industry and is now trying very hard to do the same to the healthcare industry, as I mentioned yesterday.
His Treasury secretary, Timothy Geithner, has been trolling the world giving speeches meant to boost the confidence that the investing world has in the Dollar’s value – and has been laughed at during these speeches in China, and most recently in Italy this past weekend.
North Korea is warmongering, Iran is blaming the US for their political unrest, Al Qaeda is threatening to use Pakistan’s nuclear arsenal on the US (should they get hold of it), Russia and China are openly calling for a new reserve currency on a daily basis and Brazil has removed the dollar as the primary currency used in trade with other countries. et, all the while we read reports that the economy in the US is rebounding and that things are getting better – well we need to look at these numbers to see just how good it is getting.Monday, the US announced that the numbers of people on welfare have risen at the fastest pace since the recession began and are now at levels unseen since Bill Clinton’s presidency. Last Thursday they said that unemployment was at its highest rate in the US in over 30 years – hitting over 10% in 1/5th of the 50 states that make up the US and that interest rates are at the highest levels in close to a decade.
Let’s focus on these rates for a minute and how important they are – the interest rates set mortgage rates and personal loan rates – meaning, people looking to buy big have to pay more – and they are not buying and this is causing a trickle down effect.
Last week, the US government auctioned off 160 Billion Dollars worth of Treasury Bonds and Notes, and for the most part it was a success – even with the highest rates in years. But look closer, the record debt sale that went on saw the US Federal Reserve (a.k.a. THE central bank) as the biggest customer for these bonds.
This means simply that the US bought their own debt and is paying a larger price for it as well. And it is specifically this information which have brought Obama’s numbers down sharply – it’s one thing to preach fiscal discipline and take over industry after industry in the guise of showing them fiscal discipline – yet it is completely another thing to put into practice something entirely different.
And this is where the US is right now - they are not practicing what they preach and as we saw in China, Italy, France and Germany, the US is being laughed at when they tell people that an investment in the US is a good investment right now.
We might hear the pundits telling us that everything is great in the US of A, but looking at it logically, the use of the Dollar as a long term investment tool is not looking that smart anymore.
We have seen on the Forex and watched online as the dollar has dipped and has lost value – the DAC index is off nearly 30% from its highs – this says volumes about the Dollar – no matter how much they try to show us that all is ok in the USA.
Be careful – and if you were like me, watch down under – their Dollars are looking pretty good in comparison.
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