Reply #26: Even Hijackers Shun Dollars

[54anickel]

http://www.321gold.com/editorials/texashedge/texashedge121704.html

It was reported that in Greece on Wednesday, two armed men hijacked a bus, threatening to blow it up with explosives unless their demands were met, one of which being a ransom payment of one million euros. Obviously, the actions of these hijackers are deplorable, but it demonstrates just how great the disdain is for the United States Dollar.

While we all read the headlines about how the Dollar has lost 50% of its value over the last two years, many financial reporters still don't seem to get it. They are reporting in terms of currency trading ranges where the real story is the coming paradigm shift where the Dollar will lose its status as the world's reserve currency. Jimmy Rogers, one of our favorite investment personalities, often explains that the best way to really understand what is going on in a country is to look at the black market. For example, many of our Russian-American acquaintances tell us that their Muscovite relatives are stashing euros under their mattresses instead of dollars. This may sound insignificant until you realize that many Russians (and other 3rd world citizens) do not trust local banks.

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Just a few days ago, the South China Morning Post reported that Chinese upper and even middle class citizens are lining up in the streets of Beijing and Shanghai to exchange Dollar savings for gold bullion. Chinese citizens, whose Yuan is pegged to the Dollar (which produces negative real interest rates), are now seeking to diversify in the face of an increasing current account imbalance as well as a likely revaluation in the coming years.

Because foreigners are much better acquainted with foreign exchange rates and currency movement, they are usually way ahead of Americans in this category. The sounding of the Dollar alarm by the French was what led to Richard Nixon's Dollar devaluation. Thirty years later, it seems that the Dollar alarm is being cranked up again by the Asians, Europeans, Arabs and just about anyone who doesn't watch CNBC. Speaking of CNBC, it was funny to watch former General Electric CEO Jack Welch explain yesterday how more government borrowing will lead to growth and therefore a strong Dollar.

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