Dollar Dump 2.0

The story Friday was gold, on the verge of $1,000 an ounce. Now well rested, thanks to our holiday weekend, we focus on the larger issue — in part, the cause of $1,000 gold: the dollar.

Dollar Index Downward Trend

At 77 and change as we write, the dollar index is at a 2009 low and about a point shy of a 52-week low. But as you can see above, while we appear on our way back down to historic lows, the dollar is still a ways away from 71. In more tangible terms, the euro is as high as $1.45 today, its priciest of 2009.

(By the way, if you haven’t made a few bucks from the dollar’s decline, don’t blame The 5 or Chuck Butler. As silly as it seems, those 200-day moving averages have proved worth watching.)

Ironically, we’re not as enthused about the dollar’s decline this time around. As Bloomberg explained this morning, “The dollar declined to the lowest level this year against the euro as equity markets rose on speculation the global recession is easing, sapping demand for the currency as a haven.”

That’s the best reason to sell the ol’ greenback? We could think of better… like voracious money printing at the Federal Reserve, a national debt like no nation has ever suffered in history, or this:

“An initiative equivalent to Bretton Woods or the European Monetary System is needed,” said Heiner Flassbeck over the weekend, director of the United Nations Conference on Trade and Development. Essentially, the U.N. has called for a new global reserve currency. Here’s the money shot from the new report… brace yourself for Ph.D.-speak:

“An economy whose currency is used as a reserve currency is not under the same obligation as others to make the necessary macroeconomic or exchange-rate adjustments for avoiding continuing current account deficits. Thus, the dominance of the dollar as the main means of international payments also played an important role in the build-up of the global imbalances in the run-up to the financial crisis.”

The U.N. wants for a new reserve currency that’s composed of many worldly monies — a complicated array of currencies with adjustable pegs and variable exchange rates. It isn’t clear exaclty what they would want, but it’s quite clear what they don’t… dollar watchers, take note.