Curious company
The falling dollar is on the cover of this week's Economist. And to draw the reader in, the writer of the cover story begins by quoting none other than DR founder Bill Bonner:
THE long-run value of all paper currencies is zero. That is a fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter. So why should the dollar be any different? Mahmoud Ahmadinejad, Iran's president, seems to think the long run is now: two weeks ago he decried the dollar as a “worthless piece of paper”. And Jim Rogers, a famously shrewd investor, asks why anyone would buy dollars.
I'm not sure how Bill and Jim Rogers feel about being lumped in with Ahmadinejad, but I'll trust that the Economist's readers are smart enough to ascribe them membership in the Axis of Evil. Then again, if somebody at Fox News reads this, they might well remember Rogers used to work with conservative bete noire George Soros. If people show up with pitchforks and torches on our doorstep in Baltimore, I guess we'll know somebody's been speaking ill of us on TV.
Anyway, check out the article. After a lengthy rumination on the dollar's reserve currency status, it ends on this mixed note:
Despite the anxiety and gloom, some straws in the wind suggest that the dollar's decline may soon slow. In the past few weeks it has regained ground against a handful of important currencies, including the pound and the Australian dollar. America's trade balance is narrowing, despite the effects of expensive oil imports, suggesting that a weaker currency is already working to correct imbalances.
As a rule, central banks cannot intervene to determine exchange rates, but as Morgan Stanley's Mr Jen suggests, some sort of official action has often preceded turning points in the world's foreign-exchange markets. If he is right, then a change in rhetoric or even co-ordinated intervention may be the signal the markets need before they stop believing that the dollar is destined to fall further.
So far, there's been no sign of such "coordinated action," and the Fed is doing everything short of buying TV spots and billboard space to telegraph that rate cuts are coming a week from tomorrow. That sure won't help the dollar, will it?
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