Over the past six months, I have checked Yahoo! Finance's currency page religiously. I have prayed for a global slowdown, lower oil prices, and complete carnage in hope that investors all around the world would flock to the US dollar as a safe-haven, no matter how bad our situation is. Lesson learned: sometimes when you pray for the worst, your prayers are answered. Following the Royal Bank of Scotland's jaw-droppingly horrendous earnings estimate, the pound fell to a twenty-five year low against the US dollar. (1.36 USD/GBP) Economists estimate that UK GDP could fall by two percent for Q4 '08. A deflationary period is right around the corner. As far as I am concerned, London, the overcast city of pessimism, is all smiles and sunshine. Life couldn't be better for us Yankees in the UK.
While the exchange rate could very well reach 1.20 USD/GBP by the time I leave, I fear that the dollar will only be strong in the short run. Karma will probably punish the greenback for my malevolent wishes. With trillions of dollars of recently-created currency sloshing around unmonitored, it's easy to see a scenario where the dollar loses significant value as the economy recovers. Since the inception of the Federal Reserve in 1913, the dollar has lost 96% of its purchasing power. Let me repeat, ninety-six percent! I say it goes even lower, any takers?
The national debt has burgeoned to $10 Trillion and is expanding everyday. Economists estimate that if current spending patterns remain the same, the national deficit will be 400% of US GDP by 2050. How long until our credit rating is cut? It's a scary thought. Unless there is real change (a drastic cut in the size of government, the end to an interventionist foreign policy, etc.), the dollar's days of strength are numbered. Don't say I didn't warn you. Karma's a bitch.
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