Update on the Devaluation Plan
Thursday, November 11th, 2004
By Michael Lombardi, MBA for Profit Confidential
I’ve written extensively about my belief that the U.S. has an unwritten strategy to lower the value of its currency for several positive reasons. Most importantly, a weaker U.S. dollar, when compared to other world currencies, will encourage tourism in the U.S., hinder imports, cause domestic job creation, and generally spur the U.S. economy.
The “unwritten plan” is working well indeed, but it is already starting to cause havoc in many other countries.
In Canada, exports dropped 3.4% in September, representing the third month in a row that exports have dropped on both volume and price. The U.S. dollar has been falling sharply against the Canadian dollar, down 22% last year alone. Forty- five percent of Canada’s economy is exports, and 85% of those exports go to the U.S. Hence, Canadian manufacturers are not a happy bunch at the moment… but U.S. manufacturers are.
In Germany, the unemployment rate rose for the ninth month in a row in October. The jobless rate in Germany is now at a five- year high of 10.7%! Germany, Europe’s largest economy, is hurting.
By lowering the value of the U.S. dollar against other world currencies at this time in economic history, the U.S. is being very successful in stimulating its economy. The only point at which this strategy will become unsuccessful is when the U.S. dollar has declined so much against other world currencies that foreigners stop buying U.S. debt.
U.S. debt is now growing at $1.6 billion per day. The U.S. government deficit is now 3.6% of the country’s gross domestic product — the highest percentage since 1993. The majority of that debt is financed by foreigners. Hence, it will be very interesting to see just how low our dollar goes before it affects our borrowing capability. Is it really any wonder why gold prices continue to rise? Could it be that in the years ahead of us investors will see gold as real money, instead of the U.S. dollar? I believe this slow change in attitude towards the real store of wealth has already begun.
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Tags: gold, gold prices, U.S. dollar, U.S. economy
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on TwitterTweet
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