Update on the Devaluation Plan

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.