What the Dollar Was and is at the Present, Plus an Interview With Cambridge House International

by John Lee

06/17/2007

The dollar has been the world’s reserve currency for the past two decades. In fact, since the late 80s, the dollar has pretty much been THE ONLY currency.

Throughout the time the dollar has reigned supreme there has been no reason for Asian manufacturers and merchandisers to focus on their domestic markets. Doing so would result in the exchange of their goods for unstable currencies. Instead, they have shipped their goods to the Americans, who are happily racking up debt and issuing dollars for the overpriced Asian goods.

This trend has changed since 2005. With strengthening currencies in Asia, companies are reassessing their strategy from exporting goods for dollars to focusing on domestic consumption. With a combined two trillion plus dollars in foreign reserves, there is a collective epiphany amongst the private and public sectors that perhaps enough dollars is enough. For low margin businesses such as food and agriculture, a 10% decline in the dollar is an absolute killer.

Asians never had confidence in their own currencies. They think of their own currencies as being inferior and poorly managed. One can attribute this to “the grass is greener on the other side” psychology as well as the powerful American marketing machine and the elusive strong dollar policy from the Clinton administration.

This is really the first time in ten years that regional Asian currencies from China’s RMB to the Thai Bhat and from the Indian Rupee to the Philippine Pesos are gaining recognition and popularity. This view is supported by both appreciating exchange rates and brisk sale of Asian sovereign and corporate debts. Across the Pacific Ocean, interestingly, the dollar is enduring the exact opposite fate. The currency is now suffering both a fundamental issue of deficit as well as of image, which cannot be repaired easily.

Chart: US Dollar/Chinese RMB

Chart: US Dollar/Indian Rupee

What is more, the dollar now carries an interest rate that is higher than most Western currencies and even higher than most Asian currencies. I cannot recall the last time this happened and as I wrote in the January market update “The least likely scenario is for rate to go up.”

Consequently, I do not see anything ahead that will reverse the dollar’s fate, which is further down against the Asian currencies. I do not see the collapse of the dollar index, but rather a steady corrosion of confidence in all paper currencies. To a regular person, the pain will be reflected through higher living expenses, to shrewd investors, the gain will be reflected in higher gold prices. I don’t see gold below $650/oz, supported by India’s and China’s strengthening currencies and the Indian and Chinese appetite for the yellow metal.

Vancouver Resource Conference June 17 and 18

Unfortunately, having access to top industry analysts and experts is not always an easy matter. This is why an insightful interview with Howard Fitch, President of Cambridge House International is an opportunity that should not be missed.

John Lee from GoldMau TV talked to Mr. Howard Fitch regarding the World Gold, PGM and Diamond Investment Conference that will take place in Vancouver on June 17-18, 2007.

Since 1993, Cambridge House International (www.goldshow.ca) has been hosting resource conferences that bring together acclaimed speakers, established and emerging public companies, individual and professional investors. Speakers for the upcoming June conference include Doug Casey, David Morgan, Jon Nadler, Rick Rule, Frank Holmes, Bob Bishop, John Kaiser and more. Don't miss this rare chance to listen to what Mr. Fitch has to say about this Vancouver conference on June 17 and 18!

Go to www.goldmau.com to watch the full interview and learn more about the event.