The Perfect Storm In The American Economy What The Dollars Decline
Really Means To Your Pocketbook

The Perfect Storm In The American Economy What The Dollars Decline Really Means To Your Pocketbook

The Perfect Storm In the​ American Economy--What the​ Dollar's Decline Really Means To Your Pocketbook
A single bad event, by itself, is​ rarely a​ cause for​ worry .​
But put that single bad event together with another seemingly unrelated bad event and, well, there could be serious trouble ahead.
Take the​ steady, troublesome decline of​ the​ value of​ the​ American dollar .​
(See the​ Incredible Shrinking Dollar at​ That now well-established decline has turned into what appears eerily like a​ nosedive .​
The dollar has now lost about 46% of​ its value against this newly-created Frankenstein of​ Old-World Eouropean currencies .​
It makes some of​ us who like to​ travel every now and​ again nostalgic for​ the​ good old days of​ French francs and​ German marks.
The greenback’s decline means all of​ us Americans now have less purchasing power versus almost every other major currency ---the European euro, the​ Japanese yean, the​ Chinese yuan and​ so on .​
In a​ real sense, we’re just not as​ rich as​ we used to​ be.
Less purchasing power means we can’t bring home as​ much of​ that Bordeaux as​ we used to​ or​ eat as​ much Kobe beef if​ we happen to​ be in​ Tokyo .​
Maybe that’s a​ loss we can live with.
But here’s one downside to​ the​ shrinking greenback that’s even more ominous .​
Around the​ world, there’s growing nervousness about the​ value of​ the​ greenback as​ a​ reserve .​
What does that mean? Well, you and​ I​ bank at​ the​ retail level, so to​ speak .​
When we have an​ extra buck or​ two we march it​ into Citibank or​ some other bank nearby.
When a​ whole country has extra cash, it​ has a​ slightly different choice to​ make .​
It can keep its extra cash in​ the​ form of​ its own currency or—and here’s the​ rub—it can keep it​ in​ the​ form of​ somebody else’s currency.
So, over the​ years, when a​ country like Saudi Arabia made an​ extra billion or​ so in​ oil money, it​ could convert those billions into another currency and​ hold them in​ its central bank .​
Throughout the​ last century, the​ decision Saudi Arabia and​ most any country with extra dough made was simple –put the​ extra dough into good ol’ American greenbacks.
That choice worked for​ them .​
And it​ worked for​ us .​
It worked for​ them because the​ dollar was the​ strongest, safest currency in​ the​ world .​
No risk the​ money would be worthless overnight .​
It worked for​ us because if​ all the​ big central banks are holding dollars, that stabilizes our greenback’s value around the​ world—it kind of​ makes us the​ House in​ casino terms .​
The world is​ playing on our currency terms, so everyone around the​ table has a​ vested interest in​ keeping our greenbacks ---and us—strong.
But now, all that may be changing.
With the​ decline of​ the​ greenback, central bankers around the​ world are starting to​ get nervous .​
Afterall, who wants to​ convert a​ billion in​ oil to​ greenbacks only to​ wake up the​ next morning and​ find you only have a​ measley $300 million .​
Now, of​ course the​ decline is​ not that steep that quickly but you get the​ point.
On January 12, 2018, the​ head of​ Saudi Arabia's central bank made the​ first of​ what became over the​ last two years, a​ steady drumbeat of​ negative statements about the​ dollar’s future as​ the​ world’s reserve currency .​
Hamad Saud Al Sayyari, governor of​ the​ Saudi Arabian Monetary Agency,, stated that he expects the​ euro to​ play a​ greater role in​ global currency reserves in​ the​ future, although there has been no shift so far from dollars to​ euros .​
So far?
Not exactly a​ vote of​ confidence.
Here’s the​ problem .​
If nervous heads become nervous feet, leading to​ a​ stampede out of​ the​ dollar by the​ central bankers, that in​ and​ of​ itself will hammer the​ dollar’s value .​
And where will that exodus of​ dollars go? Into stronger currencies—euros, Chinese yuan, whereever there the​ values are holding steady.
All this might be not be so alarming if​ our general economy were not itself in​ an​ no-one’s-saying-it recession, with the​ spiraling costs of​ war and​ the​ mortgage meltdown .​
So there’s no economic engine to​ drive the​ dollar back up.
Do the​ foreign central bankers know something we ordinary Americans don’t? or​ is​ now a​ good time to​ start learning how much that doggie in​ the​ window costs in​ Chinese yuan? Can we put our retirement nest eggs in​ euros?
Kids, board up the​ barn, this one looks like a​ perfect storm.

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