The dollar's continued decline

The U.S. dollar sinks and does anyone care. There's a big risk here.

Yeah, U.S. exports become more competitive, U.S. multinational profits in overseas locations translate into higher profits, U.S. workers become more competitive with foreign workers, and dollar debt can be paid back with a less valuable currency. All of these factors can help revive and stabilize the U.S. economy in the short term. Debasing the currency was an unspoken policy in the Bush administration and it remains one in the Obama administration. One could say that Bush had a choice and Obama came into a situation in which he did not, but in either case it has happened and continues.

This situation is the key to the making of our next bubble. Bubbles happen because there becomes a belief that some asset class is a sure bet. The sure bet now to the still burned and risk averse is fixed income, medium term and short term. Debasing a currency has historically not been a hallmark of powerful nations and there is a reason for that. A debased currency ultimately leads to inflation, higher interest rates, and a greater disparity of wealth among the population that often leads to political unrest.

We'll see what happens, but I'm darn glad we took a trip to Europe in April. It was on sale then.