Financial Expert John Dubots: We’re Seeing The Sacrificing of the US Dollar

Recent exchange rates of the US dollar confirm that the dollar is losing its value compared to other world currencies.

Financial services expert John Dubots commented on this news at his blog, www.johndubots.com.

“Earlier this year, I believe a conscious decision was made to sacrifice the US Dollar in an effort to rescue the troubled economy,” Dubots wrote.

Despite assurances from Treasury Secretary Timothy Geithner (Financial Times, May 21, 2009) that a strong US dollar remained a priority, the dollar continues to devalue against many other world currencies, according to Dubots.

Geithner told the House of Representatives his “basic obligation is to make sure that we put in place policies that sustain confidence in this economy, in our currency, that we sustain a strong dollar, that we retain what is a great strength and asset to this country, which is the most deep and most liquid markets for Treasury securities in the world,” the Financial Times reported.

Meanwhile the US Dollar continued to devalue.

As of May 30, 2009, the US Dollar held the following exchange rates, compared to other world currencies and gold, according to currency-conversion site xe.com:

1 Euro = 1.41366 US Dollars
1 Canadian Dollar = .917180 US Dollars
1 Australian Dollar = .800769 US Dollars
1 Swiss Franc = .937302 US Dollars
1 Brazilian Real = .506945 US Dollars
1 Ounce Gold = 980 US Dollars

Compare those numbers to numbers from just two-and-a-half months ago (March 15, 2009) and note the change:

1 Euro = 1.29342 US Dollars US Dollar Down - 9.29%
1 Canadian Dollar = .78661 US Dollars US Dollar Down -16.59%
1 Australian Dollar = .65864 US Dollars US Dollar Down -21.57%
1 Swiss Franc = .84409 US Dollars US Dollar Down -11.04%
1 Brazilian Real = .43678 US Dollars US Dollar Down -16.06%
1 Ounce Gold = 931.25 US Dollars US Dollar Down -5.23%

Why such a steep decline? Dubots attributes the fall to the government’s ‘quantitative easing.” In layman’s terms, quantitative easing is printing money in an effort to seed the financial system, an effort that will cost us, according to Dubots.

In spite of the Fed’s efforts, its worst nightmare, deflation, is persisting, as the Chicago Report recently confirmed.

Released on May 29, 2009, the report, which measures several areas of the economy, confirmed prices are continuing to fall even though the Fed is furiously pumping money into the economy.

According to Dubots, the bottom line is that the Fed’s actions to stimulate the economy aren’t working, and the US Dollar is being devalued in the process. Investors should look for this trend to continue long term, if the Fed continues its policy of quantitative easing, and gold prices are likely to continue to rise.

In Dubots’ opinion, the actions of wise folks in this type of market can best be summed up with the following acronym: R.A.P.

Raise cash on rallies
Use Absolute returns* money-management methods
Own some Precious Metals

For a full copy of Dubots’ most recent market report, click on: http://www.johndubots.com.

Contact Information

John Dubots

President

Capital Management

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