Saturday, September 29, 2007

The Crash has begun

The saga of the sagging American dollar continues. For the first time in 31 years, the Canadian loonie is stronger than the U.S. dollar.

In recent days, the dollar has also fallen to a record low against the euro for the seventh consecutive session.

Former U.S. Federal Reserve chairman Alan Greenspan said it is possible that the euro could replace the U.S. dollar as the reserve currency of choice.

Until the dollar might REALLY tanks, how dies the weakening dollar affect Americans? US consumers' standard of living may drop as they pay more for foreign goods, but demand for American labor will rise, say economists.

The last time that the buying power of the US dollar was this low was about a decade ago, and the major difference was that the price of oil ranged from $22 - 26 a barrel (in 2006 dollars). However, today the price of oil is about $80 a barrel.

Like when the buying power of the dollar was low, China's exports were tiny. The Census bureau reports the trade imbalance with China alone is $141 billion through July.

Globally, that skepticism has seeped over into the gold market and is one reason the price of gold is now above $732 a troy ounce, a 27-year high. So far this year, gold is up about 15 percent.

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