The main driver of the collapse of the dollar is the liquidity provided by the Fed at nominal interest rates, which invites a worldwide army of investors to short the dollar and buy foreign stocks and bonds. If the dollar continues to fall in value, these investors are effectively paid to borrow as long as their other investments are higher in dollar terms when they unwind the trade. Professor Roubini has a good article on this subject. He predicts that current policy is creating an international stock market bubble which will be followed by a collapse.
It is not a coincidence that the dollar’s decline relative to other currencies and gold has accelerated over the last three months since the health care debate has culminated for the moment in the passage of H.R. 3962, the Affordable Health Care for America Act. To get a true sense of Congress’s irresponsibility, it is necessary to outline at least a portion of the breathtaking scope of what they are attempting. As listed before, the Act is grossly inflationary because it mandates or results in (1) more coverage requirements per person, (2) more people covered, (3) fewer doctors per patient to provide care, (4) more adverse selection, (5) unreformed and unrepentant tort lawyers, (6) sharply higher health care unionization, and (7) less private interstate competition. The similar Senate proposal, which would effectively end much of private insurance, is discussed in an earlier CWDM.
Read more: http://www.americanthinker.com/2009/11/devaluing_the_dollar_by_trashi.html
