Wednesday, May 04, 2011
A friend of mine who lives in Zurich sent me this article and asked about my opinion of this gloomy scenario:
Here is my response:
I don’t think the dollar will collapse or stop becoming the reserve currency.
It isn’t unprecedented for a first world country to have such a high level of debt during time of war, or when preventing a depression / severe recession. The U.S. is doing both.
Under these conditions, there has never been a default as long as:
1. the currency is not backed by gold,
2) a lot of the debt is held outside the country.
Also, a bubble occurs when most people think there is no problem. Right now, everyone worries that the U.S. has a debt problem – including the government. That is a bullish sign. So, I think that the debt will be eased off. Eventually the dollar will strengthen.
Labels: Financial Crisis