I am buffled by their deep ignorance about currencies

I was listening to Bloomberg. A great program. Yet answers about the sinking dollar were about China, the European central bank, the US Treasury, and the Fed.

Is the decline a good thing? A bad thing? Most analysts do not have the faintest idea of what drives currencies.

The trend of a currency is determined by productivity (or inflation) differentials and by relative government policies between two countries.

The sinking dollar is not -- let me repeat -- is not a positive thing. It reflects the idea that we are not capable to produce goods that are competitive in the global economy. We do not know how to produce machines and high quality products cherished around the world.

The rise in commodities is about our loss of purchasing power. For instance, countries with a strong currency do not see the rise in commodities in their own currencies. Just do the math.

We are losing purchasing power relative to the rest of the world. This means, for instance, that we look with admiration at the high-speed trains of Europe and China. We have to hire Chinese or German engineers to get a high-speed train in the US.

We are losing the war. We are losing the will to fight, to work hard, to make money. We expect that someone else owes it to us.

But we are losing. I wish the politicians or someone in the press understands what I am writing about.

I "made it" in this country because I worked 12 hours a day. I studied until there were no more degrees to conquer.

We have to get back to rolling up our sleeves and start working hard for a living. The markets are slowly and steadily moving us in that direction.

Because the markets always win.

I love this country because gave me so many good things. I hate to see people not understanding what the decline of the dollar really means.

Hopefully I convinced you. I really do hope so.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

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