Wednesday, July 27, 2016

U.S. emerges as safe haven amid chaotic world

A few thoughts penned after reading this article - U.S. emerges as safe haven amid chaotic world

Nothing new. This is always been the case. During the times of chaos, uncertainty, and global meltdown, more money rushes into the US and the demand for the US dollar only goes up. Happened even during the height of 2008 meltdown as well. More money flowed into the US system than before during that time (ref: Prof. Easwar Prasad's book has all the details.)

I wonder, if the US, in my opinion, has degraded its image as the financial superpower since 1974. First, the gold standard was removed. Before that anybody could pay $36 and ask for an ounce of gold. No questions asked. And return one ounce gold and you got $36. That was a big hit and made US dollar extremely popular and really 'valuable' as it was tied directly to gold. That was the first to go. Then dollar became a paper currency and value became relative to other currencies and economic factors. For the first time people questioned if the dollar was a safe investment.

In 2008, whole banking and financial mess, self-inflicted pain definitely eroded the trust and confidence in the US system.

Despite all this if the global investment community continues to treat US markets and the dollar kindly and favorably, I think some things are still good and worth preserving without screwing up further.

Also where else people can park their wealth???? In China?? Brazil?? India??? Investments may be made in those countries but the profit is all taken out and converted back to crispy greenbacks (dollars) and parked in some tax heaven. Does not matter where it is parked as long as the demand for greenbacks continues. Printing presses in our mint never get tired. Bring in all the world's wealth! :)

Once Euro was thought it would be a contender for the dollar. Does not look like that anymore. The euro union as well as their currency are imploding. So, the dollar rules!


sunaath said...

There seems to be no alternative to greenback!

Mahesh Hegade said...

Seems like that sir. Due to globalization, all economies are interlinked. So opportunities for exploiting other countries are relatively less.