Basket Case

Is the Dollar done?

That’s what some analysts think. After the Chinese publically worried about their Dollar assets and suggested moving to a basket of currencies, some concluded that a commodity-based basked might hold the future of global finance. Higher real rates for the greenback would inevitably follow.

But we’ve seen this movie before. It’s a short trailer with no plot. You can’t enact a currency by decree. Companies and countries need to issue debt in that currency, and they only do that if people do business in that currency. That way issuers can balance their income and expenses. Europe had a do-nothing basket for years, the Ecu. It went nowhere until countries abolished their local currencies and adopted the Euro.

Since the US has the largest economy with the most liquid markets, it’s the world’s reserve currency. The only way we’ll see the dollar retired is if the US unilaterally decides to put George Washington to sleep.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T13:15:17+00:00 August 3rd, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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