By Gary Scott

The US dollar is falling and could take a much bigger dive now.

There are many articles about this in the press: Yesterday’s Wall Street Journal wrote:

“Gold futures hit $700 an ounce Tuesday to trade at a level not seen since October 1980 after hopes for a resolution of the standoff over Iran's nuclear program faded and the U.S. dollar weakened, prompting investors to seek refuge among the precious metals. ‘Gold ... thrives on uncertainty,’ said Jon Nadler, an investment products analyst at bullion dealers Kitco.com. ‘As most people have dollar-denominated assets, the quest for portfolio preservation is becoming a priority, and chasing profits for the sake of pure return is taking a back seat until the skies clear,’ said Mr. Nadler.”

But the press is often wrong! We need to investigate this ourselves and look beyond the obvious. We need to be holistic in our examination of information. We need to look at all aspects of what is going on.

Over the last two days we began looking at the factors of current accounts and trade balances and their affects on currencies. We are looking at many economic fundamentals to see how the greenback might fare.

Other articles are Dollar Dives

And Dollar Dives II

Today let’s look at the Budget Balance in terms of Gross National Product. Ideally a country should have a slight budget surplus. The US, however, has had huge deficits year after year. Deficits have to be financed with debt. Debt requires debt service in the form of interest payments. Growing debt saps energy from a country because growing amounts of national efforts must go to service debt rather than infrastructure such as new schools, improved roads, better communications and such.

The larger the percentage a budget deficit is of GNP the more that deficit will tend to force a currency down.

Here are last years Budget Balances in the major countries.

Yesterday’s look at trade balances and current accounts in the developed countries suggested that the Canadian dollar, Swedish and Danish kroners had the best fundamentals of strength.

The budget balance view reinforces this idea exactly. Denmark, Sweden and Canada, from a balanced budget point of view, have the best positions. This suggests again that these three currencies will be strong.

The Canadian dollar, Swedish and Danish kroners are beginning to look like good currencies to hold.

But we should not jump in yet! There are many other factors that affect the strength of currencies. Profits are made in two ways, through parity shifts and interest earned. We need to look at interest rates available so stay tuned and tomorrow we’ll do an interest rate review.

Learn how to cash in on distorted currencies. Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ Course in North Carolina, September 15, 16, 17. Friday, Saturday and Sunday. Sign up for September now! We are full for May. www.garyascott.com/catalog/ibeznc.html (Go to this sign up and type in the Comments Section for Sept.)

One way to survive currency turmoil is to be able to earn globally. One reason we have focused on Ecuador Import Export expeditions in the Imbabura region is that the Indigenous population there have maintained its rich culture and can successfully compete in the global economy. This makes them quite dependable business people to deal with.

Here is one of the Cotacachi locals in her traditional dress which they wear.

Enjoy R&R in Ecuador with the people of El Meson! DETAILS

On the subject of looking for truth, yesterday’s massage shared an interesting health tip that suggested some vegetables, when roasted, can become acidic and can ruin teeth and worse. An alert reader wrote and asked what oil the vegetables were roasted with.

This was a huge flaw in my thinking! The article did not mentioned this and I did not think further. The type of oil used could make a world of difference. Bad oils could cause the acidity not the veggies not roasting. (Although oil does not have to be used when roasting, this was not stated in the article used.)

The point? This is one more reminder to be holistic in our thinking about health and wealth. Always look at all parts of information. (as we are doing with currencies in this series).

Until tomorrow, may the sum of your thoughts be greater than what appears to be whole!

Gary

P.S. Learn how to be more holistic in your thinking. Join Merri and me for a week of Quantum Learning and learning Super Spanish at El Meson. DETAILS