The sight is ugly. It has been dropping and dropping slowly over the years and speeding up the last few months while Gold has been doing the reverse. This is not an expert opinion since I'm not working in Forex. However, I've traveled enough and have been exchanging enough US$ over the last 2 decades to know that it has never ever gone back to what it was 2 decades ago. Not once and not in near future either (unless God forbids, there's a war or some calamity in the world which is beyond everyone's expectation, in the world of finance, the term being "barring unforeseen circumstances") did the US$ ever gone back to its heydays, even when it was having surpluses. Now that it's owing unsurmountable debts, well, I'm not crazy to suggest it'll be launching a rocket anytime soon!
Instead, it's like a pipe that's been leaking and leaking and you never know when the entire thing is going to burst! Call me crazy or call me whatever you like, but I know my Math and I know if I had hold a single US$ a year ago, two years, five years or ten years ago, I won't be able to buy as much as I did then and when I travel, it doesn't buy me much Euro, A$, C$, Yen, S$ and RMB! So, that's something very real and not a pleasant situation to be in. If it's not just a $ but instead it's a $1m, then I'll probably have to work double the effort I did a decade ago! Argghhhhh....
So you may have heard, it's not cheap to travel out of the country anymore (if you're residing in the U.S. which in this case most of the members on Lunch are). As with the case with British Pounds which began more than 2 decades ago on its downwards spiral (and is still on the same path), the US$ is not expected to bounce back (and I don't mean those knee jerk reaction nor those short term technical rebounds) anytime soon. If I'm lucky, may be in my lifetime. Otherwise, God knows when?!
Granted, I may be too pessimistic on it but then again, I've been saved a lot of $$$ by being pessimistic on this account. So, I'd prefer to err on that front. I must however qualify by saying I made most of my observation by comparing US$ against Asian currencies and not C$, British Pounds or other North American currencies. Japanese Yen, Singapore $, Australian $ and the Euro are some of the currencies that have been performing better in relevance to the other major currencies in the world. In the overall scheme of the matter, we do know that currencies as a form of saving or investment have been losing the values over time. Inflation is something that each government is trying to combat (with very little success).
Don't get me wrong, I don't hate the US or US$. I hate it when I lose my money or investment! In any case, I don't hold any US$, haven't been since a long time ago and if in any time I do hold it, it's only for my traveling expense and not a form of saving and investment. Why I said it is unfortunate (but actually fortunate for me and truly bad for my Hong Kong friends) is that I'll be moving to live in Hong Kong soon. HK$ is pegged to the US$. So, as long as US$ keeps going down, my living expenses in HK becomes cheaper and cheaper. In fact, the day trips to Hong Kong in the past few months have had me and a lot of Chinese saying that Hong Kong is so cheap these days! The reverse is now happening... as did it happened in the US and Canada. Now, we see Chinese from China traveling to HK to buy daily essentials!!! In the past few years, it was Hong Konger who traveled to China to shop!
If you've been interested to read this review thus far, here's what I offer as a suggestion. It is purely my hypothesis and if you don't hold the same view, do no take it seriously. What happens is this. If you think US$ is low enough, especially for foreign investors (not those who make their money within US, and can afford to park your money for an extended period of time, some 3 to 7 years), go buy homes in the US. Do not park your investment in US$ (cash). As US government will tax on property investment upon its liquidation, you will also have to take that into account. Unlike property investment in Asian countries like Singapore, Hong Kong and to some extent China where capital gains are not taxable, capital gain tax in the U.S. is a pain in the butt! One of my relative owned an apartment in NYC and even after selling over 10 years ago, he has not been able to get back his money! We suspect that his lawyer had since absconded with the money!!! Either that or as you well know, the U.S. government is totally broke... so who know where that money has gone?!
Another option is to buy HK$ instead of US$. You see, HK$ has the potential to unpeg one day in near futrue and instead be either pegged to the Chinese RMB or totally converted to RMB. That's something most people would not be thinking about since there is not a high chance of it happening for those who don't perceived that reality. But, while HK$ had once been a prized currency at one time not so long ago (less than 3-5 years, it was crossed at a higher rate than RMB), now HK$ is only worth some RMB 0.86! BUT, and this is a very big BUT, what if the US$ "devalue" further and HK treasury (upon consultation with Beijing, naturally) decide to unpeg? Now, think about this, not logically but optimistically, what if that happens? And HK property leases all expires in 2047! Now, you tell me, that's the end of the 50 year period upon hand over, when that happens, HK is totally under Beijing jurisdiction. Yet, it will not happen totally in 2047 but a gradual process some 5 years before that would happen, I do believe. Otherwise, a lot earlier. Many HK people are already depressed about the loss of their savings due to the weak US$, and with so many Chinese coming over to HK to buy properties due to the fact that low HK$ makes it so attractive for them, Hong Kong locals are finding it so hard to make enough to own their own homes. If that continues for another 10 years, people would be so furious and disheartened. I figure by then the Governor will have to think of something. What do you think? Sounds logical? Probable? Improbable? Crazy? Brilliant?! ;-)
P.S. US Treasury has been printing excessive amount of money and though I'm no economist, my bet is that it is falling into Liquidity Trap like Japan did in the 80s. With greed still so rampant (despite the 2008 crisis/disaster ) among investment bankers and investors, the QE2 $600 billion is in the process of migrating to emerging markets. One don't need to be an Economist or to be in Wall Street to know that. It's all over the news. Don't believe what I said, just think about it and remember I said it. Time will reveal its essence and the beauty of living through history in the making :-)
Since my last quick tip on Nov 10, almost 6 months ago, the US$ has & is still heading further south. I'm expecting to go another 10% at the least before it stabilizes. The worst scenario? Quite easily 20% if some joker ends up being the new president!!! Of course, I may be wrong ;-)
Unfortunately and sad for me to say this but the USD is going down the drain... It is diminishing every day in $ terms and if one keeps this as part of his/her savings, it is certainly buying less and less by the day! US$ is now worth less than the Australian $, hits an all time low of almost Euro 0.70 and almost every major currencies in the world. Against the Yen and RMB, it also approaches the all time low. Goes any lower at the speed it's been going the last 2 months, … more