Wednesday, May 4, 2011

Did U.S. Special Forces Just Rescue the Dollar?

I didn't ask that question.  It was Steve Cortes of Veracruz on CNBC, who also answered that question.  Of course, as an old Special Forces officer myself, I was interested.

The dollar has been sinking all year.  However, he states that "history shows us that the country with the strongest military is always the reserve currency.  I think the ability of those heroes, of SEAL Team 6, to project power globally shows us that U.S. military is uncontested in its dominance, and I think the currency will re-assert accordingly."

Frankly, a strong dollar is not good for U.S. business at this point.  A cheap dollar helps our exporters and decreases imports, which is a good thing.  That is the same reason that China has been keeping their currency so cheap, although they are finally allowing the Yuan to appreciate somewhat.  We should not forget that China is greatly increasing their military spending, especially naval spending.  It would be a source of enormous pride for the Chinese if the Yuan also achieved reserve currency status.

If he is right that the dollar will rally, I just cannot see it happening before QE2 ends on June 30th.  My belief is that the dollar is in for a long, sustained decline.  Neither the Treasury Secretary nor the Fed Head are permitted to confirm this, but I suspect they know that a cheap dollar is in the best interest of the U.S.

My hope is that the successful Special Forces operation will draw enough media attention away from the hot issue of raising the debt ceiling, so that a compromise can finally be achieved.  Special Forces operations work better outside the glare of the media, and so do legislators!

In the meantime, let's just be proud of our boys . . . especially those in Special Forces!