Merk Hard Currency Fund

As the EUR / USD breaks 1.50, investors should take another look at currencies. 100/barrel oil, $ 1,000 gold and $ 10/bushel wheat are not anomalies, and there is a bull market in commodities.

The U.S. dollar loses its value and relevance as a global reserve currency.What determines the value of a dollar? The common belief is that purchasing power determines the value of money, which is partly true, but this is not the whole story.

In a world of floating currency, money is also evaluated in terms of money of others. Simply open a bank account in Europe, and gain a few% per annum interest, would be returned to an American investor based on a yield of 50% in 5 years.

There are a few ways to look, but they all point to the same conclusion: the dollar is falling. The other logical observation is that NOT investing in the euro area, the investor is losing 50%. It is a difficult mental leap for many to do as they do not see losses in their bank account, but as we see $ 4/gallon gas, $ 3/gallon milk and skyrocketing commodity prices many are seen.

They have to realize the simple fact: the prices are not increasing the value of U.S. $ declining.Who is not affected by the falling dollar? The poor laborers, debtors, manual, and merchants (because you can continue to practice your trade dollars, pesos, or bananas in need regardless of the continued decline of the dollar? Tomorrow you can charge twice as much, but so what?)

But if you have wealth, a house or portfolio of shares, denominated in dollars, the declining U.S. dollar should be the biggest problem for you because the portfolio loses value as the dollar does.

In the worst case, the Fed may be missing dollars worthless overnight. The best case scenario, however unlikely it is worth mentioning, the Fed could raise rates to 10%, Bush could declare a flat tax, of open borders to foreign investors through deregulation and tax incentives , remove all U.S. military commitments abroad, and be the world's banker.

This will catapult the U.S. economy and U.S. dollar currently unimaginable success, but this is a fantasy-fetched. In fact, we increase our military presence in the world, cutting interest rates, and regulation of U.S. markets, forcing businesses even Homegrown look abroad.

Consider why the dollar is falling and what can potentially stop the reader's largest decline.The U.S. dollar is clearly the Fed is the sole issuer of U.S. dollar. Investment banks and hedge funds at the end of the day, counting on the Fed for clearing, settlement, liquidity and exchange controls, they are distributors and dealers in U.S. Dollars not the manufacturer.

It is clearly stated on the website of the Fed that the Fed conducts foreign exchange transactions on the open market and maintains the U.S. operations of foreign exchange and swaps. This suggests that the Fed has the ability to intervene in currency markets to protect the dollar's strength, and although the Fed may have this capacity, he says in the same article that: the actions of U.S. policy Monetary influence exchange rates.

the exchange value of the dollar in terms of currency is one of the channels through which monetary policy affects the U.S. economy U.S.. If Federal Reserve actions increased U.S. interest rates, for example, the value of ex-change in the dollar would normally be.

An increase in the value of the dollar, in turn, increase the price of American goods in foreign currencies traded on world markets and lower the dollar price of imported goods in the United States. By restricting exports and imports increase, these developments could lower production and price levels in the economy.

However, a renewed interest.