Thursday, August 6, 2009

Currencies: The Crash of the USD, USD Down 35% YTD vs Real

Following on the theme of world currencies, we have stated here many times that we believe the US (and other countries debt of trillions of dollars been created recently will never be repaid unless theirs currencies are devalued. This may happen gradually, but perhaps also suddenly, catching all the poor investors dead with their money in money markets. We commented several times on shifting to the Brazilian Real and countries that produce real goods.

Here are the performances of several world currencies vs. the USD in the last 3 months and year-to-date, measured by their corresponding ETFs:

(please click to enlarge).

BZF is the Brazilian Real, up 35% year-to-date. The current exchange rate is now 1.80! It was 2.30 not long ago. Is 35% a "crash"? That may be subjective, but for sure, you would not want to have been invested in USD during this time. The US stock market having gone up during this time is another illusion, interestingly, very similar to what happened during 2007 when the markets were going crazy (and things were actually disintegrating behind the scenes). We know how this ended.

The Brazilian market having gone up an additional 40% YTD, now that is real gain, no pun intended.

Next up was the Australian dollar, up almost 20%, and also the New Zealand dollar.

The other currencies listed are:

FXA: Australian dollar

FXB: British Pound

FXC: Canadian dollar

FXE: Euro

FXY: Japanese Yen

FXM: Mexican peso

FXS: Swedish Krona

BZF: Brazilian Real

CYB: Chinese Yuan

ICN: Indian Rupee

BNZ: New Zealand dollar

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