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The Demise of the Dollar
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The Demise of the Dollar

...And Why It's Great for Your Investments

Addison Wiggin
Wiley, 2005
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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Addison Wiggin is a modern Jeremiah, warning that the U. S. economic sky is falling. Apparently the market for bad news is thriving. His Daily Reckoning newsletter boasts half a million subscribers and his prior work, Financial Reckoning Day, was an international bestseller. Although one might quibble with the repetitious, even querulous tone of his narrative - okay, we’ve got it already, the U.S. economy’s a mess - it’s pretty tough to dispute Wiggin’s facts. The double-whammy of huge trade deficits combined with a colossal budget deficit has put the U.S. economy on such perilous footing that only a series of Federal Reserve Board-engineered investment bubbles, combined with runaway consumer spending, has kept it from falling like a muffed soufflé. The only flaw in his logic is history itself. Someone apparently forgot to inform the Americans that their economy is supposed to be failing. Their "naïve" energy, ambition and optimism continue unabated. getAbstract.com strongly recommends this gothic economic treatise, if only because history also suggests that even a great party can’t last forever.

Summary

Is Uncle Sam Bankrupt?

Say goodbye to the "Great Dollar Standard" era. Say hello to a dire period that will see U.S. consumers losing their collectives shirts, as stubborn hyperinflation robs those stuck on fixed incomes. Three scenarios could cause a precipitous drop in the dollar’s value:

  1. Other countries dump dollars - The value of U.S. currency depends in part on foreign investment. In February 2005, South Korea announced that it would no longer hold reserves of U.S. dollars and bonds. If other countries follow suit, the value of the dollar will drop. In turn, this will increase the cost of consumer goods.
  2. Oil prices take another sharp hike - If oil doubles or triples, inflation will rise steeply.
  3. Trade and budget deficits cause a double-whammy - Excessive spending can only go on so long.

Blowing Bubbles

The United States is no longer the world’s leading consumer. China is going to be the world’s new economic engine. In 2003, Chinese expenditures overseas increased by 41%, as it passed Japan to become the world’s third largest importer behind the U.S. and Germany. By comparison, U.S. imports...

About the Author

Addison Wiggin is the publisher of the Daily Reckoning newsletter, published in the U.S. and Great Britain. The co-author of Financial Reckoning Day, he is a frequent guest on radio and television programs.

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