Friday, May 29, 2009

Commodity Producing Nations

I've been saying for a while now that commodity producing nations (Australia, New Zealand, Canada, China, Russia) will see their currencies rebound once nations, businesses, and individuals realize that the Fed, under Bernanke, is intentionally going to debase the currency in order to prop up asst prices. We have been seeing this for several weeks, but it is getting to an extreme.

Dollar Drops
The U.S. dollar weakened 1.2 percent against the euro and 0.9 percent against the yen, extending its drop after the Dollar Index slid below 80. The gauge tracks the greenback against the euro, yen, pound, Swiss Franc, Canadian dollar and Swedish krona.

The dollar declined 1.8 percent versus the Australian dollar and 2.2 percent against the New Zealand dollar, as signs of a recovery stoked demand for commodity-exporting countries. The greenback also slipped as South Korea’s National Pension Service, which had about $187 billion of assets at end-2008, pared its allocation for Treasuries over the next five years.

Printing money does not create wealth. It never has and it never will. Only efficient competitive production creates wealth, and this production is increasingly moving overseas.

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