Tags: dollar | roll | over | euro

Dollar Begins to Roll Over

By David Skarica   |   Tuesday, 18 Dec 2012 01:38 PM

I think we are seeing a key element in the markets no one is really mentioning. This being that the U.S. dollar, which had been artificially held up by economic weakness in Europe, is starting to roll over.

I still argue that the United States is the biggest basket case of them all. It has a bloated military and is trying to police the world. It has totally unrealistic unfunded liabilities it will never be able too meet. In addition, we have bickering about the fiscal cliff between the Republicans and Democrats on taxes and spending cuts.

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I believe in 2013 you are going to see a firming in the European economy. The past few years of hard austerity are going to pay off. Deficits are going to go lower and rates in Italy and Spain are going to stabilize. We are already seeing signs that Ireland is turning around. Despite all the doom and gloom that was fed to us about the euro, it is hitting multi-month highs and is breaking out. I think that the two countries with the real debt problems (the United States and Japan) are about to see large devaluations in their currencies.

Not all of this will be negative. U.S. exporters should do well. Some of the euro fear trade (people buying gold because they thought the euro would collapse) will coming out of gold. However, once this comes out, then you will get the reverse trade where people buy gold as a hedge against a decline in the U.S. dollar.

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The recent Federal Reserve announcement that it will print $1 trillion next year to try to get unemployment down to under 7 percent and as long as inflation stays under 6.5 percent shows you that they do not care about the dollar.

I think everything has set up for a sea change, this being from euro to dollar weakness and investors should protect themselves with foreign stocks, gold and precious metals and exporters in 2013.

About the Author: David Skarica

David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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