Who has the least ugly money?

Posted: June 6, 2010 in Economy

“Some people describe it as instead of a beauty contest, as an ugliness contest and the question is who is the least ugly and right now, the least ugly is the dollar,” says Morris Goldstein, a currency expert at the Washington-based Peterson Institute for International Economics.

That’s good for me, at least for the moment, since I still want to see an improving exchange rate for USD to THB. It has been quite ugly for me for a while, a double whammy in fact, with the dollar sinking and the stock market tanking at the same time. Fortunately, being the financial wizard that I am, I was largely in cash when the stock market tanked so my losses were mitigated there. However, although I was steadily moving USD to THB I wasn’t quite fast enough to beat much of the fall from the low 40’s to the low 30’s.

Lately there has been some strengthening of the USD against the THB but not much. It’s only temporary of course, because the USD is in reality nearly worthless when you consider the amount of debt bearing down on it. Many people, not just expats, would like to see a weaker THB, particularly Thai exporters who have felt the pinch of declining consumption in the U.S. and Europe at the same time weakening western currencies have made their prices less attractive. But they are victims of their own success, being paid in dollars and Euros which when repatriated to THB drives up the baht.

So we have a slight near term reversal of the declining USD. But what’s the long term? It really can’t be anywhere but down, right? I mean, the existing debt added to all the new mounting costs taken together with the perversions of the Fed and Treasury just mean a ridiculous amount of monetary inflation on the way

It would seem that given I am living in Thailand I should accelerate my conversion of USD to THB before the USD resumes its steady down trend. My only worry is that Thais like to copy things, they are pretty famous for that, and that includes government monetary policies. It seems like that is what they are doing, with interest rates near zero, government pushing banks to loan more despite the fact that consumption is down, and we have tourism down and political strife is making it worse. All the while the government keeps announcing help for one group or another despite the fact that tax revenues are well down.

So it is a race to zero it seems. I think the USD is going to win so moving into THB faster is probably the right thing to do. From there into a wealth preservation position – that usually means gold, and none of that phony buying shares from a broker who promises they are holding physical gold for you. I mean buying and holding physical gold yourself. In the U.S. I think that is difficult. In Thailand it is normal. Thai people all own gold and trade it regularly at the gold shops in every city and town across the country. That’s another thing that makes living in Thailand particular advantageous in these challenging times.

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