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Investor Warns Dollar Rally Coming to an End

     U.S. monetary policy does have consequences. Regardless of the current rally, and despite government intervention, the value of the U.S. dollar is still at stake, according to one investing expert.

 

     Peter Schiff, president of Euro Pacific Capital and an outspoken opponent of all the government intervention in the marketplace, warned the dollar is highly susceptible to collapse. Over the past year, the value of the dollar has rallied a little over 17 percent – but it’s a faux rally, according to Schiff.

 

     “The dollar is rallying for the same reason that real estate rallied or that dot coms rallied – it’s not because of the fundamentals,” Schiff said. “It’s temporary. You know, you see a lot in the market. Sometimes there’s a head-fake, you get a news item of the day – you see a move and then the real move is in the other direction. You got to fade this rally in the dollar. It can’t last.”

 

     According to Schiff, the U.S. currency will collapse once foreign central banks let go of dollars they’re hoarding in the midst of the financial crisis.

 

     “Once this rally is exhausted, the dollar is going to collapse,” Schiff added. “Look at the trillions and trillions of dollars being hoarded by central banks. Look at China, announcing they want to do this $600 billion stimulus package. How do you think they’re going to finance it? They’re going to sell treasuries. They’re going to stop lending us money.”

 

     Schiff maintained American behavior and federal government policy decisions will discourage other nations from lending to the United States.

 

     “The world has learned a valuable message and that’s don’t lend Americans any more money.”

 

     Although there has been little discussion of the dollar as other investments have fallen in recent months, Gerald O’Driscoll Jr., a senior fellow at the CATO Institute, had a similar analysis of the dollar. He told a panel at CATO’s 26th Annual Monetary Conference the dollar was currently trading in a bubble.