Date: Fri, 28 Mar 2008 17:13:33 -0700 (PDT)
From: Mervyn Lobo <[EMAIL PROTECTED]>
>
Mario,
Anyone who holds US dollars in his savings account, while his expenses are in a
different currency, is effectively imposing a tax on his savings. The US dollar
will have a weaker purchasing power when the saver needs to use his savings.
>
I am mentioning the coming financial crises so that people become aware of:
1) the hazards of putting all ones eggs in one basket
2) the hazards of depending on one currency.
3) the hazards of using only one method to store wealth.
>
Mario responds:
>
You are right, and Goanetters would do well to heed your advice to the extent
they can. However, perhaps you will agree that hedging one's bets is a longer
term strategy, and people who panic during a recession, are likely to do things
that may not be in their long term interest. There are times when one needs to
simply batten down the hatches and ride out the storm.
>
I have lived in the US for 37 years, experienced all the business cycles during
that period, and have accumulated assets in India and through mutual funds that
invest in Asian countries, as a long term hedge. Currently, any value we are
losing in the US is being partially or entirely offset by gains in India and
elsewhere.
>
My only point was that free market economies have proven over time to be
extremely resilient, and, as Samuelson has pointed out, the current downturn in
the US economy, caused mostly by excess federal spending and easy liquidity
compounded by risky lending policies by major institutions that should have
know better, already includes the seeds of its own recovery. Some of this
occurs when foreign countries increase their imports from the US which are now
less expensive due to the falling dollar, and foreign owners of US currency
purchase US fixed assets, which they are all welcome to do by US policy, and
the smart money is doing so even as we speak in terms of farmland, commercial
property, manufacturing plants and corporate acquisitions. Unlike India, the
US welcomes such acquisitions.
>
