Now fundamentally what would cause the dollar to decline. Well if you printed a whole lot of it, which the gov't is going to be doing. Between the Stimulus bill, TARP, Private-Public P.O.S program, ABCDEFG. You get it, and I am sure there is some more spending that will be going on, as well as more tax cuts. Plus, if America starts to feel as if this crisis is over, we acutally had a positive savings rate for a little so this could increase the amount of money in the system.
So with all these dollars out there, prices will go up.
The UK is already experiencing inflation.
Now what could really kill the dollar is taking the wind out of it's sails.
China is making hints of moving from a dollar back currency . Russia has also stated this previously. OPEC has made rumors about this too.
China has some pull too, they came out a few days before the Fed statement demanding that their bonds be guaranteed and what did the fed do, said they would buy bonds. Combine that with our governments need for China to buy our bonds, it will be interesting to see what our "leaders" do about China's vocal concern about the current status of the economic condition of the U.S.
Plus we have the G-20 meeting on April 2nd. Although I highly skeptical that the world stops using the dollar as its main currency, I would not be surprise if there was some black lash against the dollar after the G-20 meeting.
So what am I doing to play this macro trend. I am looking to get long UDN, or buy UUP puts. GDX and GLD, after a pull back and possibly TIP. Additionaly I could go long USO and DBC. I am waiting for good entry though, this play might not work out right away; so I am trying to get the timing as close to correct as you can.
