A positive sideline story amid the American debt crisis is the dollar is rising against the euro and pound, according to the Fitch Ratings agency on Saturday.
However, investors are slowly returning to gold investments the worse things get economically.
Fitch Ratings, a global company that tracks markets, also reports it will rule that Greece has defaulted on its debt as a result of a crucial new aid plan backed by European leaders.
Research confirms that for the better part of the past decade, the American dollar has been the "98-pound weakling" of the foreign exchange world. Over time it has lost its value against almost every other global currency including the euro, pound, yen, the Romanian new leu, and the Latvian lats.
Some financial analysts are losing faith in the almighty dollar and are reporting that it hit a 40-year low in May 2011.
According to recent financial reports, the dollar has been losing its value mainly because the Federal Reserve is printing more dollars to help spur on a healthy economic recovery.
Bloomberg Businessweek reported today that the new euro 109 billion ($156 billion) bailout had driven the euro above $1.44 on Thursday.
“But in morning trading Friday in New York, the euro fell to $1.4366 from $1.4409 late Thursday. The British pound has dropped to $1.6285 from $1.6307. The dollar is unchanged at 78.43 Japanese yen,” the report said.
Some financial experts say investors are turning to gold bullion as concerns grow about Greece, the future of the euro, the global economy and the debt ceiling in the United States.
Financial research shows gold crossed $1,600 an ounce for the first time ever last week.
The United States has more official gold stocks than any other country.
“I think the reason people hold gold is as protection against what we call ‘tail risk’ really, really bad outcomes,” Ben S. Bernanke, the chairman of the Federal Reserve, said at a Congressional hearing this month.
“To the extent that the last few years have made people more worried about the potential of a major crisis, then they have gold as a protection.”
Jeff Sommer, a financial analyst with The New York Times, reported that the World Gold Council, which tracks gold stocks, says the world’s central banks already hold roughly 29,000 tons of gold.
Only about 166,000 tons have been mined throughout world history and central banks hold a significant portion of it.
Jeffrey Bell, an advocate for a return to gold bullion, is trying to make gold an issue in the 2012 presidential campaign.
He told Sommer that the United States ought to return the dollar to a gold standard.
“The big question is whether the government and the Federal Reserve will be able to get the economy under control without a return to gold,” he said.
Sommer also reported that some experts say a gold standard would require the government to balance its budget and its current account.
Among other things, it would have to be impossible to accumulate the enormous private-sector debt load that led to the financial crisis of 2007.
To track the US Dollar to Euro Exchange Rate: Visit http://www.indexmundi.com/xrates/graph.aspx
Did you know?
- The currency of the United States can be traced back to 1690 before the birth of the country when the region was still a patchwork of colonies.
- The Federal Reserve Act of 1913 created one central bank and organized a national banking system that could keep up with the changing financial needs of the country.
- The Federal Reserve Board created the new currency called the Federal Reserve Note.
- The first federal note was issued in the form of a ten dollar bill in 1914.
Source: Federal Reserve