The dollar has no intrinsic value II

A year ago I mentioned that my in-laws were in India November and unlike previous trips, the U.S. Dollar was no longer accepted by vendors.  About a year ago, my next door neighbor was in his home country of Burkina Faso.  In previous years, the premium for exchanging US dollars for CFA (the Franc of French Africa) was reasonable.  But when he was there last summer they started with 16% premium and negotiated from there.

Jim Rogers is right–the US has already lost its AAA credit status.  When vendors and money changers overseas have rejected the reserve currency status of the dollar, small players, then the rest of the world will not be far behind.  My utter rejection of dollar began in January 2009, as documented here.

thanks to Zerohedge

Krugman vs. Rogers

Krugman and Rogers are publicly exchanging barbs.  Krugman says that Bernanke’s quantitative easing is necessary to stave off deflation.  Rogers says it will cause a collapse of the dollar and surge in commodity prices, i.e., inflation.  Who is right?  Krugman or Rogers, the deflationistas or the inflationistas?

Krugman writes:

I’ve seen Rogers in action; he seemed to me to be confused about issues like the difference between assets and liabilities. And please note that inflationistas like Rogers have been wrong about absolutely everything this cycle (and the last cycle, and the cycle before that). 

[Read more:]

Now to be sure both men are rich.  But so far I’ve not heard that Krugman has made money investing–his money probably comes from his Nobel prize, writing, book royalties, and media appearances.  Rogers on the other hand is universally recognized as one of the world’s premier investors/traders, along with such names as Warren Buffet and the shady George Soros.  I would tend to accept the advice of a successful  investor over an egghead.

I first heard of Jim Roger’s and his advice to put money on commodities and shunning bonds on January 19, 2009.  I’ve maintained such a portfolio, and I think I’m doing very well thank you very much–not including some serious profit-taking along the way, our current DIY portfolio is 60% above book with mostly oil and gas and gold mining stocks; Rogers would approve.  Had I put my money in bonds, I’m afraid at the dismal interest rates, my portfolio would have slight nominal gains but would have lost some serious buying power.  Rogers is right, his recommendations have worked for investors.  Krugman may end up being one of the most ridiculed and mocked economists of all time.

The deflationista David Rosenberg said that there would be a double dip this Fall.  A friend of mine took his advice and sold some of his oil stocks and now regrets it.  It could still happen.  But my money is on Rogers not Krugman.