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The Kiplinger Letter


The Kiplinger Washington Editors
March 7, 2008

Dollar's Slide Is Scary
But No Reason to Panic

The dollar will fall further, but expect a rebound by the end of the year. This week's Kiplinger Letter looks at the outlook and what it means for you.
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Is the Falling Dollar a Threat to U.S. Security?

The administration says it is, but a veteran currency strategist is not worried. The fears are overblown and the dollar is not in all that bad shape.
Marc Chandler
Brown Brothers Harriman
Marc Chandler, with nearly 20 years of experience as a currency researcher and strategist, has been the head of currency strategy at New York-based Brown Brothers Harriman since late 2005. More than 180 years old, Brown Brothers Harriman is the oldest and largest partnership bank in America.

The falling dollar is alarming, but is it a threat to national stability? National Intelligence Director Michael McConnell recently included the falling dollar as a weakness that could be exploited by U.S. rivals, especially energy rich ones.

But Mark Chandler, the top currency strategist at the investment banking firm Brown Bros. Harriman, says the dollar's woes may be worrisome, but they hardly rank with terrorism, the threat of cyberattacks and danger posed by various foreign hot spots. "Far be it from a currency strategist to disagree with U.S. intelligence agencies over the threats to the U.S., but of all the potential threats to U.S. security, the dollar is simply not one of them," he writes. "... The greenback's depreciation in recent years is simply an unwinding of its gain in the second half of the 1990s."

Security worries appear to stem from the decision by some oil producing countries, notably Syria, Iran, Libya and Russia, to be paid in currency other than the dollar. "McConnell gives us a warmed over domino theory as if Syria, Iran and Libya have abandoned the dollar and others will follow suit. Hardly. Such an assessment seems to exaggerate the role of these countries. ... The other oil producers and most notably Saudi Arabia have indicated no desire to shift the benchmark for oil away from the dollar," Chandler writes.

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POSTED BY: William (March 12, 2008 02:50 PM)
Hide and watch as the dollar begins to surge upward. Chicken little has convinced few, that the sky is falling. Where else, but America, do you find the masses rushing to get in. Albeit to work or especially to invest.

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