Back in June of 2007 I was very concerned about the state of the NZ economy and the fact that we were living and spending well above what our economy could afford. Interest rates were so high that international investors were pumping huge amounts of cash into our economy and the dollar was ballooning out to limits that we’ve never seen before. Exceeding US$0.84 at one point during the second half of 2007.

Several times through the year I made a comment about buying US dollars as a way of easing the crunch. In my post in June I even said that Dr Bollard was going to ease the impact of our economy retracting on itself by buying US dollars. Part of the reason being that while the NZ dollar was very strong against the US, it wasn’t actually all that much stronger against other major currencies. The main reason for the rise in value against the US Dollar was because the US dollar was declining in value. We are all very clear as to why now.

Now everyone world wide is retracting their money. They’re pulling it out of international banks and returning their money to their own local economies or even stashing it under their beds. With the massive fall out we’re seeing from the Sub Prime Mortgage scam in the US, the ballooning effects have managed to completely bankrupt one country and the number of financial institutions that are crumbling grows daily across the globe.

But the US dollar is starting to recover some of the value it lost. As investors there start to bring their money home, the value of the dollar is climbing as a result. This doesn’t meant that their economy is out of danger of catastrophic failure or another great depression, everyone is riding that knife edge. But what it does mean is that if you people had listened to me last year and bought US dollars while the currency had declined in value, you’d now be riding a pretty sweet profit with more to come over the next 6 months or so as the NZ dollar continues to weaken. Thus offsetting the losses coming.

I’m expecting the Euro to start dropping in the not too distant future. Keep an eye on it. Just remember, I’m not a financial adviser and I can only give personal opinion.