Devaluation of The Dollar

Posted by Ray on September 22, 2008 under Main | Be the First to Comment

This is why the bailout of the financial services industry is a problem. The dollar is down 3 cents against the Euro…that is a significant move. The sad part is that the bailout is not even official yet. While this could be traders jumping the gun, so to speak, it is possibly a sign of things to come.

As stated in our previous post, prices will sky rocket with the devaluation of the dollar. Oil was as high as $130 a barrel today, another unprecedented move, all of this stemming from the bailout package. Based on today’s price movement we can now see how the world views this bailout.

Two things have yet to happen:

1. The deal is not even inked yet and things are this bad.

2. We are not even half way through the real credit mess.

Has anyone else noticed that no one is mentioning the credit swaps yet? People are more apt to pay their mortgage before other debts like credit cards. Credit card debt is hedged with credit swaps, a big part of AIG’s business, which helps offset charge-offs if clients do not pay up. These instruments have yet to make serious headlines and are next to blow up.