Knowing first hand that the dollar has declined approximately 8% in the last 6 weeks, compared to the Mexico Peso, makes me a little nervous, well, a lot nervous. That's a pretty big change in 6 weeks... an 8% devaluation of the Dollar compared to the Peso...
When I say first hand, I am referring to my trips to the ATM machine at our local BanaMex office here in San Blas, Mexico. BanaMex is our local bank, a subsidiary of CitiBank.
Six weeks ago a 100 dollar withdraw would yield 1320 pesos whereas today I only received 1220. A 100 peso decrease which is the equivalent to a days pay for a lot of people in Mexico. I can clearly see that rent, food, electric and everything else we pay for just went up 8% since I exchange dollars for pesos. The Peso is strong and getting better compared to the dollar.
The scary part is this devaluation goes virtually unnoticed by my friends and family in the States. It just sort of sneaks up on the American public via price changes at the supermarket, gas pumps and unemployment lines. What's a couple of bucks when you are stressed from work, relationships, traffic, kids, and your cell phone keeps ringing. Unless you have been laid off, you may not even notice, perhaps a news story about the economy being "slow" but moving upward. That's why they call it programming! My observation is that it's out of control. Have a beer!
For now, The Federal Reserve announced it intends to move forward with QE2. QE2 is short for "quantitative easing round 2". This means the Federal Reserve is going to print more money to buy more United States Debt (referred to as government bonds on wall street).
It's the Fed's intent to print more money that caused the recent decline in the dollar. It goes without saying that every time the Fed prints money it reduces the value of the dollars already in circulation. The US is in so much debt I doubt it will ever get out of debt....... Don't forget about the Foreclosure Crisis and the rising bank failure rates. Did you know 25 banks failed in 2008, 140 failed in 2009 and more than 140 will go down this year.... that's worse than the Great Depression but in all fairness, there are more banks now than the 30's. I feel better already. Where's my beer?
The G20 summit begins today, November 11, 2010. G20 is a group of 20 nations representing the 20 major economies of the world. Collectively, these 20 nations represent 85% of the World's economy in terms of dollars... Da Big Boyz.
A major topic of discussion will be regarding the tensions over exchange rates, global economic imbalances and the aggressive "monetary easing or quantitative easing" (the printing of money) by The Federal Reserve Bank.
The Fed moved forward with their 600 billion dollar government debt (government bond) buying frenzy, ignoring the fact that it would have global repercussions causing problems for other economies. In other words, we as a nation will have a lot of explaining and back peddling to do at the G20 summit thursday and friday in Seoul, Korea. Watch the news and watch your wallet because I believe things are going to change. Adios amigos! Donde es la cervesa?
..... the Federal Reserve IS NOT the Federal Government. It is the central banking system of the United States. It is the "Bankers Bank" and the United States Government Bank ..... separate from the Federal Government (private and regulated). Just as you and I keep a checking account the US Government keeps a checking account with the Federal Reserve where your tax payments are processed etc.