In these times of economic uncertainties, many a time the market has gotten cautious and money hid in the “safety of the American greenback” (doesn’t the American dollar also have a green front?). So doesn’t this mean the American market has good fundamentals?
An economist might answer, “Yes.” But do you know what the study of economics is? An art, not a science. If there was much science to it, all country’s economies would be good at all times.
And worse, those economists that say the Yankee buck is a safe haven, are overlooking fundamentals from within their art.
The Americans are cutting revenues (taxes) at a time when they have their biggest debt in history. These are horrible fundamentals. I know Europe is having its own troubles but this is ridiculous. Indeed, I live in Canada which has better fundamentals right now and our dollar lowers when fearful investors are going to the “safety of the American dollar”.
Something else must be going on to make the greenback safe, something currently outside the scope of most economic theories.
I believe that difference is that America is holding the biggest stick in the world right now. Part of that stick is the 2nd largest build up of nukes in the world. Russia has more but that country treads more softly in world matters.
The USA has the most technologically advanced military in the world. They out competed Russia in the Cold War and quite frankly Russia allows that it got behind. They’ve had invisibility for some of its aircraft for decades. No not invisibility in visible light but invisibility to radar.
They have stealth helicopters, i.e. helicopters that stay mostly silent. They’ve been testing craft that go above Mach 10 which is 3 times faster than any aircraft fly now.
The Americans kept up the arms race even after Russia bowed out of the cold war.
Excepting the nuclear nations, the USA can take down the government of any single country in the world. The problems in Iraq or Afghanistan are simply the problems of holding a country and trying to rebuild. Taking down the original governments only took a few months.
So that’s why the American currency is seen as ‘safe’. If countries stopped selling the Americans oil, those countries would soon have a new government.
Walk loudly and carry the biggest stick. That’s why the American greenback is so safe.