The title of this week’s article is Yankee Doodle. For those of you less familiar with the folk song (often used as a children’s nursery rhyme) it is sung patriotically by the USA about the Seven Years’ War.

Now as you know my kangaroo hop holiday has so far flown me from Australia to New Zealand and on to the USA. And for each leg of my journey we are putting the host nation’s currency under the spotlight. So you would rightly assume that the Yankee Doodle title has been used as some form of parody for the greenback – and you’d be right!

However history provides us with an even more glowing parody! You see the Seven Years’ War was actually a global conflict involving most of the great powers at the time from 1756 to 1763. Just as now we have a crisis affecting most major currencies and countries. I also love that the Seven Years’ War fits neatly with Jeremy Gratham from GMO’s prediction of Seven lean years. Just a few weeks ago many people were still writing him off but recent events, economic data and ensuing market turbulence have put an end to that. I think Gratham is right on the money that the US economy will be fumbling along the bottom for a further 4 years.

Perhaps the most telling link about this folk song is that it is sung with pride! The song was made up by the English to make fun of their Yankee compatriots yet the Yankees now sing it with gusto. I liken it to the absolute stupidity and recklessness of the last few weeks as the Congress and Senate failed to pass the bill to raise the debt ceiling until the 11th hour. This was horrendously naive. Like Winston Churchill said “You can always count on the Americans to do the right thing, once they have exhausted all other options”.

Once again the USA has brought the world close to the brink and the last few days turmoil have shown us that we are a long way from a stable path to growth. It’s also shown us that at least in the short term there is no other currency to step up to the challenge of reserve currency status. At least we also have the Swiss Franc for safe haven!

This volatility is a trader’s delight when you get it right!

Good luck.

To be continued…


Published on 9th of August 2011
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