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Think Globally, Act Globally.

By John Dietz - Email Editor

Date: 31-Jan-2006

A new creditor could be on the horizon. This one is in the form of all that paper you carry in your wallet. By the end of the day, the Federal Reserve Chairman Alan Greenspan will hand over his long-standing reign to Ben Bernanke.

For those who have been busy, Ben Bernanke was chairman of the president's Council of Economic Advisers, received his bachelor's degree in economics from Harvard, and his Ph.D. from MIT. He was a professor at Princeton University and chaired its Economics Department. He also served on the Federal Reserve's Board of Governors for nearly three years. While the rest of the world takes a keen interest in this passing of the torch, in the U.S. the event is going by without much notice.

There are plenty of reasons why this event is important. Greenspan has been the one U.S. constant for eighteen plus years in the ever-changing financial markets. As we all know, the markets hate uncertainty. Remember Greenspan's irrational exuberance speech? The markets do…

As the new Federal Reserve Chairman Bernanke has already stated, he will be a "steady as she goes captain" following in the footsteps of his predecessor. I'm not sure if I should be happy or sad about that. I do know that circumstances that are already in place will dictate the next few years.

For today's discussion we are focusing on the U.S. dollar. The sixty plus years that the greenback has enjoyed as the staple of modern currency could be near an end, or so some are pontificating. While it's hard to say what the future holds for the short term, in the long term we could see a paradigm shift.

Some financial guru's are envisioning that you will wake up two weeks from now and the yuan, yen or the euro will be the new currency of choice. Some of the best trading minds in the world say that the dollar is going up in the short term and down in the long term. The effect this will have is anyone's guess.

I think the important thing to consider is that world market forces will affect you locally in many different ways. From the grocery store to the local lumberyard to your mortgage rate, world economics will affect you and your community.

It may be time to think globally and then act globally. Somewhere in the world there is a bull market and that applies to currencies as well. Hedging against a dollar fall may just be prudent. Creditors come in all varieties; this one is your pocketbook.

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