While I have been in Southern Africa, my income has dropped by 10% as the dollar plunges - I live in Geneva where my expenses are in Swiss Francs. Since Bush started his regime with a so-called 'strong dollar' policy the dollar has dropped about 30% against the Swiss Franc, But not surprising when you consider, like Reagan before him, reducing taxes and increasing defence expenditure only leads to a large deficit.



Normally that would mean higher interest rates to keep the dollar stable and inflation under control. But, to counteract the madness, interest rates went historically low and the result was that American citizens used the cheap money to but property, that bid up its price and then the citizens used the excess to increase consumption. Essentially, allowing China to accumulate a huge surplus of dollars while mortgaging the country to whatever next the international markets will inflict.



Now, I suspect what will happen, is that there will be a small consumer boom in the USA, house prices will recover a little while inflation starts to take off. The current US administration is hoping to stage manage a recovery before the November election leaving the next administration, likely to be the Democrats, to clean up as Bill Clinton did before. The dollar will continue to gyrate.



What should an investor do? In the short-term, sell Euros for dollars and buy US assets. Inflation will allow your mortgage to fall rapidly in terms of real incomes, After a couple of years of the new administration stabilising the US economy and reducing defence expenditure - buy Euros again!!