I have been watching the chart of the Canadian dollar. Over the past three years it has exhibited a surprising amount of non-volatility, trending roughly between 96 to 103 cents on the US dollar in the last year:
This is compared to a currency such as the Yen which has had some obvious devaluation going on over the past half year:
This leads to the obvious question of whether the Canadian dollar is still in a range or whether there is something going on that will trend into a further decrease in the dollar. Typically the dollar has been linked to the fortunes of the commodity market, and the general commodity market hasn’t really gone anywhere over the past year, so one would think this is part of a trading range as opposed to some breakout on the downside.
I continue to hold a majority of my holdings in US-denominated securities and despite the fact that the US federal reserve is doing its best to turn its currency into toilet paper, I would expect the US currency to be better toilet paper than other world currencies out there. I am guessing the phrase “in the world of the blind, the person with one eye sees all” is the most appropriate here.
This is truth hard to resist – if the US will go down, the rest of the world would be totally crashed.
Looking at Europe – it takes them many long years to straight the union. They will survive, but it will be highly volatile.
I do some diversification, one way to do it is by investing in european and emergency markets, using non-US brokerage accounts.
However it does not always help, only by keeping small sum in sterling pounds I lost almost $5,000 since the UK lost its AAA rating…
Living in Canada, if there is some sort of economic collapse in the USA it would cause massive domestic disruption as well. The justification for being purely within the Canadian-US confines is more of a form of Pascal’s wager than anything else.