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Kenn, i think every reason/item you listed for the weak dollar is correct. I would guess China especially looks at every opportunity to offload the 860+ billion of dollars they are currently holding. Just this week China loudly forecast the dollar will devalue more due to huge deficit spending. China looks for every opportunity to diverse away from the dollar because everyday the positive trade deficit )positive to china) only adds to its holdings. CR offers them an invisible hand to decrease their dollar holdings (funding the stadium with dollars they earned but paying in yuan) without causing a currency panic. However i don't see the dollar at 600c much less 700c. Our govt has to first stop deficit spending and until we get term limits i don't see congress doing that. The yet to be funded healthcare bill is a showstopper. I've never done any currency trading but now that I'm here I'll look for opportunities to convert dollars to colones as a hedge against further devaluation-if we get a dollar bounce I got a plan. CR may not be the best country to hedge with (not alot of mfg) but it's where I'm living for the next couple of years until i go further south.

 

I forgot to mention the role of drug money in CR. AM Costa Rica mentioned this, and I suspect it's real. CR is increasingly seen as a safe place to park and spend drug money, which guess what is in dollars.

 

I'm not forecasting nothing. The 700 colone to the dollar figure was just given by AM Costa Rica or some other such outlet (I forget) as what the exchange rate would me today IF CR had maintained its daily devaluation rather than switching to the market-band system. Oddly, this sounds right viscerally. I used to buy coffee at 500 colones and now keep seeing it at 700 colones. Basically, CR inflation keeps going, and my dollar that was worth 580 last year at this time but is now worth 500 should be worth close to 700 simply to keep pace. We're not only talking about the decline of the dollar relative to the colone but also the failure of the dollar to rise in tandem with inflation. We're 25% down from where we should be to keep pace, and that hurts.

 

But what happens in the future is anyone's guess. There's no specific reason why CR would or perhaps should care about protecting those of us with dollar incomes. Based upon the last proposed revisions of the residency law, some of which went through, CR no longer feels that it needs gringo residents. They are probably right about this too. CR has probably passed the development point where they need to go this route, so they don't. I can't blame them either.

 

As for what's going on in the US, well, I partially disagree. Sorry, I see the healthcare bill as a money saver over the long haul, and it simply is. It's just nonsense in my book to see it otherwise. However, there are obviously details that need to be addressed, mostly because in order to pass it every vested interest had to be promised a continuing windfall. Obviously that can't be sustained. Taxes also have to go up somewhere. Pick your poison, but there is no free lunch. Somebody somewhere has to pay (while somebody somewhere has to take a hit). As for term limits being and solution, I'm in the naysayer camp. There are certainly lifers I'd like to get rid of, but I personally think it's a myth to imagine that an amateur congress is mysteriously superior. I had no problem with guys like Edward Kennedy or Robert Byrd hanging on, and don't have a problem with John McCain continuing. I don't think amateurs are the answer.

 

What I do suspect is going on is that the US wants a weak dollar now, because that helps exports, which in turn theoretically helps business, which in turn theoretically helps the overall economy. I'm not sure I buy all this, mostly because I suspect that global business headquartered in the US is already doing well. The corporations have rebounded, only the slugs haven't. However, I fear that the US is mostly a plutocracy these days so whatever business wants it gets. Our friend Obama does veer liberal (thank God) so surely knows what's happening, but Obama actually isn't that liberal (despite rumors to the contrary), is only one cog in the machinery, and has to put a little faith in trickle down. The upshot is that the US wants a weak dollar now to goose a recovery.

Edited by kenn

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