To Have and To Hold?

March was a great month for the stock market.  It wasn’t so hot for the U.S. dollar though, which started a slow slide early on against a basket of foreign currencies.  This slide picked up tempo as the month wore on, becoming a full-fledged rout last week, leaving the dollar down more than 7%.  It has since found some support at these lower levels.  This big decline parallels domestic policy decisions to continue issuing hundreds of billions of new dollars destined to morph into trillions through the miracle of fractional reserve banking.  The Chinese, who happen to be holding a substantial sum of our dollars as a result to the trade imbalance between us, are becoming concerned.  Their holdings of dollar reserves seems to be dwindling, off by several hundred billion of late, to roughly one trillion.  That may mean they’re spending dollars to buy the raw materials needed for the ongoing infrastructure development program they are pursuing.  But they have asked us to provide some guarantee that our dollars will remain solid, that we won’t flood the world with them in a vain attempt to stimulate our way out of recession.  Apparently they weren’t satisfied with the response since calls from Beijing now discuss a alternative, new global currency to replace the dollar.  Thailand, Malaysia, and Indonesia have joined the chorus.  Should you keep saving those dollars under your mattress for a rainy day?  That just might be a typhoon kicking up over the eastern horizon.