Excellent-but-unreadable economist Willem Buiter pretty much agrees with me on the inevitable collapse of the dollar – although his timeframe is 2-5 years rather than my best guess of six months to 2 years. This will see the $/£ exchange rate going back to somewhere around 1.65.
The interesting bit will be whether the changing $ value will create a perception of rising energy and commodity prices, or whether everyone will be sensible enough this time round to realise that it’s largely a mirage. The evidence from last time isn’t entirely heartening…
OK, but have you put your money where your mouth is and sold USD and/or bought GBP, or even better both?
Well, I've put all my savings into GBP. I'm reluctant to get into shorting, since it's a good way of risk-maximisation…
(I don't think my failure to significantly sell GBP and buy USD in summer 2008 was particularly unwise: it was clear both currencies were going to collapse vs EUR and JPY, the question was only one of timing, and the US financial crash was even worse than the UK one. I do, however, think I was an idiot to not buy larger quantities of EUR in summer 2007)
If sterling rises to 1.65, from 1.45 now, that's only about 12% decline in the dollar, which I wouldn't call a 'collapse'. Unless of course, as I assume you think sterilng is collapsing as well, just not as much. In which case do you think any currency (euro, yuan are the only two that come to mind) will be gaining significantly? Or are you predicting generalised worldwide inflation?
It's obviously not an easy one.