As the bottom falls out of the dollar, and people’s cash goes up in a mushroom cloud of smoke, someone’s going to make a lot of money… from foreign currencies

I’m reading all the front pages this morning, and I’m seeing nothing but fear:

Bloodbath
Global Rout
Panic Selling
Roller Coaster

It’s enough to make seasoned brokers and pit traders jump out of windows, not to mention the folks who’ve watched their retirement funds lose $2 trillion (over the past year and a half). It is truly a global market meltdown.

And it would seem that there’s no safe place to run anymore. Even commodities are flopping like a fish out of water.

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Okay, folks, here’s the chronology of the US dollar (versus the euro) over the last five days…

September 11: Dollar climbs throughout the day, but ends only slightly up at 0.7145.
September 12: Dollar starts a massive two-day slide, dropping from 0.7144 to end at 0.7034.
September 14: Dollar starts falling again, but suddenly shows a sharp correction higher, moving from a low of 0.6919 to a high of 0.7034.
September 15: Dollar swings wildly, but ends only slightly down at 0.7019.
September 16: Dollar oscillates, but is trending higher back above 0.7050

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Here in Vienna, the only english channel I get is CNN, and I can’t tell you how shocked I was yesterday hearing how the Dow plunged more than 500 points on news that Lehman Brothers is no more.

Asian markets fell just as hard, and investors everywhere are panicking.

Here in Europe, though, markets aren’t reacting as sharply today, though still red for the second day straight. The biggest economies with the most ties to US markets, like Germany, the UK, and yes, Austria. Also, Norway is getting hit hard, because oil prices are dropping quickly as fears of depressed demand keep prices below $100.

What really has me worried, though, is the US dollar. Especially since I’m still here in Vienna. This, of course, has commodity-price ramifications as well. The Fed is meeting once again, and we’re in the “perfect storm” that may have Bernanke - who looked like he was on some really good drugs today - cutting rates to try and stop the bleeding.

That’s great, folks… Let’s try to print our way out of this yet again and put more of the burden on taxpayers after we’ve pretty much assumed responsibility to pay for Fannie Mae and Freddie Mac.

I guess I’m a little miffed cause everything is going to cost me more here… at least in Vienna. Once I get to the Czech Republic, Slovakia, Poland and Hungary, I’ll be doing a little better.

So far that is. We’ll see how the currencies move today.

I’ll be crossing into the Czech Republic today, heading for the picturesque Cesky Krumlov and then on to Prague. I’ll chat with you then, and let you know how much my dinner cost!

When the U.S. economy fell off a cliff, a bunch of investors fled to the “safety” of booming emerging markets, like China and Brazil.

Turned out to be a good bet for a while, until our credit crisis became a global disease… and even stellar markets had their corrections.

But now, on the slightest bump up in the dollar, some analysts are now questioning whether emerging markets is the best place for your cash. Some say that U.S. stocks are a better bet than foreign stocks.

What’s really going on is that other major currencies, like the euro and the British pound, are being hit by recession fears and the possibility of more bank write-downs.

The dollar hasn’t really risen that much on its own yet. We’re still seeing poor housing numbers and sky-high inflation. There have been bright spots in the U.S. economy, and I won’t deny that things are starting to look better, but a major shift back to holding only U.S. assets in your portfolio is a big mistake.

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