Eben Esterhuizen quotes George Soros saying that the current financial crisis is the culmination of a 60-year super boom of dollar credit expansion . The current financial crises based on over-leverage and excess government spending is part of the long term trend in the decline of the dollar that started in the 1970's. The Pound Sterling did not lose its status as the currency of international payments overnight; the process took nearly 80 years and ended last century. The US dollar is in a similar situation. If anything, the recent dollar drop and all the "sky is falling" pessimism is ahead of itself and the dollar actually has a greater chance of rallying from here against the Euro (1.47 USD/EURO).
I do agree with Mr. Soros that the U.S. will have to have higher interest rates at some point and that's why I'm currently short US long term treasuries.
Eben nicely outlines the risk reward of my higher interest rates bet; a bet that is currently causing me to cough up cash to meet margin calls on my treasury futures. But if I'm right, the reward is much larger than what I lose if I'm wrong.
Disclosure: I am short 10 and 30 year treasury futures. I am short (small) Euros and British Pounds versus the US Dollar.
Playing with Fire Disclaimer: You can lose more than your initial investment with futures. Do not invest with futures unless you are a professional and fully understand the risks (not that I feel like a professional right now the way my bond futures keep going against me).