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Off-Balance Sheet: How To Strenghten The Dollar In No Time


Dollars are made of paper, and paper is an inherently weak material.


Relax, it's only money.

Here in the 'Ville we like to keep things smart, but we also love to laugh. All work and no know how it goes. With that in mind we proudly introduce The "Off-Balance Sheet," a place where Minyans can experience humorous takes on the world of finance, personal stories from our Professors and Minyans and all the other stuff that makes life worth living. So take a break from the flickering ticks and dive in.

The U.S. dollar is not strong.

This should not come as much of a surprise to anybody. Dollars are made of paper, and paper is an inherently weak material. Take a look at this chart:

The weakness of paper is why the typical dollar bill stays in circulation for a scant eighteen months. Certainly not the kind of efficiency we need as the country is busy running up a deficit expected to exceed $9 trillion when fiscal 2007 ends on September 30th-that's 65.5% of GDP.

How Can We Strengthen The Dollar?

I called the U.S. Bureau of Printing & Engraving in Washington, D.C. and inquired about strengthening the dollar by manufacturing the bills out of a stronger material-say, steel. I encountered a bit of resistance at first, so I tried explaining steel's extremely forgiving "plastic range," the spread between the yield point of steel and its ultimate breaking point. The yield point of mild steel is around 36,000 psi, while its ultimate tensile failure point is around 60,000 psi.

The woman to whom I was speaking still didn't cotton to my argument, so I presented an even more attractive option. I told her that Corten steel (simply a brand name for one of the High Strength Low Alloy steels) has a 40% greater yield strength over that of mild steel, with no significant increase in weight.

"Sir, we accept bids every four years from paper companies for printing materials."

She just couldn't open her mind enough to get off this paper kick.

"Ma'am, did you listen to anything I just said? Isn't it crazy to keep printing dollars on paper? Would you build a bridge out of balsa wood?"

She thanked me for my time and hung up.

I decided to see what Crane & Co. of Dalton, Mass., a supplier of currency paper to the U.S. Treasury since 1879, had to say.

According to the company's figures, more than four billion U.S. $1 notes are printed annually on something they call "Marathon substrate" and claim that it can "experience untold numbers of transactions, folding, crumpling, soaking, and washing."

"Untold numbers of transactions and folding?" Boasting that your paper can be folded is like climbing to a mountaintop and bellowing for all the world to hear that your eyelids can open and close.

Tradition Versus Progress

OK, perhaps going from paper to steel is too radical a move for people to accept. So how do we strengthen the dollar without spooking the traditionalists? After all, we didn't go directly from the abacus to the PC. I'll admit-change is most effective when eased into. I wracked my brain for hours over glass after glass of 103-proof rye whiskey, neat. And then it hit me. The whiskey, I mean. When I came to, I had my answer.

Tyvek is the way to make the dollar stronger.

As DuPont (DD) says on its website: water, abrasion, and tear-resistant Tyvek is a tough, durable blend of very fine, high-density interconnected polyethylene fibers, bonded together with heat and pressure.

It's white (perfect for printing), non-toxic (don't worry about the dog getting into your wallet), chemically inert (won't spontaneously combust) and contains no binders (neither do Hebrew National franks, but whatever). Now, here's the kicker: Tyvek combines a good printing or coating surface, high opacity and toughness to a degree unique among products of similar weight and price.

As you can see in the picture below, Tyvek suits are used to protect workers against, among other things, Avian Flu. There's a reason why they're not outfitting these guys in paper.

What Does This mean For You As An Investor?

The paper/steel/Tyvek situation presents us with some interesting options. If the government takes my advice and transitions U.S. currency from paper over to Tyvek, it will be a slow process, at best. But, as I hold considerable sway in Washington, I have a good feeling we'll be seeing Tyvek money eventually. So, I'm long DuPont. Steel? Not likely to make it to the finals of the paper money-replacement tournament, so I'm dumping everything I've got parked in US Steel (X) and ThyssenKrupp AG (DAX). And, as the country gets richer and richer, I have a feeling builders are going to stop using steel girders (too blue-collar) and go with something along the lines of platinum or white gold (much more upscale; highly appealing to rappers, NBA players, and Paris Hilton).

For a second opinion, I once again turned to financial guru Kevin Depew.

Kevin, what's your take on the dollar's weakness?

It's weak.

Can you expand on that a bit?

Sure. The dollar is very weak.

I was hoping for something more.

You get what you pay for, big spender. And I don't see any green on the mahogany. See you around, soldier boy.
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