"I've long believed that China's currency is due to appreciate notably against the buck," says currency expert Jack Crooks, upon returning from speaking at a Forex seminar in Beijing.

In his World Currency Alert he explains, "Until now, there's been no straight-forward, highly-liquid way to play it. Now there is: the WisdomTree Chinese Yuan Fund (NYSE: CYB)."

"I now think it makes sense to secure some exposure to the Chinese yuan. There's been a major U.S.-China dynamic that's drastically altered the global economic landscape over the last several years. It goes a little something like this:

• China sends goods to the U.S.
• The U.S. sends dollars to China.
• China sends dollars back to U.S.
• The U.S. sends treasuries to China.

"Ultimately, China supplies the globe with liquidity. Behind this capital flow is an artificially undervalued Chinese yuan. This exchange rate situation is why China has become a major supplier of goods and capital to the rest of the world.

• China's inflation rate hit a new 11-year high of 6.9% in November.
• Food price gains are playing a large role in China's fight with inflation. Pork prices, which leaped 56% from a year earlier, combined with meat and poultry prices rising 38.8%, are real drivers of inflation as a wealthier middle class consumes more meat.
• China hiked interest rates in 2007 six times and also increased banks' reserve requirement ratios 10 times.

The British Pound sank to new all-time lows against the Euro, as the market is counting on more interest rate cuts in the UK. What is interesting to note that with all the cynics out there saying how lousy the US economy is and that the Dollar is a "has-been" currency, it's not the only major currency to get hit.

This news follows the Bank of Israel raising rates by 0.25%, this move was made in part to slow down potential inflation. The currency markets are at a crossroads. In some countries the dreaded inflation has already arrived, and central banks have no choice but to raise rates. Other countries are doing their utmost to stay out of recession and have relaxed a tight money policy, trying to create more money supply.

2008 promises to be an exciting year in the Forex markets as the inflation/slow growth war is played out among the world's currencies.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/24/07.

This post was part of AOL Money & Finance's Best & Worst of 2007 feature. The voting has now closed and readers have chosen the weak dollar and rising oil and gold prices as the money story of the year. Be sure to let us know in the comments if you are pleased with this result.

As we approach the end of 2007, we now have a really tough question to answer. What is the Money Story of 2007? What are the candidates?

The Boom and Bust in Private Equity Buyouts

As we entered 2007, no one could imagine the activity with private equity firms around the world. Private equity firms were supposed to be the new Masters of the Universe, ushering in a new Gilded Age not seen since 1920s. We saw this with the initial public offering of the Blackstone Group, the premiere private equity group. This was followed by a series of public and semi-public offerings by other organizations, such as Apollo Group.

However, the new Roaring '20s was relatively short-lived with the credit crunch. This caused most merger activity, including corporate buyouts, to come to grinding halt. Blackstone Group (NYSE: BX) now trades substantially below its high price. Who could guess that private equity would experience a boom and bust all in the same year? However, before you dismiss private equity as an element of the past, remember that most of these firms still have substantial cash available ready to invest when conditions are ripe.

1. Asian central banks should allow faster currency appreciation to offset inflation in their home countries
2. It is becoming costlier for the central banks to enter foreign exchange market

The New York Times reports that the Dow lost 360 points -- or 2.64% -- back to where it was before Ben Bernanke cut the Federal Funds Rate an unexpectedly large 50 basis points. My message to Bernanke is that cutting rates just to keep the market from falling is not a winning strategy.

The Fed is supposed to keep inflation in check, and it's failing at that job. How so? At $96.37, the price of oil is near an unprecedented $100, and gasoline prices -- which blessedly dropped during the fall -- are poised to rise about 50% to $4.50 a gallon, just as people step up their driving during the holidays. On January 19, 2001, oil was $24 a barrel -- it has since quadrupled. Meanwhile, the cost of heating a home is hitting a record -- $3.05 a gallon for home heating oil in Massachusetts. It may be higher elsewhere.

Then there's the little problem that the Fed has engendered through its rate cuts -- a dollar that's plunging like a knife. Relative to the euro, the dollar has lost 13% from $1.30 at the beginning of January 2007, to its current $1.47. And since January 19, 2001, the dollar has lost 60% of its value! Back then, one euro bought 92 cents. In addition to Brazilian supermodel Gisele Bundchen, China is now seeking to switch from the dollar to the euro. So the dollar drop is feeding on itself.

I'm glad that I'm not the only one who is just a little miffed at the way that Fed chairman Ben Bernanke and his elite staff have chosen to handle our economy. My feelings fall pretty much in line with those of investment genius Jim Rogers. I listened to a short interview with him today on public radio. He pretty much confirmed my belief that the dollar could be going the way of the dinosaurs. For crying out loud, the Fed dumped about four tons of greenbacks on the financial system Thursday. Bank leaders such as Citigroup Inc. (NYSE: C) aren't generating enough profit to meet the demands of operation and to please the shareholders at the same time! What's the Fed going to do about the 80% profit decline at Wachovia Corp. (NYSE: WB)? A lower basis point for bank borrowing won't even scratch the surface of the cash shortfall. In fact, the lower the basis point the more it injures the bank's ability to make a profit on the loans that we need right now to salvage some home ownership scenarios from the mortgage debacle. How much more evidence do you need to realize we are living in a time of disastrous fiscal policy? We're lining up to make 1929 look like a cake walk.

What a fantastic time to own oil, gold, or any currency other than the dollar! And what a wonderful world it must be for foreclosure lawyers! How can you profit? Buy non-dollar currencies, lock in your heating oil price, and consider shorting mortgage insurers.

The statistics are mind-numbingly awful. The price of oil hit a record $96 a barrel, up 300% from $24 in January 2001. Gold is near a record high at $800, the dollar is at record lows -- for instance it takes $2.08 to buy a British pound. Housing, which has been tumbling from its peak in August 2006, is hurting too -- with foreclosures up 100% in the last year. And the mortgage meltdown has led to big layoffs -- my firm counts 70,087 finance layoffs by 42 companies so far this year.

There are three ways you can profit from this trend. First, you can buy currencies -- like the pound and the Euro -- which are getting stronger as the dollar weakens. Second, if you heat your house with oil, you can consider locking in a fixed price -- because oil is clearly going to keep going up.

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Despite a 50 basis point drop in the price of money, the Bernanke bailout is not helping the LBO market much. The New York Times [registration required] reports that a $25 billion deal to take student loan bundler Sallie Mae parent SLM Corp. (NYSE: SLM) private is on the skids.

Meanwhile, Bloomberg News reports that the negative side effects of lower interest rates is helping weaken the dollar. This morning it hit a record low of $1.40 relative to the euro. This may actually be good news for companies that derive a significant portion of their revenues from overseas -- particularly in Europe. But as someone who is thinking about taking a trip to Europe next year, I am concerned about how outrageous the prices there will seem to me.

J.C. Flowers, the firm spearheading the SLM buyout, may be willing to walk away from the deal and pay the $900 million breakup fee. Sallie Mae stock now trades 17% below its 52-week high of $58, probably because the market anticipates the deal will either fall apart or be concluded at a much lower price.

There is a bit of glee circulating on the frozen tundra amid news that the Canadian dollar has hit the equivalence of 92.34 American cents, its highest point in 30 years. TD Securities Inc. chief currency strategist Shaun Osborne states that it is possible that the Canadian dollar could reach a value of .96 cents by June. Analysts agree that if commodity prices continue to rise, there stands a good chance that the two currencies would equalize. I say if that point is reached the two currencies should be immediately put into lockstep and our fluctuating currency exchange on our northern border should end forever. Could it be done? Yes, it could. Will it ever happen? Probably it won't.

Personally, I think the benefits would far outweigh the temporary disadvantages. Granted, I expect there would be quite a tussle in the commodities exchange for a time but that's a self adjusting system anyway. NAFTA paved the way for the "free flow" of goods and materials across our borders. Currency equalization would take the teeth out of much of the damage that tilted document has inflicted upon the American economy. I suspect that Canadian manufacturers might get just a little testy about the idea, but I believe that in the long run it would level the playing field for them as well as us. I also think it would give North America a lot more leverage in the world markets.

Economic idealists and world view visionaries already have a name for a singular North American currency. Do a web search for the word "Amero" and you'll spend the rest of your week reading about it. You'll receive every point of view you could ever imagine. Some say it would be the next step to the "One World Government," some say it would be a protectionist move. I say it's the most logical step toward stabilizing two very powerful yet unsteady economies. I see it as a grand statement to the rest of the world that there's still a force to be reckoned with over here pinned between the Atlantic and Pacific oceans.

Then, if we could just annex Mexico...

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