So... the DXY is now 1-2 days distance from all time lows. We took out the 04 low in July. Next is the 1992 all-time low at 78.33, just over a point below its current level What's the plan to avoid a monetary collapse? Bernanke doesn't comment on it. Paulson has always held that a strong dollar is in our interests. All I see is an accelerating weakness... especially if they're cutting rates next week At the very least stop jawboning a healthy economy when the bubblegum holding it steady for the last several years has been mostly monetary weakness. Who are they kidding? Are we trying to stall the neocon heartland revolts until a democrat is in office or.... we're gonna give alaska to canada in exchange for a monetary merger? Bleed it so slow nobody notices? Plutocracy? Barter?
I think they can't raise rates to save the dollar because that would cause a market crash, deflation and depression. If they try to hold rates in an effort to stabilize the dollar, the economy will weaken into a recession by January, even if no other calamity hits in the meantime. So that only leaves cutting rates in an effort to keep the music playing. It buys yet more time to fix the imbalances at the cost of debasing the dollar still further. Will they waste the opportunity yet again?
How does a rate cut help for people trying to save? It doesn't make any senses if he is going to cut on next Tuesday. Maybe he wouldn't; we just have to wait to see.
This guy http://www.gold-eagle.com/editorials_05/willie021605.html had some negative comments about the DXY as an index in 2005. He had some interesting comments about hedge funds too... I recall when the Dollar vs. Yen was about 85 in the Reagan era. The US started exporting to Japan, it was a good thing for the trade imbalance probably and the US economy in general..
good article, thanks. explains it well for sure, there's an argument for further weakness to improve the trade defecit. just looking at the DXY from 81-89, it looks like we're lower here than at any point during the reagan years. I wonder at what point the trade deficit would reverse trend... it seems to be falling even faster than the dollar.
The falling, plummeting?, dollar does not seem to have been of great help in improving exports and decreasing imports so far. Although we certainly have done a marvelous job of exporting weapons all over the world, subsidized by US tax dollars disguised as "foreign Aid." Then we tax payers cleverly lend a hand to our US weapons industry once again when we trundle off to "liberate" the foreign lands that we previously sold subsidized weapons to. This seems to have been working out pretty well for the weapons industry so far. Thank God, that he/she is on our side -- otherwise where would we be? I suppose that part of reason that imports were not so much decreased by printing a few extra trillion dollars was that pesky Chinese peg of their currency to our dollar, and then when they finally agreed to be nice, they just dragged their heels when it came to letting their currency appreciate. But this hasn't been all that bad for us. I mean, what would Wal-Mart do if it wasn't for China? The Chinese have been mighty nice in helping us hold inflation down to ten percent or so. One place where the falling , diving?, dollar has truly been exceedingly helpful is in boosting the bottom line of our patriotic US corporations. In fact this has been so successful that the increase in earning of not a few of the really big guys can be attributed almost 100% to appreciation of foreign currencies v. our own colorful but pathetic dollar. Have you noticed that we finally caught on to how important really spiffy looking currency is, and have started to take lessons from countries with really great looking money like Argentina and Malawi? And too, there is one other place where our slipping, crashing?, dollar has been a Godsend. It has really taken a bite out of our balance of payment deficit by making US domestic assets dirt cheap for our pen pals across the water. You know, useless stuff like land, skyscrapers, ski areas, ports(?), oil and chemical companies, they are real bargains now. Now that the Japanese own Steamboat why not sell Aspen too the Saudis? Oh, and i almost forgot the best thing. The Stock market. Up, up, and away! Whew it's just breath taking. Some people say its flat-lined for four years in discounted dollars, whatever they are. What the hell are they talking about? The damn thing looks like its gone straight up to all time highs to me. It's working folks. What geniuses our guys in Washington are! Cut taxes, which is really nice. (I sure did enjoy spending that check Mr. Bush sent me.) Then just borrow what we need to pay the bills and print some later to pay back what we've borrowed. Maybe print a little extra in case of an emergency. Love it! Love it! Love it! Who says mister Bush is not smart? He's a damn genius!
Personally, I favor that they raise rates.... with the explanation, "defend the $USD". It doesn't matter how much "time they buy", they never do anything with it... except print more money and overspend. At the rate they're going, in 30-50 years the $USD will be so low nearly all Americans will effectively be bankrupt... we'll all be Pauper $Bazillionaires. Then they'll look back and say, "something should have been done"... but it will be too late.
Think this way; most Japanese pension has supported USD for last 20 years so; then China will come in to position; where Japan has held before. If fed cuts rate to support the market which will hurt these foreign banks' primary reasons to support USD; and there will be no compelling reason for confidence in USD backed assets; Lost confidence in USD will lead to lost the leadership of the wolrd. But we have too many egotistical politicians already.
It's "pay back" time for the US economy....and now we are oh-so-hosed and Bernanke knows it. The key "fixes" needed: 1) less government spending 2) smaller government; less bureaucracy 3) de-legislation of stupid laws that impede growth just never happened. I leave it up to the astute readers of this thread to develop contrary examples for each of the above. Some Hints: Sarbanes-Oxley, The ever-so-awful FAA & TSA.