Will agree with you there 100%. And that's also my point. If this stuff comes apart now, we're all going down.
Its not on anybody's interest to pull the plug. Asian countries know they need to slowly move away from the dollar or they will dig their own grave
Excerpt from TradingMarkets.com directly relevant to the topic of this thread: <i>"Equity Market Dreads Slow Growth/Rising Inflation By Kevin Haggerty ... It was kind of funny listening to Fed Chairman Bernanke yesterday telling us that inflation is the biggest threat. Sounds to me like he is trying to talk the US dollar up, indicating they will raise rates if need be. There is no doubt that industrial metal prices have skyrocketed again, but this is not the case with the economy. Maybe he is worried about the low-ball bogus inflation numbers we get from the Bureau of Labor Statistics. Even the Dallas Federal Reserve Chairman recently questioned the quality of the numbers and the market dislocations that can result. If the current inflation numbers were calculated the same way they were before the Clinton administration revised them, they would be considerably higher. According to data on pre-Clinton era CPI, it would be just under 5%, and the current official government data is only about 1.5% (www.shadowstats.com). The Clinton revision was obviously done to keep the government interest payments down, and for other political purposes, but it also screws everyone that gets cost-of-living raises, etc, based on the CPI. That includes all the people on Social Security. Bernanke knows inflation is much higher than reported, and is now looking at an economy that is slowing down significantly. Third quarter GDP was +1.6, the slowest since 2003, the slump in the housing market is the worst since the early 80's, and yesterday's durable goods orders fell the most in six years, not to mention the inverted yield curve. The slow growth and rising inflation is the worst scenario for the equity market, and it will get very crowded at the exits." Have a good trading day, Kevin Haggerty</i>
u are genius! You really read between lines... Seriously. I don't share such a pessimism as the writer of the above article. Inflation? Yes - partly due to increased worldwide competition for limited natural resources, partly from lower $, partly from higher OER and from higher Cap.Ut. But to believe that in one of the most dynamic times ever US will suddenly stop growing is a little bit too much - especially when the main reasoning is that "Joe" can't sell his house for 10% profit only one year after he bought it...
I honestly don't think we're at that point yet. I think a lot of this move up in EUR is due to repatriation than anything else at the moment. In a few months, the market will realize the whole Fed cut is a myth. The EZ will start to experience a slow and then the story will change. December of 2004 was the same way - with all the people calling for the end of the US as we know it, etc. Then they all vanished in a few months to hide under their rock until now.
That weaker $ influences inflation is not hypothesizing about future but rather stating what happened in the past few years. It is not long time ago when we were all confused if the fx rate is quoted as USDEUR or EURUSD. Quite likely it will simply go on...