Hi, John - In the long, slow decline that began a year ago spring, the market has consistently underestimated the severity of the downturn.
"...since the markets are ruled by psychology to good degree, that when the market wants to focus on the negative, it does, and it feeds on itself."
I agree; but I think that the remnants of the boom psychology still inhabit the markets - witness the recent rally on news that pales in significance to the accumulating global negatives.
Mrs. Peel's post of Stephen Roach's excellent synopsis puts things in perspective. For over a year, the technicals have given conflicting signals (depending, I guess, on who's reading them).
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And still the market rallies; ruled by what psychology? The evidence might (might) support the conclusion that the old 60-month cycle, straightarmed by Mr. Greenspan for so long, is reasserting itself with a vengeance.
In any case, it has long been a truism: as the US economy goes, so goes the world. It's anyone's guess as to what the ultimate effect devaluation of the US dollar would have in a global recession, but I think you have it right...
"...the US imports a tremendous quantity of goods and a lower USD should cause price increases in things like Asian made clothes, shoes, electronics etc............."
I also think a lower US dollar would prolong the global recession - by making it more difficult for others to export to the US, and simultaneously giving the Fed another dragon to slay: inflation.
It's enough to make you wonder if central bank intervention makes any difference, in the end. >g<
Regards,
Jim |
