[“You’re going to see American profits disappear. American corporations are going to be in big trouble. It’s going to be a mantra not to buy American. All our major manufacturers are reporting major slowdowns in Europe. You’re going to see the dollar disappear.”]
I do not know who is being quoted here but this is just so much fluff.
Hersh is simply a partisan with an ax to grind and should chill out. Evidence that the damage done by the strong dollar is now being undone comes from a report Friday that BMW is planning to build a new factory in the US. The wild swing in the Euro -- up by over 60% from its low five years ago -- certainly hurt European manufacturing competitiveness and will force them to move factories to lower cost nations, with the US now being counted as relatively lower cost. Didn't something similar happen to the US in the 90's due to Rubin and his strong dollar policy?
Now that the words have been spoken by Alan Greenspan,
["It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point".
"This situation suggests that international investors will eventually adjust their accumulation of dollar assets or ... seek higher dollar returns to offset concentration risk, elevating the cost of financing of the U.S. current account deficit and rendering it increasingly less tenable".]
the markets can get on with their business. And, the markets' business is to discount the future, which has already been done in the case of DX: most of the last few years, the US Dollar has been going down in anticipation of the day when the crowd realizes what Greenspan said. Thus, the crowd, which is comfortably short the dollar, is about to get the big surprise: a strong dollar.
Confirmation that the dollar is in the process of turning comes from the open interest in DX futures. Large speculators, who had been heavily short DX, actually have started buying those contracts to close out the trade -- it's the only way they can realize their paper profits. It may take them several weeks to complete this process, but it takes a while to turn a tanker.
It's in the best interest of central bankers around the world to force the big speculators to cover their shorts in the US Dollar to avoid a crash scenario that would plunge the planet into a multiyear depression. Thus, it's not fundamentals which dictate a rally in the dollar -- it's self-preservation that does.
So the Seymour Hersh I say take a chill pill.The effects of a soaring dollar will be wide-reaching and will include a plunge in the price of precious metals and many foreign currencies (not necessarily all, however). |
