Believe you've nailed the most important issue for investors over the next Vernal Equinox year which began in March 20.
This dollar chart from 1983 tells a story.
stockcharts.com[h,a]maoannay[d19831021,20051021][pf][iLb14!Lh14,3!La8,21,5][J37987068,Y]&pref=G
IMO...FWIW...
Positives: The dollar is sitting on chart support with a long history of being defended, plus a window for a Forward Time Projection entered 1 bar before the recent 80.39.... which should produce a rising dollar. This will be confirmed with a solid close above 90'32.
Negitives: Their are some mighty rumblings going on that about the world amongst financial leaders... suggesting the worlds monetary systems are out of balance, (enclosed article)... that the risks are growing and that these creditable imbalances are of a very serious nature.
So with the dollar perched on 22 years of support, to ignore the prospect that they're right... but do not fix the problems... could present rapid declines in the dollar. If that 90.32 isn't taken out that maybe a key?
As we both know the international monetary system is an agreement to agree amongst the major central banks, lets see if they can agree....?
Tough Choices For World's Finance Leaders
By Steven Pearlstein
Friday, April 15, 2005; Page E01
washingtonpost.com
Let's give a warm Washington welcome to the finance ministers and central bankers who are in town from all corners of the globe to attend the annual meetings of the World Bank and International Monetary Fund. We hope you'll enjoy our ritzy hotels, eat at our fine restaurants, maybe even take in a baseball game. And, as always, the Metropolitan Police Department is at your disposal to keep the protesters at bay while ensuring you never get caught in the traffic jams you create.
We'd just ask one teensy, tiny favor: Get real. Forget about the cheerleading and the macroeconomic mumbo jumbo. Put aside domestic political considerations and your cherished institutional prerogatives. History will record this as your last, best chance to acknowledge that the global economic machinery is badly out of whack and to finally do something to fix it.
There's no dispute about what needs to be done. None. The United States has to raise taxes, curb government spending and get short-term interest rates up to 4.5 percent in the next year. Europe has got to lower interest rates and unshackle an economy from strangling regulations and union contracts. Japan needs to open sheltered sectors to foreign competition. And China and other Asian tigers have to unpeg their currencies from the dollar.
None of this is easy, and almost all of it is contrary to current policy and political wisdom in each country. But the lousy political choice is either to do something unpopular now or face the consequences of a nasty global recession before long.
"We are running out of time, and markets may not be willing to wait till after the next election," declared Raghu Rajan, the top economist at the IMF. "The world needs action now."
The problem is that the global economy has settled into an arrangement of mutually dependent economic pathology. It's complicated, but the story goes something like this:
With his tax cut, American Joe buys a DVD player whose components are made in Taiwan and Singapore and assembled in China. But rather than spend their wages and profits, workers and companies in those countries put 40 percent of them in the bank.
The banks might have used the deposits to make loans so local companies could expand, but there is already too much capacity in most industries. So they do the safe thing and buy U.S. Treasuries and Fannie Mae bonds, knowing their central bank will minimize their currency risk by keeping it pegged to the dollar.
As it turns out, all these purchases of U.S. bonds help push interest rates down to unusually low levels, sparking a housing boom and prompting Joe to refinance his house and take out some equity. He uses the proceeds to build a new family room and equip it with a flat-screen TV whose components are made in Taiwan and Singapore and assembled in China. . . .
It's a wonderful arrangement that, in the short term, generates solid growth rates in the United States and spectacular growth in Asia, some of which spills over to Europe (in the form of increased exports) and Latin America and the Middle East (in the form of higher oil and commodity prices). And voila: We've just had the best year for the global economy in decades.
Two problems. One, it is unsustainable. As the Brits might say, there's only so much your tailor will be willing to lend you to buy his suits.
More significantly, it makes no sense to take capital from developing countries, where it could be invested to generate higher productivity from a growing workforce, and ship it to the United States, where it is used to bid up the price of real estate and let the people who are already the world's richest live beyond their means. Capital is supposed to flow the other way -- and at some point, it will.
The only question now is how this return to the normal order will be accomplished. Alan Greenspan, John Snow and the others could still surprise us this weekend by announcing a bold, coordinated effort to bring about an orderly rebalancing of the global economy. Or they could party on, waiting until growth slows, inflation takes off, the dollar collapses and a series of financial crises does it for them. |
