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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: George K. who wrote (37061)	9/13/2005 8:53:15 PM
From: regli	Read Replies (2) of 116555

Reflecting back to 1987 might be worthwhile. "Two weeks before the crash, investors were shaken by news that the U.S. trade deficit had not declined as expected -- in fact, the $15.7 billion deficit reported in August was 50 percent worse than anticipated. Then an increase in West Germany's interest rates provoked Treasury Secretary James A. Baker into threatening a currency war by driving the dollar down, in open defiance of February's Louvre Accords (by which the U.S., West Germany and five other nations agreed to keep their currency values within a mutually beneficial trading range.) The U.S. objected to higher foreign interest rates because they would mean lower American exports and less available capital on the international market, capital needed to cover the federal budget deficit. A declining dollar, it was feared, would result in a flight of foreign capital from the U.S. These events caused many investors to begin bailing out of the market in anticipation of rocky economic days ahead, especially in light of the chronic failure by a Republican president and a Democratic Congress to agree on how to reduce budget and trade deficits." eightiesclub.tripod.com

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