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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (2675)	12/24/2000 10:15:03 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 3536

the Marshall plan stipulated that the money be used largely to buy US goods Well that's correct, but if we took out that foreign aid gave them in order to purchase our products, they would have been in a trade surplus with our markets. Without that foreign aid, they wouldn't have been able to afford US products anyway. But those nations still possessing an ability to export (bananas.. etc?) likely enjoyed a trade surplus with the US. The numbers just aren't being reflected because we're not pulling out the foreign aid. it could cause a drastic decline in the Dollar and thus repatriation of funds to their foreign owners To where? We're talking 100's of Billions of dollars worth of assets Zeev. What other economy is able to handle such an influx of funds, OR BE ABLE TO JUSTIFY SUCH INFLOWS? Japan? Nahhh... they pay lousy interest rates, are in a liquidity trap, have a national debt equal to 130% of GDP, declining taxpayer base, and will probably have to resort to devaluation to spur their consumers to loosen up their wallets. And as the US slows to a walk (crawl?), they will slide into full-blown recession. Europe? Well, they could put it there. But Europe lacks unity of direction, or cultures, and they still have an unpredictable Russia on their borders. Furthermore, their economic problems also display high unemployment, excessively high taxes/wages, and in the event of a slowing of US economic growth, Europe will ALSO slow and be forced to lower rates to spur growth. So since economic weakness in the US will spur even weaker economic conditions in other nations, pulling wealth out of one weaker economy and into an even weaker one makes little sense to me. I just think we're overblowing this "capital flight" scenario... The dollar is retracing back to the monthly trend line. If we break through 105 on the downside, then I might start getting nervous. But anything down to there is a needed consolidation: futures.tradingcharts.com And this one from Carl Swenlin over on decisionpoint: decisionpoint.com Regards, Ron

To: Zeev Hed who wrote (2675)	12/26/2000 8:27:40 AM
From: Henry Volquardsen	Respond to of 3536

Zeev, my only real argument with your post is the implication, perhaps incorrectly drawn on my part, that there would be a sudden realization that the trade deficits are to large leading to a drastic decline in the dollar. My response would be that the free flowing nature of the currency market is such that the realization would not come suddenly but over an extended period and this would be factored in over time and not suddenly. This is more of a technical disagreement over how the market would function than a disagreement over possible cause and effect. As supporting evidence I would put forward the dramatic decline in short term volatility in the currency markets over the last 20 years. I first started in the business right after the collapse of the fixed exchange rate regime. At that time the intraday volatility was huge. Over the intervening two decades intraday volatility has greatly decreased as the markets have gotten very efficient at assimilating information and changes in trend. To me this argues against drastic moves and in favor of more subtle but longer term trends. Btw your near term forecast of the Euro retesting parity leaves it well short of its IPO. I agree that the implementation of the Euro was folly. On Japan I am decidedly pessimistic. There are no signs of a serious attempt to grapple structural issues. Also the demographic issues are snowballing ahead and very few people have paid much attention to the looming pension issue. Try as I might I can't see an exit for Japan that doesn't endure deep trouble. Henry