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

To: Lee who wrote (3066)	5/3/2001 5:38:50 PM
From: Ahda	Read Replies (1) \| Respond to of 3536

Thank you for your post you have answered some questions that have bothering me. The rational within this post is superb the reality of the possibility of a dollar not creating enough value in our own nation is clearly seen in this. biz.yahoo.com

To: Lee who wrote (3066)	5/4/2001 2:04:37 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

Lee, Thanks for the Makin article: The Current Account Deficit Is a Poor Guide to Dollar Behavior. This is certainly true in the short term, but over time the imbalance that the U.S. has in its current account cannot be maintained. Indeed, I think that we have reached a point where a change will occur. The manufacturing recession the country is in could be greatly helped by a decline in the dollar. The recent report on auto sales pointed to an ongoing problem that domestic auto producers are having in losing market share to foreign producers. The risk of a sharp slowdown in U.S. consumption growth is not negligible in view of the fact that U.S. consumption has continued to grow at a rate 2 percentage points above the growth rate of disposable income, with the difference being financed by a sharp rise in consumer borrowing. Here Makin points out the other large imbalance in today's economy, that of too much consumption, given the growth in income. When spending slows, as it certainly will one day, the large current account deficit will suddenly be thrust into the limelight. I think you will see American manufacturers calling for a weak dollar policy by the government. Until then, the tug of war between American's demand to spend and foreigners demand to invest in dollars will continue. As soon as the tide changes and the dollar begins to fall, the wave of foreign demand for dollar-denominated investments will turn to a trickle. There is nothing as self-reinforcing as a move in the currency markets. When this one begins, it will be a big one. Today's revelation that the U.S. may have crossed the line into recession means, IMO, that this day isn't far away.