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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (17264)	2/20/2003 11:29:53 AM
From: Gary H	Read Replies (1) \| Respond to of 81972

Speaking of the Dollar, this is from the Richebacher Letter of Feb. 03. "Today’s economic and financial conditions in the United States are incomparably worse than in 1987–89. Economic growth is much slower today, the trade deficit is much higher and interest rates are much lower. But there is still a fourth factor that makes a great difference: the unprecedented exposure to the risk of a falling dollar, running into trillions of dollars, both from existing foreign holdings of dollar assets and from euro liabilities incurred by American corporations and institutions. The important point here is that both have principally abstained from covering their exchange risk. Strong expectations to gain from a strong dollar or from a weak euro prohibited any hedging. But the unexpected reality for them now is a falling dollar and a rising euro. Being sure of a further long and steep fall of the dollar, we have been wondering for some time when the foreign investors and American borrowers will finally give up on the strong dollar and stop their bloodletting either by liquidating their positions or by safeguarding themselves at least against currency losses by selling dollars in the forward market. Such hedging has probably started, though at a moderate scale. This brings us to the destabilizing forces at work in the markets. There is a widespread assumption of a "normal" level of the dollar against other currencies, from which it will not diverge too far or too long. No such level exists. The dollar is effectively out of control. There is no way to say where it may bottom. This is a measure of the macroeconomic costs of allowing an external disequilibrium to become so large and to accumulate for years. The dollar’s fate no longer lies in the hands of central banks or banks but in the hands of many millions of fickle private investors. Mr. Greenspan’s extreme monetary looseness created a whole variety of bubbles. The dollar bubble was one of them, and all bubbles infallibly burst. Considering the incredible size of the excesses and imbalances that have accumulated in the U.S. economy and its financial system, there is certainly the potential for an uncontrollable crash of the dollar."

To: long-gone who wrote (17264)	2/20/2003 3:01:55 PM
From: sea_urchin	Respond to of 81972

long-gone >If that $ has a artificial high value, it puts our commodity producers at a disadvantage on the world markets. True, but imports come in very cheaply. However, notwithstanding those cheap imports because of the strong USD, the US balance of trade is in excess of minus one billion dollars per day ie $1bn per day in favor of foreigners. So, if the USD devalues further, this will only aggravate the already existing huge trade deficit. Here's Mr Hodges again: mwhodges.home.att.net >>>The U.S. is the world's largest debtor, a long fall from being the world's largest creditor when I was a young worker. In recent years the adult population consumed $3 trillion (borrowed from foreigners) more than they produced, leaving their children owing $3 trillion of their future income to foreign interests. Not a nice bequest from one generation to another.<<< What I have read is that the devaluation of the USD is part of a deliberate and wider policy to head-off deflation and try to make some inflation because it is the deflation that will put the economy into recession. As we know, there is no simple way that the already massive fiscal and personal debt can be paid off and inflation is seen as a way of reducing that debt in favor of increasing the value of assets. This set of charts (components of the CRB index) shows that, although the CRB, itself, is rising continuously, the agricultural components are steady or have fallen. Surely this indicates that GWB has not kept his promise to farmers because, although the USD has fallen and commodity prices have risen, Agriculture and Livestock prices have not. stockcharts.com\|D