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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: E.J. Neitz Jr who wrote (88467)	3/31/2003 8:35:45 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 281500

> Relative to this nation's historical past it is quite small relative to GDP Sadly that is irrelevant. Like stock market, moves are based on incremental effects rather than absolute value. Any time a negative change is perceived, even if things are still better than they were at some comparable period in the past, markets head south. > this administration has affirmed a strong dollar policy Only after dollar was dropping too much too fast did they come out and say so and not strongly enough. Later on another "in the know" character whose name I've forgotten said something along the lines...probably the dollar was artificially too high anyway. Which is another way of saying we wanted it to drop but not in such disruptive fashion. > I am sure the Bush economic team would question that. Your opinion again. Sigh...now you are pushing me to dig up the info and do the research, even though you have not done any work for declaring your position. Currency markets are very fickle. What little remark a policy maker makes has huge effects on them because nobody is going to come out and say hey, I want to devalue my money. Greenspan and Co have their super-mild-and-cautious lingo for that reason. Even so, one of the Fed governors, whose name I cannot remember but will provide a link for later on, is on the record as saying deficit can always be cured because you can always print money. This is the kind of language that will send $ south no matter what White House says. I'll get you some links later on but don't expect me to do all the work for you. > Being primarily in bonds since Bush was elected, I have become richer... This has nothing to do with the currency effect. Compared to where you would have been if the dollar was strong, you are poorer. About a year ago, $C was ~$0.62 and I think the low in the past 3 years is around mid/high 50c. Today it is $0.68. So you lost 10% against the loonie since last Jan and about 20% if you go further back. Whatever your gains in bonds, they would have been 20% higher if the dollar had not dropped. ST

To: E.J. Neitz Jr who wrote (88467)	3/31/2003 9:41:26 PM
From: BEEF JERKEY	Respond to of 281500

Interesting take on the war's effect on the dollar @ prudent bear: A quick and “clean” resolution to the war was crucial for bolstering flagging dollar confidence. Today’s open-ended “resolution” is a loss from a financial perspective. So at this point we are left to contemplate the distinct possibility that the growing prospect for a protracted and ugly war could be a catalyst for the looming dollar crisis. After all, over the past five years, Rest of World (from the Fed “Flow of Funds” report) has increased holdings of U.S. financial assets by a staggering $2.7 Trillion, or 56%, to $6.3 Trillion. My heightened concern today is that these massive positions were accumulated under the perception of a world almost unrecognizable to what is now unfolding; a vastly different American economy; an alarmingly deteriorating global economic and political backdrop; and an altered view of the United State’s international role and standing. Holdings of U.S. financial assets were not accumulated with the expectation of massive federal deficits and a wartime economy. The perception of a vibrant, productivity and technology-driven juggernaut is quickly giving way to the reality of a stagnant U.S. economy with enormous expenditures for defense, both international and domestic (not to mention a mortgage finance Bubble!). Keeping in mind our thesis of the exponential growth in non-productive Credit – escalating inflation of U.S. financial claims – foreign holders of U.S. financial assets are now faced with steadfast devaluation of their share of the underlying wealth producing assets of our economy. It’s an accident in wait. prudentbear.com