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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: sciAticA errAticA who wrote (33588)	5/12/2003 11:10:16 AM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

CHAOS-ONOMICS: Strangely Attracted to the Truth May 12 chaos-onomics.com The Security Council resolution that you and Jack have so secretly negotiated contradicts the assurances I have given in the House of Commons and elsewhere about the legal authority of the occupying powers, and the need for a UN-led process to establish a legitimate Iraqi government. This makes my position impossible. - Clare Short UK International Development Secretary What an interesting weekend. US weapons inspectors are calling it quits, according to the Washington Post, not having found any WMD. The US and Britain admit to being "occupying powers" in their UN draft resolution, and expect to take over the UN Oil-for-food program. Not wanting to get caught out as a spoil-sport, Germany and France agree to drop sanctions but still hope to win out in the battle over the fine print. Meanwhile Tony Blair's Labour Party is being rent asunder by his support for the US military adventures and waffling on the Euro. Topping it all off, Treasury Secretary Snow did his best Paul O'Neill imitation in praising the benefits of a lower dollar for exporters. The skeptic in me, while considering the dismal conditions in post-war Iraq, notes how useful current conditions are for engendering international support to get aid rolling into Iraq as soon as possible. The initial stand of Russia, France and Germany calling for a return of UN WMD inspectors prior to a cessation of sanctions looks a bit cold hearted, which, I imagine, has led to some softening of the view. However, the apparent progress towards a resolution still leaves open the fine print of currency denomination and duration of direct US/UK control. Meanwhile China seems to be following Russia in a more hard line approach, insisting on a leading role for the UN in Iraqi reconstruction. Is it just me or does it seem as if Tony Blair is using his Chancellor of the Exchequer, Gordon brown, as the "bad cop" on Britain's entry into EMU in an effort to shield himself from further Labour Party revolt? With the party already in turmoil over Blair's support of, in their words, Bush's War and given last week's upset over the NHS, Mr. Blair had best get some good news to the people or the Tories, despite recent internal party problems of their own, might be ready to offer voters an alternative. While the FX crowd must be happy as clams to have the US Treasury Secretary give them the "all clear" to buy as many Euros as they like (although still nervous about the heavy hand of Peter "the fixer" Fischer's penchant for reminding markets of "two way risk") talk of the benefits of a cheaper currency sounds a whole lot like the "beggar thy neighbor" polices of currency devaluation that collapsed world trade in the 30s. The recent slide in the US$ explains, perhaps, the recent strength in the US stock market. That is, rather than reading the equity market rise as a sign of recovery, one could also read it as a sign of the protection against a currency devaluation trade. Similar action was evident in many of the SE Asian nations right before the currency devalued as well as in Argentina and Brazil. It is far less market disruptive to buy $5B in US common stock than it is to buy $5B in precious metals. Turning to the chart of the day, a reader alerted me to the rather lackluster performance of the Euro vs. Gold. I find it interesting the Euro/Gold is trading at roughly the same level it was when Iraq made the shift to denominate its oil exports in Euros. To the extent one chooses to rank fiat money by its ability to hold value vs. Gold, the Euro looks to be the new sheriff in town as the US$ has lost nearly 30% vs. Gold over the same few years. Perhaps some of the recent Central Bank selling of Gold has been an attempt to make the Euro as good as Gold. I wonder if some of the Euro-philes are beginning to plan for a Bretton Woods type meeting only in Brussels this time? Regardless, Gold bugs have much to gain from a little competition in fiat money land.