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

To: Noel de Leon who wrote (98457)	5/18/2003 5:53:55 AM
From: Dayuhan	Respond to of 281500

Interest rates only explains some of the difference in the evaluation. More important is the lack of confidence in American markets. A bit more complicated than that, I'd say. The dollar, like everything else, was wildly overvalued in the '90s, as everybody wanted to put their nut in dollar-denominated investments. The excessively strong dollar that resulted had a lot of negative impacts on the US, particularly on the trade deficit. I see the current trend less as a fall than as a return to a sane valuation that keeps American companies competitive. Eventually the ECB will have to cut interest rates in response, and that's not a bad thing either. Confidence in US markets may be less than it was in the 90s, but that confidence was excessive, and it deserved to be brought back to reality. Too many people assume that a strong currency is good for a country and a weak currency is bad. Like most simple formulations, that is thoroughly inadequate.

To: Noel de Leon who wrote (98457)	5/18/2003 11:25:51 AM
From: HH	Respond to of 281500

"Interest rates only explains some of the difference in the evaluation. More important is the lack of confidence in American markets." Instead of focusing on "market confidence" or interest rates you might find this reference from Le Monde insightful ..... <<...... thesis advanced in the newspaper Le Monde that the current decline in the dollar does not reflect American weakness but a situation in which "the power of a country, in circumstances of low inflation and low growth, is reflected in its ability to depreciate rather than increase the value of its currency.">> iht.com HH