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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Square_Dealings who wrote (16284)	11/19/2004 9:49:39 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Eichel: US, Europe, Asia need to coordinate to resolve forex problem - Friday, November 19, 2004 9:41:09 AM afxpress.com (updates with radio interview comment on forex; recasts headline, lead) FRANKFURT (AFX) - German Finance Minister Hans Eichel said the world's three main trading blocks need to coordinate efforts behind the scenes to resolve currency imbalances that have seen the dollar sink against the euro and the yen "Within the trioka - i.e. Japan, America and Europe - we'll have to sit down together and try to reach a common solution," Eichel told DeutschlandRadio Berlin in an interview ahead of this weekend's meeting of G20 finance ministers and central bankers "But that is a matter that is not for the public. Exchange rates are not discussed in public." Earlier, in an interview with the Frankfurter Allgemeine Zeitung, Eichel urged further moves towards greater exchange rate flexibility among the west's key Asian trading partners "In order to make the adjustment process easier, greater exchange rate flexibility is generally desirable," he told the newspaper, when asked about the fixed exchange rate system in some Asian countries "In this connection, I welcome China's move to create the conditions for more exchange rate flexibility, particularly through reforms in its financial sector." The G20 has a "joint interest in stable oil prices", Eichel also said, adding that he expects the group to "jointly adopt this view" [wow who woulda thunk. BTW do they me stable up here or stable at $30? mish] Meanwhile, a cheaper dollar "means of course that oil is not as expensive for us as it appears to be on the world market," Eichel told DeutschlandRadio Berlin "The snag, on the other hand, is that it's bad for exporters," the German finance minister added, while noting that Germany exports most of its goods to partner countries in the EU rather than to the dollar region. newsdesk@afxnews.com mog/jms For more information and to contact AFX: www.afxnews.com and www.afxpress.com

To: Square_Dealings who wrote (16284)	11/19/2004 10:00:15 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Greenspan Coin Toss Theory Greenspan:deficit means diminished appetite for dollars Friday, November 19, 2004 1:45:44 PM afxpress.com WASHINGTON (AFX) -- The large size of the U.S. current account deficit means that at some point that foreign investors will have less appetite for acquiring dollar assets, said Federal Reserve board chairman Alan Greenspan Friday, in remarks prepared for delivery to a conference on the euro in Frankfurt, Germany. Greenspan said it was impossible to know when the dollar would lose its lustre. Statistics have shown that forecasting exchange rates has a success rate no better than forecasting the outcome of a coin toss, he said. But the U.S. must boost national saving to make adjustment of the current account deficit easier. Reducing the federal budget deficit would be the most effective action that could be taken, the Fed chairman said ================================================================ Lose its lustre? WTF like a 30% drop is not losing it like no one saw this coming either? Is he from mars? Mish

To: Square_Dealings who wrote (16284)	11/19/2004 10:12:17 AM
From: mishedlo	Read Replies (3) \| Respond to of 116555

Greenspan Says U.S. Can't Be `Complacent' on Current Account Nov. 19 (Bloomberg) -- Foreign investors will reach a limit in their desire to finance the U.S. current account deficit and eventually diversify into other currencies or demand higher U.S. interest rates, Federal Reserve Chairman Alan Greenspan said. ``Given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point,'' Greenspan said at the European Banking Congress in Frankfurt. ``International investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns to offset concentration risk, elevating the cost of financing the U.S. current account deficit an rendering it increasingly less tenable.'' The Fed chairman repeated his view that financial markets will most likely absorb this adjustment without high costs to the U.S. economy. ``Market forces should over time restore, without crises, a sustainable U.S. balance of payments,'' Greenspan said. Even so, ``we cannot become complacent.'' Predicting what this means for the dollar's level, is difficult, Greenspan said. ``Forecasting exchange rates has a success rate no better than that of forecasting the outcome of a coin toss,'' the Fed chairman said. The euro rose to a record $1.3075 yesterday and traded at $1.3020 at 8:05 a.m. in New York. A euro was worth $1.1988 on Aug. 30. An index tracking the dollar's value against a basket of six currencies fell to 83.10 yesterday, the weakest since 1995, according to Bloomberg data. Trade and Fiscal deficits Greenspan and U.S. Treasury Secretary John Snow are participating in meetings of the Group of 20 finance ministers and central bankers over the weekend. The dollar's slide against the euro is likely to dominate policy maker's discussions, analysts said. Greenspan didn't speak about the direction of interest rates or the pace of U.S. economic growth in the text of his remarks to a Frankfurt panel on the euro. The U.S. current account deficit, the widest measure of trade because it includes investment, grew to a record $166.2 billion in the second quarter. The Fed chairman said one key to the U.S. trade adjustment would be policies that boost U.S. saving. ``Reducing the federal budget deficit (or preferably moving it to surplus) appears to be the most effective action that could be taken to augment domestic saving,'' Greenspan said. ``Significantly increasing private saving in the United States -- more particularly, finding polices that would elevate the personal saving rate from is current extraordinary low level -- of course would be helpful.'' Snow signaled two days ago that the Bush administration won't participate in attempts to stop the dollar's slide. ``The history of efforts to impose non-market valuations on currencies is at best unrewarding and checkered,'' he said at a conference in London. Fed officials received a special presentation from the staff on the U.S. current account deficit and June, and subsequently began remarking on the dollar's potential to fall. ``What corresponds to those deficits is the need to borrow from the rest of the world,'' San Francisco Fed bank president Janet Yellen said Sept. 9. ``Ultimately escalating borrowing leads to, over a matter of decades, as unsustainable a trend as federal deficits, and somewhere that has to turn around, and I believe that involves the dollar.'' Dollars accounted for 63.8 percent of all assets in the vaults of foreign central banks and national treasuries at the end of 1993, the International Monetary Fund said, down from 66.6 percent in 2000. Foreign official holdings of euros rose to 19.7 percent in 2003, up from 16.3 percent in 2000. The U.S. central bank raised its overnight lending rate to 2 percent on Nov. 10, the fourth increase since June. The federal funds rate target is now equivalent with the European Central Bank's refinancing rate. quote.bloomberg.com

To: Square_Dealings who wrote (16284)	11/19/2004 11:09:23 AM
From: mishedlo	Read Replies (3) \| Respond to of 116555

Greenspan concerned with weak dollar Federal Reserve chairman says U.S. must address trade, budget deficits or face future woes. November 19, 2004: 9:51 AM EST NEW YORK (CNN/Money) - Federal Reserve Chairman Alan Greenspan warned the U.S. must deal with the causes of the weak dollar -- the U.S. trade deficit and the federal budget deficit -- or the country could run into economic problems down the line. Greenspan said that while history has shown that developed countries are not necessarily hurt by a weak currency, "we cannot become complacent. History is not an infallible guide to the future," he said in a speech delivered in Europe. The text was released in Washington. "More will need to be done in Europe as well as in the United States to ensure that our economies are sufficiently resilient to respond effectively to all the shocks and adjustments that the future will surely bring," he concluded. Greenspan focused on the nation's current account deficit, the measure of both trade and investments across the national board, which he said has risen to more than 5 percent of gross domestic product, the broad measure of the nation's economy. "It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," he said. Greenspan said it is therefore important that the U.S. budget deficit be cut, a move that would reduce the current account deficit. "Reducing the federal budget deficit (or preferably moving it to surplus) appears to be the most effective action that could be taken to augment domestic saving," he said. "Corporate saving in the United States has risen to its highest rate in decades and is unlikely to increase materially. Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term solutions." The value of the U.S. dollar, which has been hitting a series of four-year lows versus the yen and record lows against the euro during the last couple of weeks, fell following Greenspan's remarks. Greenspan said that so far the evidence is that there is still strong demand for U.S. assets by overseas investors and central banks. Those investments help limit the current account deficit and keep the dollar from sinking further. "We see only limited indications that the large U.S. current account deficit is meeting financing resistance," he said. He added, however, "Net claims against residents of the United States cannot continue to increase forever in international portfolios at their recent pace. "This situation suggests that international investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns to offset concentration risk, elevating the cost of financing of the U.S. current account deficit and rendering it increasingly less tenable," said Greenspan. Greenspan said he did not foresee a crisis in markets if the United States does not close its so-called twin deficits. While he didn't identify what potential crisis he was referring to, some economists have suggested that a sudden collapse in the value of the dollar was possible without taking steps to close the deficits. Greenspan's comments seemed to dismiss that worst case scenario. Greenspan began his comments saying he was speaking as an individual, not for the Federal Reserve. money.cnn.com