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

To: RealMuLan who wrote (17490)	12/2/2004 8:21:23 PM
From: RealMuLan	Respond to of 116555

Consumers could get caught under falling dollar Wall Street cheering, but currency shift carries risk for housing By Martin Wolk Chief economics correspondent MSNBC Updated: 5:29 p.m. ET Dec. 2, 2004 Is the dollar's latest dive anything to be afraid of? From Wall Street to Washington, the answer has been a resounding "no." Economists, traders and business leaders have been cheering loudly, saying a decline in the currency is long overdue, boosting the ability of U.S. producers to compete in a tough global environment. Few take seriously the Bush administration’s occasional pronouncements that it still favors a “strong dollar," and even Fed Chairman Alan Greenspan gave a nod of approval to the trend in a high-profile speech in Europe last month. The dollar’s decline “is medicine needed to promote the healing of global imbalances,” said J.P. Morgan Chase senior economist Bruce Kasman in a commentary titled “Two Cheers for the Dollar Decline.” But for consumers, that medicine could be hard to swallow, especially if the dollar’s decline turns into a free fall. That could spark a run-up in inflation and force the Federal Reserve to raise rates aggressively, potentially bringing down the high-flying housing market. “A weaker dollar, generally speaking, is better for business and bad for consumers,” said Mark Zandi, chief economist of Economy.com, a forecasting firm. “If the dollar’s decline is orderly, then inflation will rise, but very modestly,” he said. “In a darker scenario, the process is not smooth, interest rates rise more and the pain we feel will be more significant, in large part because of problems in the housing market. The housing market will get crushed, and that will reverberate through the economy.” msnbc.msn.com