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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: sea_urchin who wrote (22603)	3/11/2005 6:37:05 PM
From: philv	Read Replies (2) \| Respond to of 81102

I have been aware of his call visa vie the US dollar. I don't have a crystal ball, but I would be surprised if there is a large up-side to the dollar. He is a true contrarian, and worries that if everyone is on one side, there is something wrong. He has expressed these views for at least a month now. You know there is something very wrong when even the greatest scam artist on earth sounds warnings. "The U.S. economy appears to have been pressing a number of historic limits in recent years without experiencing the types of financial disruption that almost surely would have arisen in decades past. This observation raises some key questions about the longer-term stability of the U.S. and global economies that bear significantly on future economic developments. Among the limits that we have been pressing against are those in our external and budget balances. In the United States, we have been incurring ever-larger trade deficits, with the broader current account measure moving into the neighborhood of 6 percent of our gross domestic product. Yet the dollar's real exchange value, despite its recent decline, remains above its 1995 low. Meanwhile, we have moved from a budget surplus in 2000 to a deficit that is projected by the Congressional Budget Office to be around 3-1/4 percent of GDP this year. In addition, we have enacted commitments to our senior citizens that, given the impending retirement of our huge baby-boom generation, will create significant fiscal challenges in the years ahead. Yet the yields on Treasury notes maturing a decade from now remain at low levels. Nor are households experiencing inordinate financial pressures as a consequence of record-high levels of household debt relative to income. Has something fundamental happened to the U.S. economy that enables us to disregard all the time-tested criteria for assessing when economic imbalances become worrisome? Regrettably, the answer is no; the free lunch has still to be invented. We do, however, seem to be undergoing what is likely, in the end, to be a one-time shift in the degree of globalization and innovation that has temporarily altered the specific calibrations of those criteria." This from a thread I follow. Message 21126218 "Has something fundamental happened to the U.S. economy that enables us to disregard all the time-tested criteria for assessing when economic imbalances become worrisome? Regrettably, the answer is no; the free lunch has still to be invented." I think Greenspan knows there is something very wrong, and in his words, there is no free lunch. The tab will be paid. Mostly by Americans and whoever hold American assets. A depreciating US dollar would fit the bill, not the other way around. There are plenty of examples of countries who got into fiscal trouble, and in not one of these examples did the currency rise. High interest rates always resulted to defend the value of the slumping currency. Which country imports the most oil? Which country is the biggest borrower? Which country has the world's biggest trade deficit? Unless these issues are addressed, I just find it hard to accept Faber's argument, especially in the medium to long term. I just can't think of any good reason, given the fundamentals, for the dollar to appreciate. Faber is a pro, and has a substantial following I am sure. He makes a living prognosticating about these matters. On the other hand, I am not, and don't, and am not as smart, nor convinced.