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

To: mishedlo who wrote (25715)	3/16/2005 12:51:17 AM
From: CalculatedRisk	Read Replies (1) \| Respond to of 116555

California Real Estate Prices: Boom and Bust calculatedrisk.blogspot.com Someone commented that California RE prices never decline. Here are some graphs showing previous busts.

To: mishedlo who wrote (25715)	3/16/2005 6:02:24 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 116555

The future path of the U.S. dollar is likely to depend much less on the actions of Asian central banks than on U.S. domestic policies, the economist Joseph Stiglitz said Tuesday. Indications that Asian central banks are reducing their large purchases of U.S. dollar securities, especially government bonds, have roiled the currency markets in recent weeks. The U.S. has also asked China to revalue its currency, the yuan or renminbi, in hopes that would narrow the U.S. trade deficit with China and thus reduce downward pressure on the dollar. But Stiglitz said the U.S. should look at home for the root causes of the dollar's weakness: a huge current account deficit that can be financed only by increasingly large foreign purchases of U.S. securities. A country's current account deficit is by definition the gap between how much it invests and how much it saves, Stiglitz said, arguing that since domestic savings in the U.S. are so low, capital inflows have to be large. "These are basic economic identities," he told a conference organized by Credit Suisse First Boston. "The heart of the problem is domestic savings. And underlying that are the huge fiscal deficits." Stiglitz, who was a senior economic adviser to the Clinton administration, blamed the large increase in budget deficits under the Bush administration for the rapid deterioration of the U.S. current account position. "The question is whether the adjustments to address major imbalances are smooth or abrupt. It's not whether the dollar is going to be weak," he said. "The dollar was attacked in the early '70s, that's why the world went off the fixed exchange-rate system. It can happen again." However, Stiglitz said, mass selling of the dollar is more likely to happen as a result of a "rush for the exit" by private-sector investors scared of losing money on the dollar. Central banks would on the whole prefer currency stability, he said. "They won't act to cause a precipitous fall in the dollar -- but they won't necessarily try to support the value of the dollar either," Stiglitz said. He also argued that much-debated possible changes in China's currency regime will have little effect on the U.S. current-account position, and thus on the dollar. "The exchange rate of the yuan won't have large effects on these variables. People simply haven't come to grips with this," Stiglitz said. A revaluation of the renminbi might narrow the U.S. trade deficit with China, "but it will just show up in the trade deficit with someone else," he said.