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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (56505)	3/22/2006 1:43:31 PM
From: ild	Read Replies (2) \| Respond to of 110194

Date: Wed Mar 22 2006 13:35 trotsky (P.Yorkie) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved " conventional wisdom is that when when a country has a huge trade deficit the currency should fall relative to other currencies. " i'm not exactly sure why this post was addressed to me, and what it has to do with what Bernanke said. for one thing, i do NOT subscribe to this 'conventional wisdom'. in any event, the 'conventional wisdom' of the day is that the trade deficit 'doesn't matter' - to which i say, it doesn't until it does. a brief synopsis of my view on relative currency valuations, which i have posted here MANY times, although that seems to have escaped you: the main factor in how fiat monies relate to each other is the speed at which the respective currencies are printed. thus, in 2005, when the Federal Reserve allowed money growth to decelerate sharply, while the ECB pumped broad money growth to nearly 9% p.a., the dollar strengthened against the euro. the other factor are EXPECTATIONS of FUTURE real yield differentials, which in turn are made up of expectations of future interest rate policy and expectations of future inflation. the policy part of the equation is inherently more difficult to predict, but the inflation expectations can be easily divined by looking at the t-bond/TIPs ratio ( policy expectations are embedded in the FedFunds futures contract ) . current account deficits come a distant third, and their influence is mostly psychological. the most important factor by far remains the speed at which the respective printing presses are running. Date: Wed Mar 22 2006 13:08 trotsky (Bleuler, 10:42) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved now, i don't like that rag 'frontpagemag' ( the paranoid effusion of the inimitable right-wing wingnut David Horowitz ) , but i would agree that the ANC government's 'affirmative action' type policies are deplorable - and there is certainly merit in the idea that legitimate minority grievances are not properly addressed in today's RSA. on the other hand, one must not forget that South Africa's blacks HAVE BEEN brutally suppressed for a very long time, and the most egregious oppressing has been done by Hendrik Verwoerd's Nasionale Party, the Afrikaaner-led party of apartheid, in its roughly 50 years in power. they not only treated blacks as second-class citizens, they also had an economic program of state capitalism / socialism going on that amounted to 'affirmative action' for the Boere ( Afrikaaners, the Afrikaans speaking white minority for those that don't know ) . in other words, the ANC simply turned the tables on them, and is now doing EXACTLY what they were doing, with the sole exception that it has a far more capitalistic, free enterprise orientation, as evidenced by the many privatizations of former state-controlled businesses it has performed against the explicit resistance of its coalition partner COSATU ( the SA trade union umbrella organization ) . furthermore, under the ANC government, SA is enjoying the biggest economic boom since the 1960's, sports a respectable fiscal surplus, and has one of the most conservative and independent central banks in the world. the Rand has been one of the strongest currencies on the planet for 5 years running. they must be doing SOMETHING right.