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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (8250)	9/13/2007 2:07:57 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

Hawk, 3 points, i expect a US slowdown to be a global contagion and reduce global economic activity, Not disagreeing with you long-term. But I still remember LTCM, (as well as the S&L crisis) and the Fed had plenty of ammunition to keep things going for a couple of more years. And at that time we were basically the only global economy still plugging along. What concerns me about all of this talk about the USD collapsing is EXACTLY what you're referring to. It's in NO other country's interest to see the USD totally break down. It would certainly lead to major problems in Europe, IMO, as well as China (although they might try to continue to retain the peg). I'm not so sure that we're at the edge of the precipice quite yet.. but we're sure getting closer. The problem is that global capital is stuck.. US T-Bills, normally the safe have, are already far lower than the Fed Funds rate. So where will this capital flee to? The Euro? The Yen? Gold? Now maybe (as I put on my conspiracy theorist cap) the Central Bankers have decided that the global economy is due for contraction and they are orchestrating a major recession (maybe to collapse the Chinese bubble since Bejing won't do it). If that's the case, then commodities are in for a perfect storm. But China's closed economy is sheltered from capital outflows and it seems that it will be difficult for that bubble to burst until the government either volutarily decides to revalue the Yuan, or is forced to do so by protectionist tariffs (primarily by Europe). We're wobbling, but I'm not sure the economic chair is on the brink of falling over. There's still a ton of money (2.7 Trillion) sitting in money markets waiting on the sidelines to see which way the puck flies on this economic hockey rink. Btw, as the USD decreases in value, it should make US assets more attractive to purchase relative to foreign currencies. Because a lower dollar increases our global competitiveness compared to their own economies (Europe, Japan).. And that should act as a magnet for their capital.. Of course, I'm not saying this will last forever.. but if I were a European, I'd see the handwriting on the wall with regard to my diminishing export competiveness, combined with my continuing high unemployment. And I can see that the BOJ is showing some concerns of a major economic decline there... Either way it goes, this should be interesting to observe. Hawk