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

To: mishedlo who wrote (69883)	10/3/2007 10:00:43 AM
From: Wayne Campbell	Respond to of 116555

As far as I know the US dollar is simply a needed convention to make a system work. It is assumed to be the most massive economy and heavy things don't move quickly or easily and so should be least volatile of any currency The Forex market is a high stakes game played by vast numbers of interests. Hedging vs speculators. Carry trades. Some things done for under the table diplomatic or private sector deals. The smart money simply looks to get a return for their holdings (like interest on deposits)and looks for rising fundamentals behind currencies. OTOH Why would Great Britian sell so much gold right at the bottom of the market, when it didn't take an economics degree to recognize a beaten down currency ready to rebound. Why would they not hold these reserves at least as a hedge against inflation? Why would a major like Barrick do the same thing and prefer to hold US denominated derivative paper rather than a rising currency? There are usually shady deals or 3rd/4th party interests behind nonsensical currency situations like these. And these nonsensical situations create opportunities like the one that developed for buyers of gold/gold shares at turn of this century Eventually China may have to join the speculators (fundamentally correct speculators I might add)and move into s rising currencies despite political pressures. More and more China is holding the hammer and can decide to do what ever it bloody well wants