Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

The Dollar Looks Ready to Rally
Barron's ^ | 29 April 2008 | By KOPIN TAN

Posted on 04/27/2008 3:01:19 PM PDT by shrinkermd

When the Federal Reserve cuts interest rates for a seventh consecutive time this Wednesday, it will begin to wind down a pernicious campaign that has flooded the market with cheap dollars since last summer. At the same time, the whoosh of air from Europe's deflating credit bubble puts new pressure on the European Central Bank to begin cutting borrowing costs in order to goose growth.

The strategy shifts by central banks will drive a greenback comeback against the overpriced euro, turning back the 15% slide that since August has lifted the euro -- to a record $1.60 last week -- even as the dollar continues to struggle against the undervalued currencies of Asia.

Monetary policy isn't the only catalyst for a healthier dollar. "A lot of what has happened since last summer also is emotional, and that can change on a dime," says James Paulsen, Wells Capital Management's chief investment strategist. Among other drivers: mounting evidence that the credit crisis loosening its grip stateside is still tightening across the Atlantic, and a growing belief that the U.S. economy could bottom and rebound before Europe's.

The rehabilitation, ironically, is driven by a weak dollar, which makes bargains of our exports, fills Manhattan's 65,000 hotel rooms with European tourists, and entices foreign giants from Ikea to Toyota to open factories here to exploit our increasingly cheap labor.

Already, the dollar has begun to strengthen against commodity-driven currencies from the Canadian loonie to the South African rand, and odds are it is close to a bottom against the euro, sterling and most developed-world currencies. On top of that, "negatives about the dollar are more fully discounted compared to the potential positives," says Marc Chandler, Brown Brothers Harriman's currency strategist, who expects the euro to pull back to test the $1.40 threshold this year

(Excerpt) Read more at online.barrons.com ...


TOPICS: Business/Economy; Editorial; Politics/Elections
KEYWORDS: currency; dollar; dollarrally; economy; euro; fed
Navigation: use the links below to view more comments.
first previous 1-20 ... 41-6061-8081-100 ... 281-293 next last
To: AndyJackson
I'm glad that you think my CD maturing was caused by the Fed. LOL!
61 posted on 04/29/2008 10:57:02 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
[ Post Reply | Private Reply | To 60 | View Replies]

To: groanup
I took money out of a mutual fund and put it into my checking account.

Yes, but you did not create the short term cash in order to liquidate your stock portfolio. The Federal Reserve did.

Your problem is that in that joy to be a smarmy jerk like Toddster you overlook simple fundamental facts, like the fact that short term money equivalents, unlike credit, are not created out of thin air but genuinely reflect short term cash created by the Federal Reserve.

There is a wealth of economics literature on the subject if you need to go educate yourself on it. You can start with the Federal Reserve itself.

You see, if the federal reserve did not create the liquidity for the system, you could and everyone else could not liquidate stock portofolios at ever increasing valuations because one liquidation would decrease the amount of short term cash available for the next liquidation. There is only so much money to go around, unless Bernanke stays as busy as he has been and creates more of it.

BTW I know of no serious economist or member of the federal reserve board or economist at the federal reserve who argues that the federal reserve does not create short term money. The argument is not about whether they do, but whether they should, and whether they should be creating moral hazard by liquidating the excesses of the banking system.

62 posted on 04/29/2008 10:58:10 AM PDT by AndyJackson
[ Post Reply | Private Reply | To 56 | View Replies]

To: AndyJackson
you overlook simple fundamental facts, like the fact that short term money equivalents, unlike credit, are not created out of thin air but genuinely reflect short term cash created by the Federal Reserve.

Prove it. LOL!

63 posted on 04/29/2008 11:04:42 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
[ Post Reply | Private Reply | To 62 | View Replies]

To: Toddsterpatriot
Prove it. LOL!

Baghdad, you must be the only person I know who thinks that the Federal Reserve does not create money. Even the Federal Reserve says they create the money, and publish the statistics on how much money they create.

64 posted on 04/29/2008 11:13:33 AM PDT by AndyJackson
[ Post Reply | Private Reply | To 63 | View Replies]

To: AndyJackson

No, clown, prove that this $2 trillion jump was caused by the Fed running the printing press. Prove that it was not caused by individuals and corporations deciding they wanted to hold more cash. It should be easy, if you know how the Fed creates money.

Even the Federal Reserve says they create the money, and publish the statistics on how much money they create.

If only you understood the statistics that they publish. LOL!

65 posted on 04/29/2008 11:17:52 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
[ Post Reply | Private Reply | To 64 | View Replies]

To: Toddsterpatriot; groanup

66 posted on 04/29/2008 11:20:12 AM PDT by AndyJackson
[ Post Reply | Private Reply | To 63 | View Replies]

To: Toddsterpatriot
Prove that it was not caused by individuals and corporations deciding they wanted to hold more cash.

No you obtuse twit. People can want all the cash they want, and the demand for cash is infinite. The limit is how much cash there is to hold, and there is only one source for cash.

Now try thinking clearly instead of like a smarmy jerk all the time.

67 posted on 04/29/2008 11:24:21 AM PDT by AndyJackson
[ Post Reply | Private Reply | To 65 | View Replies]

To: AndyJackson
People can want all the cash they want

Wanting cash and holding a larger portion of your wealth as cash are two different things.

and the demand for cash is infinite.

Not even close. What yield do you currently earn on your cash?

The limit is how much cash there is to hold, and there is only one source for cash.

Excellent! Prove the Fed created $2 trillion more cash over the last few years. Should be easy, even if you are an ignorant jerk.

68 posted on 04/29/2008 11:31:41 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
[ Post Reply | Private Reply | To 67 | View Replies]

To: Toddsterpatriot
Prove the Fed created $2 trillion more cash.

I will take the published statistics of the Federal Reserve for it. You apparently believe that it is all a fiction.

Wanting to hold more of one's assets in cash does not make more cash available.

If everyone holding non cash financial assets (stocks, bonds, real estate gold, etc.) in the US tomorrow decided instead they wanted to hold cash, the total value of all non cash assets would plummet to some fraction (less than 100%) of all cash currently on hand. It would not create an extra dime of cash not already in the banking system (less a certain amount of money currently stuffed in matresses that might come out of matresses and actually be put into the banking system).

Anything else would have to be generated through an increase in banking reserves.

But you know that already and are just being very very dense to try to show how very smart you are.

69 posted on 04/29/2008 11:46:49 AM PDT by AndyJackson
[ Post Reply | Private Reply | To 68 | View Replies]

To: AndyJackson
Prove the Fed created $2 trillion more cash.

I will take the published statistics of the Federal Reserve for it. You apparently believe that it is all a fiction.

This chart you posted does not show that the Fed created the "2 Trillion blip up on the tail of the cart from oh about the middle of 2007 through to the present moment"

The only way the Fed can create money is by adding securities to their balance sheet. How much did they add since oh about the middle of 2007 through to the present moment?

You apparently believe that it is all a fiction.

Yes, your supposed understanding is all a fiction.

See, the thing about money with zero maturity is that it can increase without any action by the Fed. My CD matured, some of my money moved from M2 (time deposits) to M0.

Glad I could help.

70 posted on 04/29/2008 1:59:04 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
[ Post Reply | Private Reply | To 69 | View Replies]

To: Toddsterpatriot
The only way the Fed can create money is by adding securities to their balance sheet.

BFS!

71 posted on 04/29/2008 2:34:36 PM PDT by AndyJackson
[ Post Reply | Private Reply | To 70 | View Replies]

To: Toddsterpatriot
My CD matured, some of my money moved from M2 (time deposits) to M0.

BS you dumb twit. When your CD matured, the bank that owed the money had to take some of its own M0 to pay off your M2 and turn your M2 into and M0. Total M0 is unchanged.

Zero sum, my smug ignorant little tikester.

72 posted on 04/29/2008 2:38:15 PM PDT by AndyJackson
[ Post Reply | Private Reply | To 70 | View Replies]

To: Toddsterpatriot

Also, my little tikester, I don’t think you understand what your graph actually shows. Hint: it does not near term money in circulation.


73 posted on 04/29/2008 2:43:32 PM PDT by AndyJackson
[ Post Reply | Private Reply | To 70 | View Replies]

To: M. Espinola
The dollar has indeed bottomed and begun to strength relative to the Euro.

Euro to U.S. Dollar Exchange Rate


74 posted on 04/29/2008 2:46:56 PM PDT by ktime
[ Post Reply | Private Reply | To 38 | View Replies]

To: TomasUSMC
Don’t you worry.... that big rebate check is in the mail! It will solve it all.

Not for many of us... we're deemed too "rich" and so we're discriminated against.
75 posted on 04/29/2008 2:48:28 PM PDT by TexasGunLover ("Either you're with us or you're with the terrorists."-- President George W. Bush)
[ Post Reply | Private Reply | To 34 | View Replies]

To: AndyJackson

Are you really as ignorant as your post implies? Banks can create money with no Fed. In fact, it is the hindrance of a reserve requirement that holds money creation in check.


76 posted on 04/29/2008 4:14:07 PM PDT by groanup (War is not the answer. Victory is.)
[ Post Reply | Private Reply | To 62 | View Replies]

To: groanup
Are you really as ignorant as your post implies? Banks can create money with no Fed. In fact, it is the hindrance of a reserve requirement that holds money creation in check.

Obviously you have not clue how central banking works or you would not make an idiotic well the FED does not create it, but the Fed restrains it kind of dumbass remark. Go learn some basic economics and then you will be appalled at how grossly ignorant your question is.

I don't get you your junior partner sidekick tikester child. I really don't. THE FEDERAL RESERVE TAKES CREDIT FOR GROWING THE MONEY SUPPLY. They claim they set policy, every economist says they set policy, they execute the policy through well published open market operations which they explain in gorey detail, and they publish charts and graphs showing exactly how much money they cause to be created in the banking system and every economist says that that is what they do, but you two idiots deny that they do it. Are you dense, are you obtuse, or are you calling all economists and central bankers liars. Which of the three is it? You can check more than one box.

It is admitted, here, that long term credit depends upon demand and supply for credit as well as the availability of short term money to finance long term credit and service the resulting debt paymnets (principal and interest). But the leash on money with the federal reserve is really really tight,and the supply of what the federal reserve calls short term money - which they claim they manage - has gone up by $2T. You did not create short term money by selling stocks. You became a sink for short term money, not a supply thereof. Get it!?!?!?!? You are a negative, not a positive in the short term money supply equation. When you sold your stock to acquire M0 someone else expended M0 to acquire your stocks.

77 posted on 04/29/2008 4:49:18 PM PDT by AndyJackson
[ Post Reply | Private Reply | To 76 | View Replies]

To: nicola_tesla
He isn't claiming the US economy will recover so soon, he is claiming the dollar will stop falling and turn around. It is oversold, all the moves have been overdone as usual, and the future direction of dollar interest rates is upward not downward. Though slowly, no doubt. Euro rates still having dropping to do.

Gold has been declining at a 75% annual rate since the Bear Stearns bailout. Nobody ever talks about the "robbery" involved in that, though lol.

78 posted on 04/29/2008 5:17:53 PM PDT by JasonC
[ Post Reply | Private Reply | To 5 | View Replies]

To: groanup; Toddsterpatriot
Furthermore, like night follows day and fractional reserve banking multiplies money by expanding credit, when you trade a long term financial obligation for short term cash (i.e. swap M3 or things that are not even counted in M3 such as stock equity) not only do you not expand the money supply, you contract available credit. This sort of deleveraging is usually referred to as a credit collapse, or monetary depression. It is to fight this rapid demultiplication by your desire to hold more M0 that Bernanke has fought by creating $2T more of near term money equivalents, and he did so, as he and the federal reserve board and its economists, not accidently but through deliberate and wilfull intent to keep you from collapsing the economy when you liquidated your mutual funds.

No Bernanake is not worried about you expanding the money supply. He is fighting tooth and nail to keep you two from collapsing the credit supply by working very hard on M0 to counteract the demultiplying effect your actions are having.

The actual policy argument among serious economists, unlike you guys, is not whether Bernanke is expanding the money supply, but rather whether he should continue to reward and expand moral hazard by doing so.

79 posted on 04/29/2008 5:22:02 PM PDT by AndyJackson
[ Post Reply | Private Reply | To 76 | View Replies]

To: KYGrandma
California and the northeast and Florida, all got the most overpriced and have the furthest to fall. The rest of the southwest also had a pretty big move, but from pretty cheap initial levels and its already fallen back pretty hard. That area is getting reasonable again. Texas always was etc. But plenty of places are still insane. Only 20% of the population can afford the median house price, in half the country. That isn't sustainable, it only got that way on speculative momentum and firehose finance.

The present bubble, though, is in commodities. And it is going to burst, too. Right behind it, third world economies that have been long term basket cases but have recently been charging on hot money running from the dollar.

80 posted on 04/29/2008 5:22:06 PM PDT by JasonC
[ Post Reply | Private Reply | To 7 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-20 ... 41-6061-8081-100 ... 281-293 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson