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Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

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  • Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

    For all you nay-sayers, its not Bush's fault (bush i only one man, unless you are also blaming his economic advisers) Found this article from www.fark.com

    But my friends on the 8th day God created the Dollar, and like the parting of the Red Sea, the dollar will rise again. *In no way will Viagra be receiving any compensation for the line "the dollar will rise again".*

    Interesting article none the less, I learned a little bit of how interest rates work etc.

    MarketWatch - Dollar will rise again


    Dollar bull
    Commentary: U.S. doing a better job restraining money growth than euro zone

    By John Dessauer
    Last update: 12:01 a.m. EDT June 2, 2008
    PrintPrint EmailE-mail Subscribe to RSSRSS DisableDisable Live Quotes
    NAPLES, Fla. (MarketWatch) -- Currency traders know Albert Einstein was right: All things -- especially in the currency market -- are relative.
    You can't talk about one currency in isolation. Headlines tell us that the dollar is down. That means other currencies are up. But do they deserve to be up? Are those other economies that much better than the United States? And does the dollar deserve to be down? Is the United States making more serious fiscal- or monetary-policy mistakes?
    The answer is no. Popular dollar bashing shows that crowd's ignorance of Europe and Japan. For example, one popular, but completely wrong, notion is that the U.S. is flooding the world with dollars. In fact, the U.S. has been doing a much better job restraining money growth than the euro region.

    Money supply growth rates
    Country/region Broad Narrow
    United States + 7% + 0.2%
    Euro zone + 10.3% + 2.9%

    Source: The Economist.
    If money-supply growth were the main driver of the world's currency market, the dollar would have been going up versus the euro. Instead the euro has been very strong. The common answer to this point is that interest-rate differentials are currently more important than money growth.
    That sounds good at first. Three-month interest rates are 4.86% in the euro region and only 1.96% in the United States. That makes the euro more attractive for interest income. But if interest-rate differentials work for the euro, they should work for the Japanese yen as well.
    They don't. At 0.75%, three-month interest rates are lower in Japan than in the United States. If rate differentials were that important, the dollar would be rising versus the yen. Neither money growth nor interest rates explain the dollar's recent decline.
    In spite of widely differing interest rates and monetary policies, the euro and the yen have marched in the same direction versus the dollar. From roughly June 2007 until March 2008, both the yen and the euro rose 19% versus the U.S. dollar. The reasons run from diversification by oil producers and China to outright momentum-based speculation.
    Recently, the dollar has rallied; it's up roughly 3% from the March lows. This rally has sparked the debate: Which way next for the dollar? My opinion is the dollar is headed higher, to 1.30 versus the euro and to 120 versus the Japanese yen. The reason: The dollar has fallen so far that both Europe and Japan are suffering. Their pain is our gain. We can see that in the recent strong growth in U.S. exports. Our gain leads to a stronger dollar.
    A strong argument can be made that the euro is not a sustainable currency. Separating monetary and fiscal policy just can't work for long. To me it is a wonder the euro has lasted this long. But strains are building.
    Spain desperately needs lower interest rates to prevent a real-estate collapse from dragging the whole economy down. Germany, a major exporter, likewise wants lower rates to bring the euro down. The strong euro is taking a bite out of German profit margins. But the euro-zone central bankers are focused on inflation and rapid money growth. They refuse to come to the aid of Germany or weakening economies such as Spain and Italy.
    Trading Strategies: June 2008
    "It is only a matter of time, probably less than three years, until the euro experiment meets its end," said Avi Tiomkin, a currency expert and adviser to hedge funds.
    Japan is in worse shape. It's almost 100% dependent on imports of raw materials -- especially oil. The surge in oil and other commodities has cut deeply into Japanese corporate profits and consumers' buying power. The strong yen on top of the commodity-price surge is a major blow to the short-term outlook for the Japanese economy. The long-term record is no better. It has been 19 years since Japan's Nikkei Dow stock index peaked near 40,000. It recently stood at 14,000. Meanwhile, the U.S. Dow Jones Industrial Average has climbed from 2,800 to more than 12,000.
    The dollar, the euro and the yen are the world's three major currencies, and, the more you know about Europe and Japan, the more you like the dollar. Thirty-five years ago, the dollar was falling versus the currencies of Europe. It was widely expected to fall to 1-to-1 against the legendary Swiss franc. It finally did that on March 8, 2008.
    And this dollar plunge, down 19% in nine months, looks a lot like the overshoot in the late 1970s. The dollar rose in the early 1980s.
    The dollar will rise again.
    John P. Dessauer is the author of two books on global investing and writes the monthly value-investing newsletter John Dessauer's Investor's World. He also manages portfolios for private clients. End of Story
    Last edited by Apophis; 06-03-2008, 06:11 AM.
    Randy = Ace ! - Warlab
    Level II Volunteer FireFighter
    Level I HazMat Technician
    NYS EMT-B
    Town of Mamaroneck Fire Dept.

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    Bring On Project Reality 1.0!!!
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    Apophis - "TG was created to cater to a VERY specific type of gamer rather than trying to appeal to the greater gaming population.
    Tactical Gamer is not mainstream.
    We are not trying to attract mainstream gamers."


  • #2
    Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

    I believe the dollar will rebound. More important than the current rates are the expected future rate movements that will be influencing the dollar. Later this year, the Fed will start tightening, while the Euro zone will be cutting rates, and we will start to see a reversal of what's happened to the dollar the past 5 years.

    For all the problems the US has, the EU has the same, but delayed by a couple of years:

    -- they have serious real-estate bubble problems
    -- they have a trade deficit
    -- they have a budget deficit
    -- they import almost as much oil as we do

    On top of it, they are still integrating the new EU entrants, and they are stuck with socialist style governments/economies. Furthermore, they have a worse demographic outlook than the US -- low birthrates for the Europeans themselves, and a large influx of Muslims, who are not being assimilated as smoothly as would be hoped.

    So, medium- to long-term, I believe the US (and consequently the dollar) are in a distinctly better position than the Euro zone and its Euro.

    3) Support game play in a near-simulation environment. Where the focus of play would not be solely on doing what it takes to win, but doing so utilizing real-world combat strategy and tactics rather than leveraging exploits provided to players by the design of the game engine.

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    • #3
      Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

      Your titles are too exaggerated. I don't know too much about economics, but i know the euro is going to be pretty strong for a while. The dollar may rebound, but the euro has a lot going for it right now.

      Comment


      • #4
        Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

        I'm also no expert, but from what little I think I know, that article is basically "bull." ;] The opening of the article, in which the author accuses those whom disagree with him of showing "ignorance of... Japan" is hilarious - he uses Japans' low interest rate and appreciating currency as evidence of a lack of relationship between interest rates and currency values. Evidently the author is "ignorant" of why Japan has such low interest rates - Japan lowered their rates long ago because they've been combating deflation for about a decade now!

        A whopper like that in the first quarter of the article. Awesome!

        The dollar may rebound or it may not, who knows. If this guy is so certain, then he should engage in currency speculation.

        If you want to know what drives currency values, I recommend this podcast regarding Monetary Policy, featuring Tyler Cowen.
        Last edited by Nikolas; 06-02-2008, 06:59 PM.
        A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

        "$250,000 a year won't get me to Central Park West."

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        • #5
          Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

          Originally posted by Tempus View Post
          Later this year, the Fed will start tightening
          I don't mean to pick on you, Tempus :] You're assumption here is not unreasonable. Hopefully you're right!

          But I anticipate that the Fed will try to tighten up rates over the next 3-6 months. It may or may not succeed due to obvious political pressures. After that, from 6months from today through 12/18/24months from today, rates will have to be lowered drastically in order to accommodate massive spending (~$1T) from the Federal government related to housing bailouts.

          This is all pure speculation from me, based on nothing at all.
          A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

          "$250,000 a year won't get me to Central Park West."

          Comment


          • #6
            Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

            Originally posted by oldirti View Post
            Your titles are too exaggerated. I don't know too much about economics, but i know the euro is going to be pretty strong for a while. The dollar may rebound, but the euro has a lot going for it right now.
            I got the title from fark.com its where I find lots of interesting news articles (tons of dumb people live in florida). Check it out if u have a few mins to spare.
            Randy = Ace ! - Warlab
            Level II Volunteer FireFighter
            Level I HazMat Technician
            NYS EMT-B
            Town of Mamaroneck Fire Dept.

            sigpic




            Bring On Project Reality 1.0!!!
            RSS Feeds:Bamboo | | 9/11 - Never Forget |
            Apophis - "TG was created to cater to a VERY specific type of gamer rather than trying to appeal to the greater gaming population.
            Tactical Gamer is not mainstream.
            We are not trying to attract mainstream gamers."

            Comment


            • #7
              Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

              Huh, Tybalt and I agree on something. Cool.
              I can ADS using more than a 2x without significant stutter! This was a good patch.

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              • #8
                Re: Why the US dollar will rebound, and why you can kiss the Euro goodbye - fark.com

                Cool, I agree with Ron Paul. About 90% anyway.

                http://www.lewrockwell.com/paul/paul319.html

                These guys created currency with Ron Pauls face on it and put it in circulation. What Balls.

                http://blog.barofintegrity.us/2007/1...cy-seized.aspx

                Last edited by Hambergler; 06-02-2008, 09:49 PM.

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