Friday, March 07, 2003

It's Time for Serious Talk About the Dollar John W. Snow, the Treasury secretary, said he was "not particularly concerned" about the dollar's recent weakness. Should he be? 12:11:22 PM  Google It!  comment  []

Monday, November 18, 2002

Is This the Beginning of the End for the US Dollar? Stephen Roach  No, it is not. The conditions are not ripe yet While I have been arguing for close to two years now that the USD is grossly over-valued, I don’t hold the view that we are witnessing the beginning of the end for the USD, at least not yet. Bottom line Recent developments in the currency markets suggest that the worst is behind us. If the market is right on this view, then the USD should continue to weaken. Such a development would be very consistent with our "Dollar Smile" framework. However, I hold a more pessimistic outlook on the global economy, and am looking for risk aversion to rise again. If this scenario materialises, I believe the USD will be able to reassert itself again, particularly against the Asian axes. But this rally likely will be short-lived. When US yields bottom, fear-motivated capital inflows into the US will dwindle, undermining support for the USD. That will likely be the true beginning of the end for the USD. 12:57:53 PM  Google It!  comment  []

Monday, July 15, 2002

The China Factor by Stephen Roach (Deflation) Mounting deflationary risks are an important case in point. In my view, the risks of global deflation are higher today than at any point in the past 70 years. Japanese deflation is unmistakable, and America’s GDP-based inflation rate of 1% hasn’t been this low in 48 years. The risks to Europe’s 2% inflation rate are decidedly on the downside, especially given pro- cyclical fiscal and monetary policies that are now bearing down on a weakened Euroland economy. Moreover, with the exception of Korea, the rest of Asia is already in deflation; that’s true of Hong Kong, Singapore, Taiwan and, of course, China . . . China’s export-led growth dynamic now has increasingly important deflationary implications for the broader global economy. Nor am I alone in reaching this conclusion. As I travel the world, I find a growing consensus in policy and investor circles endorsing China’s role as an agent of global deflation. . . . this increasingly fragile global climate . . . a weaker US dollar -- the world’s most important relative price -- will ultimately play a key role in sparking any such rebalancing. . . . this lopsided world economy. Yet left to its own devices, the endgame would find a world dominated by the American consumer and the Chinese producer. That’s hardly a stable alternative. Global rebalancing is only way out. 1:54:12 PM  Google It!  comment  []

Worth less than a euro After sliding for months, on July 15th, the dollar finally fell to parity with the euro, and then slid further. Now that it has broken this psychologically important barrier, is the American currency heading for freefall? After months of turbulence on the foreign-exchange markets, during which the dollar drifted downwards, the decline has gathered pace. On Monday July 15th, the dollar finally fell below parity with the euro for the first time since early 2000. In economic terms, reaching parity with the euro is not particularly significant. It will not, of itself, make much difference if the dollar/euro rate were fractionally one side or the other of parity. For the foreign-exchange markets, though, parity has assumed great symbolic significance. Some currency experts believe that the dollar will now fall sharply against both the euro and the Japanese yen. 8:47:56 AM  Google It!  comment  []

Wednesday, June 26, 2002

Gloom for the world economy The world’s financial markets are in turmoil after the revelation of a massive accounting fraud at WorldCom. Is the collapse in share prices and the dollar a short-term reaction: or might policymakers now find themselves struggling to keep the economic recovery on track? 1:29:38 PM  Google It!  comment  []

Euro nearly reaches parity with dollar "The euro flirted Wednesday with parity to the U.S. dollar, which was dragged down by falling stocks on Wall Street and another scandal over corporate accounting." "The euro reached 99.43 U.S. cents early Wednesday, before slipping back to 98.5 cents, its latest climb in a rally that began in early April and has sent the currency up 14 percent." "Many economists predict the euro will reach parity - one euro to the dollar - in the next weeks or months. That would be a public-relations boost for the 3-year old currency, which has so far played a distinct second fiddle to the dollar as the preferred vehicle for investors and central banks around the world." "At the same time, experts say it's mostly the dollar's weakness - not a sudden improvement in the euro-zone economies - that is driving the rally. In the 12 countries that use the euro, second quarter growth was only 0.2 percent." 1:25:14 PM  Google It!  comment  []

Thursday, June 06, 2002

A dollar cliffhanger A weakening dollar could be good news for the American, European and world economies all at once. But this will only be true if the dollar’s decline is gradual and moderate, and this cannot be guaranteed. A sharp fall could spell trouble "CURRENCY forecasters who have long predicted its decline have seen the dollar climb inexorably for years. At last it seems to be turning. Since February the dollar has fallen by 9% against the euro, to a 17-month low of $0.94. It has also hit a six-month low against the yen, of ¥123. It may well fall further over the coming year." "Two factors weigh against the dollar. First, it is by most yardsticks overvalued. Its trade- weighted level, adjusted for inflation differentials, remains well above its average over the past couple of decades. And second, America’s large current-account deficit, at more than 4% of GDP and growing, looks unsustainable. If the dollar stays roughly where it is as the economy rebounds, then the deficit will grow. As a rule, once a country’s external deficit approaches 5% of GDP, its currency tends to fall." "To trigger a slide, foreign investors do not have to become net sellers of American assets. The dollar will fall if they merely reduce the pace at which they add to their holdings. It will fall even more if American investors continue or expand this year’s buying of foreign assets, notably European equities." 8:11:11 AM  Google It!  comment  []

Tuesday, May 28, 2002

FOREX-Dollar teeters above lows, U.S. data eyed "The dollar slid back within sight of eight- month lows against the euro as concerns over the strength of the U.S. recovery resurfaced ahead of U.S. consumer confidence data due later on Tuesday." "But the threat of further yen-selling intervention by Japan stemmed the dollar's losses against the yen, particularly after Japan's Finance Minister described the Japanese currency's recent surge as "too drastic"." "'The market is showing no signs that it has finished with taking the dollar down,' said Russell Jones, head of foreign exchange research at Lehman Brothers." 9:25:29 AM  Google It!  comment  []

Saturday, May 25, 2002

Fasten your seatbelts Fears of a war between India and Pakistan, along with new warnings about terrorist attacks on America, have given the world’s financial markets a collective attack of nerves. The world’s big currencies have suddenly grown more volatile and at least one central bank has intervened to try to calm the markets. But could the latest uncertainty also signal the long-predicted decline of the dollar? "It is easy to see what is driving the latest attack of nerves. In America in recent days, the Bush administration has been issuing ever more alarming warnings about another terorrist attack. Such fears have had an immediate practical effect: on May 22nd, the Brooklyn Bridge in New York was closed temporarily after a suspect package was found. But the warnings, and the reaction to them, have also alarmed the financial markets. Suddenly, the dollar seemed a less attractive prospect: it has lost some of its allure as the traditional safe-haven currency. Gold, long unfashionable, jumped on May 22nd to its highest level in two years. Significantly, in dollar terms, it rose above the value it reached in the aftermath of September 11th last year, when it had also enjoyed a very brief resurgence." 11:23:15 AM  Google It!  comment  []

Thursday, May 16, 2002

The Muscle-Bound Dollar May Now Be an Achilles' Heel "The dollar has long been the wild card in the economic outlook. Its surprising strength in the 1990's helped keep inflation in check by reducing import prices. A high dollar also attracted hundreds of billions of dollars in investment to compensate for the low savings rate among Americans. And while the dollar rose more than 40 percent since 1995, the gross domestic product kept growing strongly, anyway. The high dollar greatly raised world prices for the nation's manufacturing exports, but record trade deficits only partly offset other fast- growing components of G.D.P." "This pattern, however, has long been too good to stay true. As the expansion shows signs of weakness, it is time to encourage a modest decline in the dollar to stoke manufacturing sales, which have been hit hard by the high dollar." "It is also time to recognize the serious imbalances the strong dollar has created. The United States owes trillions of dollars of debt it took on to finance current account deficits. As important, the high dollar has done longer-term damage to some industries by discouraging investment in globally competitive goods." 9:50:11 AM  Google It!  comment  []

Tuesday, May 07, 2002

Wrong again [American Economy] "The Fed’s duties are clear—to maximise growth and employment as far as possible, but to do so while maintaining price stability. Notwithstanding some disappointing data in recent days, an increasing number of economists are now starting to think that inflation could become the Fed’s biggest concern this year. The Bush administration, in this case personified by Paul O’Neill, the treasury secretary, continues to insist that it believes a strong dollar is good for the economy and that it is unconcerned about the current-account deficit. It is in any case not clear what effective action the government could take if it thought otherwise." "But should market concerns intensify, and lead to a dramatic collapse in the dollar, Mr Greenspan might become very anxious about inflation—since the conventional wisdom has it that a sharp fall in a currency can lead to a rapid acceleration in inflation. The Fed might then find itself steering a tricky course between heading off inflationary pressures and sustaining what might become a very weak recovery. That is not the position now. But Mr Greenspan, who is famous for obsessively scrutinising the constant stream of economic data even at the best of times, will be acutely aware of the risks and uncertainties ahead." 8:18:50 AM  Google It!  comment  []

Wednesday, May 01, 2002

Surprisingly, the Euro Rallies, Raising Hopes of Further Gains "Is the euro turning? That is a question that currency analysts have been asking since the new currency was introduced in 1999. But if they have dared to say yes, they have been proven wrong." "So any rebound of the euro, which is up 4.7 percent since the end of January, is viewed with caution. Still, there are signs that the single currency of 12 European nations is on a steady upward tilt, a move that would be an important event for Americans who invest on the Continent. As the euro strengthens, return from stocks or bonds in Europe will increase when they are translated back into dollars." "The surest sign of strength for the euro is that the dollar is weak. The dollar is down so far this year against the Japanese yen, the Australian dollar and the Mexican peso. Since the end of January, when the dollar rallied against most of the world's currencies, the dollar has been falling against the British pound, the Swiss franc and the euro." "What is surprising about this euro rally is that it appears to be the result of a perception of weakness in the American economy and financial markets. This is surprising because the dollar managed to keep the upper hand against the world's currencies after the Sept. 11 terrorist attacks and even in the face of what was thought, at the time, to be a serious recession." " . . . the dollar's strength reflected positive expectations about long-term returns on investments in the United States — compared to the rest of the world — while the recent performance of the stock market is making investors question those expectations. . . . it did not take a big shift in the flows of foreign capital into the United States to push the dollar lower. That flow just has to slow down, and it will, if expectations about the American outlook change." " . . . wondering about what has happened to the argument that has kept the dollar strong and the euro weak: that the United States would outperform Europe both on economic growth and stock market returns." 2:07:17 PM  Google It!  comment  []

"A strong dollar is in the best interests of the United States, and the Bush administration won't change its policy on the subject anytime soon, Treasury Secretary Paul O'Neill told Congress on Wednesday." "The Bush administration's allegiance to a strong dollar follows the same commitment from the Clinton administration. Both maintained that the U.S. economy reaps enormous benefits from a strong dollar, which helps to hold down inflation, provides consumers with a wealth of product choices from all over the world and attracts the billions of dollars in foreign investment the country needs to offset its huge trade deficits." "O'Neill took issue with a recent warning by the International Monetary Fund that the country's huge trade deficits were one of the biggest risks facing economic recovery in the United States and the rest of the world." "'The overvalued dollar is ... perhaps the single most serious economic problem facing manufacturing in this country . . . It is decimating U.S. manufactured goods exports, artificially stimulating imports and putting hundreds of thousands of Americans out of work.''' "C. Fred Bergsten, who heads the Institute for International Economics, a Washington think tank, said that every 1 percent rise in the value of the dollar produces an increase of at least $10 billion in the current account trade deficit. He estimated that the dollar is overvalued by 20 percent to 25 percent." "The U.S. current account deficit, the broadest measure of trade, stood at $417.4 billion last year, near its all-time high of $444.7 billion set in 2000. If the dollar remains overvalued, Bergsten said, the deficit is likely to approach $500 billion this year and could hit $800 billion by 2006, an amount equal to 7 percent of the entire U.S. economy." "'It is time for the administration to change its policy toward the dollar ... to reduce the risk of the much more severe adjustment that will inevitably hammer us later if it continues to ignore the problem,' Bergsten said." 2:03:57 PM    comment  []

Tuesday, April 30, 2002

The greenback slips The American dollar has started to slip in foreign-exchange trading. This has been expected for some time. America has been importing far more than it has been exporting for years, financed by foreigners attracted by tantalising equity returns. The bad news is that when currency turnarounds come, they tend to be swift and brutal "SO FAR, the declines have been modest. The dollar has hit a near four-month low against the euro, at $0.9035, a five-and-a-half-month low against sterling, at $1.4608, and a one-and-a- half-month low against the yen, at ¥127.75. But, however modest, the decline of the greenback has been swift and has come in the wake of astonishingly strong first-quarter growth figures in America’s gross domestic product (GDP), or national income. What is going on? Economists and investors have been jittery about the dollar’s strength for years. It has defied gravity and has remained strong through the bursting of the dotcom bubble, and last year’s slowdown. It even emerged unscathed by the attacks of September 11th, which some people thought would damage its reputation as a safe haven for investors. Now foreign-exchange traders are wondering whether the dollar’s latest wobble is the first sign, at last, of a long-feared decline." "In the 1990s Americans spent as much as they pleased, and even more than they earned. Stock prices soared ever upwards. And foreigners kept on investing in the United States, sustaining the dollar and its purchasing power abroad. But as Americans spent, they also racked up a huge current-account deficit—the measure of how much more Americans spend on imported goods and services, (and receive in net investment income), than foreigners do. This currently is estimated to stand at a whopping 4.2% of GDP. As a comparison, the euro area has a surplus equivalent to 0.3% of GDP. A deficit can only be financed by capital inflows, either by borrowing from foreigners or by selling assets to foreigners. In America’s case, foreigners have in the past been happy to invest in American assets, attracted by its apparent productivity miracle, soaring share prices and the dollar’s resilience as a “safe haven” at a time when developing countries were going through currency crises. In turn, foreign investment has continued to sustain the dollar’s value." "Paul O’Neill, the US treasury secretary, reckons there is little to worry about. He argues that the deficit simply reflects the fact that foreigners, attracted by those superior returns, want to invest in America. In other words, the current-account deficit is merely the accounting counterpart of that net inflow of capital, rather than the deficit driving a need for capital. But others disagree. The International Monetary Fund reckons that the current-account deficit is a real cause for worry, and warns that its size poses one of the biggest risks to the world economy. If flows of capital to America begin to dry up, the deficit will have to shrink, either through a decline in domestic demand or a fall in the dollar, or both. Not a pretty prospect." "Weighing against the dollar is also a mound of historical evidence suggesting that big current- account deficits always collapse in the end. A study by the Federal Reserve of large current- account deficits in developed economies found that deficits usually began to reverse when they exceeded 5% of GDP. And this adjustment was typically accompanied by an average fall in the nominal exchange rate of 40%, along with a sharp slowdown in GDP growth. America’s current-account deficit, at an estimated 4.2% of GDP, is currently under that threshold, but is growing at such a rate that it is likely to move into the danger-zone by the end of this year." 8:13:43 AM  Google It!  comment  []

Wednesday, April 10, 2002

Mismanaged, misaligned or misunderstood? The strength of the American dollar is once more causing tension in the world economy. But are the world’s major currencies misaligned? And can governments do anything about it if they are? " . . . in recent years, currency crises have taken on a somewhat different character: they have become dominated by the unexpectedly persistent strength of the American dollar." " . . . America has only consolidated the dollar’s position as the strongest and the pre-eminent reserve currency. . . . such pre-eminence comes at a price. . . . unfair competition from abroad . . . exacerbated by America’s strong exchange rate." "In Europe, by contrast, pride is hurt by the euro’s chronic weakness. The talk is—and has been ever since the currency came into being three years ago—of the euro being 'undervalued'—it does not reflect the “fundamentals”, some economists argue." " . . . currency values reflect the price that forex traders place on them and that, in turn, might partly result from an assessment of what politicians and economists like to call the fundamentals nowadays: by this they really mean the relative economic performance of different economies— whether inflation is low, for instance, and productivity is growing. But forex traders have a different perspective from government policymakers—their job is to make money, or at least not to lose it."  ... [more] 5:40:20 AM  Google It!  comment  []

Thursday, March 14, 2002

Trade Deficit March 14, 2002 " . . . the current account imbalance last year remained at the second highest level on record. It is expected to show only a slight further improvement this year, something that has many economists worried. To finance this trade deficit, the United States must depend on foreigners' willingness to exchange their cars, crude oil and other products for American dollars, which return to the United States in various investments from stocks and bonds to purchases of American real estate and factories. . . . Greenspan said in a speech Wednesday that it would unrealistic to expect foreign investment to stay at the high levels of recent years for a prolonged period. He said the best way to shrink the current account deficit would be for Americans to increase their record-low savings rate . . . The concern is that at some point foreigners will decide to pull their investments out of the United States, triggering a decline in the value of the U.S. dollar, depressing the value of American stocks and bonds, sending U.S. interest rates prices soaring." ... [more] 8:23:39 AM  Google It!  comment  []

Sunday, February 24, 2002

The new American challenge "Something fundamental may be changing in the economic balance between the US and western Europe. ... If the present divergence continues, Europe, already insignificant militarily and politically, will play a declining economic role as well. ... That divergence is itself the result of the US productivity renaissance. ... Also important are hours put in by each worker and the proportion of the population in employment. ... In 2001 ... productivity per hour in the EU was as much as 87 per cent of US levels, but real GDP per head was only 67 per cent. ... the EU's shorter average working hours and ... the smaller proportion of its population at work. ... The apparently good EU productivity performance was partly caused by undesirably large falls in employment." " ... steady divergence between the US and the EU in productivity and standards of living. This ... divergence could slow if the EU were successful in raising employment rates towards US levels. But that would take politically implausible changes in the EU labour market and fiscal structures. ... the US economy could grow by at least 1 percentage point a year faster than the EU's. Such sustained superiority is not implausible. The US does ... possess many advantages ... its greater acceptance of market forces; the superiority of its institutions of higher education ... its domination over most areas of new technology; its relatively youthful population; and its openness to immigration of the best and brightest." "It is always difficult to discern breaks in trends. Trends in productivity growth are no exception. But we may be witnessing such an event. For half a century, western Europe did a wonderful job of dealing with le defi Americain [the American challenge]. But the challenge has been renewed. Can Europe respond?" ... [more] 2:38:21 PM    comment  []

Saturday, February 23, 2002

[President of the European Central Bank] Duisenberg steps down " [the euro is] a disappointment to those who see the currency’s external value as somehow symbolic of Europe’s economic strength ... " " ... the euro-area’s performance has given much greater cause for concern. ... Germany ... is in recession. ... reform has been slow to materialise ... " " ... American manufacturers have recently begun to complain about the strength of the dollar, both in relation to the euro and to the yen: they are finding it harder to compete in world markets. ... t is possible to argue that the euro’s continuing weakness is at least partly an inevitable reflection of the dollar’s strength. ... any pronounced and prolonged decline in its value ultimately depends on there being attractive alternative assets for people to hold. But it takes time for a currency to build up reserve status." "More troubling is the structure and operation of the ECB. ... it is thought to lack transparency ... The European Commission is expected to propose reforms in the bank’s structure, probably some time this year. ... Improved economic performance might also help. And that much- talked-about reversal in the dollar’s fortunes might then take place. ... But it might be unwise to bet on a sudden and prolonged upturn in the euro’s value just yet. ... [more] 3:33:43 PM    comment  []

The Future of the Euro-Dollar Relationship Depends a Lot on the U.S. " [the euro] ... could become a rival for the dollar and have some far-reaching effects on the U.S. economy. ... provide a place of refuge if mounting U.S. debt finally leads to a weaker dollar ... the euro may never reach the supremacy the dollar enjoys today [but] it is likely to become a respected equal over the long term ... 'we will have a bi-polar world'" " ... the rise of the euro could reduce the cushion that U.S. consumers get from the dollar’s global stature. 'People all around the world accept U.S. dollars and they cost us nothing to print. That allows us to have protracted deficits and an imbalance of trade. Basically we’re financing our consumption for nothing.' ... countries are likely to buy euros as a reserve currency to diversify the holdings that back up their own money. ... eventually the euro could account for half of all reserves. ... Other countries ... that view the dollar as politically incorrect might also be interested in switching to the euro." " ... the U.S. current account deficit will eventually erode the value of the dollar. ... 'What will really trigger a turnaround is that at some point markets will stop focusing on relative growth and start focusing on the long-term debt buildup and a day of reckoning will arrive' ... That day could come in around five years ... the euro should reach parity with the dollar in several years. ... 'All the estimates indicate the euro is undervalued against the dollar.' ... But the future of the euro-dollar relationship will be determined not by what Europe does right, but by what the U.S. does wrong ... 'But if the U.S. has hyperinflation or imposes capital controls, or if our current account balance should start to soar again so people worry about the solvency of the dollar' ..." ... [more] 3:20:58 PM    comment  []

On the right side of history [U.S.-European relations re Muslim world] "The EU supposedly fears massive ‘destabilisation’ of the Muslim world. ... The population of the Middle East is growing at a rate six times faster than that of Western Europe ... Islam is turning out ever greater legions of poorly educated young men with little or no economic opportunity at home and every incentive to head to Frankfurt or Marseilles or Luton and drift into Islamic terrorism while living off Euro welfare. ... if you look at even the official figures for Muslim immigration to Europe. If Washington isn’t getting much support for its plans to take out Saddam now, France and Germany and co. are going to be a lot less keen in five or ten years." "'American patriotism, obesity, emotionality, self-centeredness: these are the crucial issues.' ... a continuous stream of preposterous criticism of the Americans has had at its core the assumption that such a demotic [of or pertaining to the common people; popular] culture must necessarily be a profoundly stupid one. ... There’s evidently a powerful psychological need among the non-American Western elites to believe that, if America is big, it must also be blundering; if it’s powerful, it must also be clumsy; if it’s technologically superior, it must also be morally inferior." ... [more] 12:33:44 PM    comment  []

Thursday, February 21, 2002

What hope for the euro? Feb 4th 2002 " ... the currency’s external value as somehow symbolic of Europe’s economic strength ... [the euro] may yet lose more. ... it is still significantly higher than its all-time low, reached in October 2000. ... it is not difficult to find reasonable expectations for the euro’s decline." "Foremost ... America is now poised for recovery from recession and ... to do so more quickly than many people had anticipated. ... But the euro-area’s performance has given much greater cause for concern. ... Germany—the world’s third-largest economy, and the euro zone’s biggest—is in recession. ... The euro area’s lacklustre economic performance has disappointed many of those who had detected signs of a stronger commitment to reform, especially in Europe’s traditionally rigid labour markets. ... Plans to dismantle state-run monopolies and to open Europe’s markets to greater competition are also taking much longer to push through than previously seemed likely." " ... the euro’s continuing weakness is at least partly an inevitable reflection of the dollar’s strength. The American currency has consistently defied predictions of impending collapse. It remains the currency of choice in times of trouble ... " " ... it takes time for a currency to build up reserve status. ... The European Central Bank (ECB) has ... undermined confidence in the single currency. ... the structure and operation of the ECB. ... it is thought to lack transparency ... The decision-making framework puts too much reliance on low inflation ... too much emphasis on undershooting the inflation target ... " "The European Commission is expected to propose reforms in the bank’s structure ... This may, eventually, increase international confidence in the euro. Improved economic performance might also help. And that much-talked-about reversal in the dollar’s fortunes might then take place. ... But it might be unwise to bet on a sudden and prolonged upturn in the euro’s value just yet." ... [more] 4:10:13 PM    comment  []

Bush turns away from the weaklings of Europe "Europeans and Americans are now living on different planets ... the huge gap that now exists between the world view of Europe’s policymakers and their American counterparts. .... To the Bush team, the War on Terror is a defining moment in history ... The consensus in Washington ... is that Europe is irrelevant to the world today. Because it will not spend what is necessary to matter as a military power, its views on issues that involve the use of such power are of no consequence ... the increase in America’s defence spending is almost half again as large as the total budget of Europe’s biggest defence spender, the UK." " ... there is an unfortunate coincidence of timing: the War on Terror has made clear Europe’s impotence at precisely the time that it has demonstrated America’s overwhelming technological advantages. ... The military weakness of Europe is only one factor ... [some think] Europe is completely inward-looking ... They contrast this with outwardlooking America. While Europe fusses over Macedonia and the problems of French farmers, America is developing new, innovative long-run policies towards countries that really matter in the 21st century — China, Russia, India." " ... those who matter here are convinced of two things: the important business of the world will be done by America, which will not let any coalition dictate its mission; and Europe is largely irrelevant to our efforts to make America safe from further harm. There is more. Several Administration economists are convinced that Europe is doomed to economic weakness — low growth and high unemployment. Its military irrelevance will be matched by its economic irrelevance ..." " ... doesn’t understand why the European elites don’t see in the collapse of Argentina a warning. Fixed exchange rates don’t work when labour can’t move freely among nations in the fixed-rate area ... All America can do ... is wait for the strains on the euro to become intolerable, and then politely refrain from saying 'I told you so.' ... he can understand Europe’s frustration, it once having been a great centre of Western culture and power, now reduced to irrelevance." ... [more] 3:38:19 PM    comment  []

Thursday, February 14, 2002

German let-off signals trouble for euro "THE credibility of the European single currency was severely undermined yesterday ... " "The European Commission had wanted to issue an 'early warning' to force Berlin to curb an unsustainable budget deficit ... " "[Germany's] deficit is forecast to rise to 2.7 per cent this year." ... [more] The forecast current fiscal deficit in Japan for the fiscal year 2000 was nearly 10%. Actual: General Government Operations Balance = -34,111.6 billion yen; Gross Domestic Production for Q301 = 121,963.9; FY00Deficit/Q3GDP*4 = 7% Data: Economic and Financial Data for Japan [jrr] 3:27:20 PM    comment  []

Tuesday, February 12, 2002

"If a panic were to cause Japanese to flee yen-based holdings, the U.S. dollar might soar in value, creating a dollar bubble that could fuel a temporary speculative stock market boom. It might feel good at first, but as post-1980s Japan and the post-2000 internet and telecom sectors show, bubbles have nasty aftereffects." ... [more] 2:47:19 PM    comment  []

Thursday, February 07, 2002

Since the beginning of the year the euro has once again seen its value against the dollar fall. This has been a disappointment to those who see the currency’s external value as somehow symbolic of Europe’s economic strength and who had hoped that the introduction of euro notes and coins on January 1st would somehow transform the new currency’s fortunes. ... [more] 8:57:35 AM    comment  []

The euro is doing well. It could, in fact, become an alternative to the US dollar as a global reserve currency, or even provide a place of refuge if the dollar weakens. A lot depends on the US economy (registration required) ... [more] 8:44:57 AM    comment  []

Tuesday, February 05, 2002

Paris shares down sharply midmorning as bearish outlook gains ground "Share prices were down sharply in morning trading, falling below the trading range in place since last November as the constant stream of discouraging corporate outlooks cut further into hopes of an economic recovery for later this year, dealers said." "The euro climbed to 0.8695/$8700 from 0.8665/$75 late yesterday, as the dollar slipped in tandem with yesterday's rout on Wall Street indices, dealers said." "Warnings of lower than expected profits ... added to the bearish sentiment growing on investors." "Things are getting worse and worse," said one Paris trader. "On the French index we've just broken a big support at 4,380 points, and that's not good at all-on a chart basis, we're going to go down to 4,000 quickly." 1:27:53 PM    comment  []

Monday, February 04, 2002

8:39:42 AM    comment  []

Saturday, February 02, 2002

European inflation rises. [NYT] 10:03:30 AM    comment  []