It has little to do with inflation, and more to do with trade flows. I’ve gotta believe that the EU ministers are sweating now, though. They may have a harder time selling things in the US.
It’s not sentiment...it’s that the U.S. Dollar has been **VASTLY** overpriced since the end of WW2 in order to prop up the foreign economies collapsed by that war.
...at our expense.
Now the Dollar is gradually coming back down to reality. Still a ways to go, though (China, are you listening?!).
The sentiment is that the U.S. is going down the tubes. Its people do not save, over-consume, many are mired in risky loans in a crashing real estate market, and it has a government which spends like drunken sailors while throwing endless amounts at Iraq.
Actually tame inflation here and increasing inflation in Europe would correlate precisely with a lower dollar and a higher Euro. The relationship is direct and not inverse between values of denomination and inflation.
“after tame core inflation data suggested that the Federal Reserve has room to further cut interest rates.
“My guess is that the inherent resilience of the U.S. economy along with future policy actions, should they be desirable, will keep the economy on a track of moderate average growth and gradually declining inflation over the next few years,”
Well that is very good news. I hope he’s right. I’d like to see the US expand it’s manufacturing sector. And a cheap dollar sure helps.
When the treasury TIC flows have fallen below Federal spending, the federal deficit will explode. Then watch out below.
BUMP