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Interesting. Wish I could say I understood more than I do about the whole internation currency game.

My thought is that we are driving down our dollar so as to make the spectre of deflation not show up on our own reports. That is even if we are having deflation if the dollar itself is worth less at roughly the same rate than since the reports are all valued in dollars it looks as if we are flat instead of going through deflation.

But like I said thats just my thought. I could be completely out to lunch on this one......

Look at it this way.
Bush wants to get reelected, so like any good politician he tries to spread around cash from federal spending, aka pork. (That is of course your money that you send to DC.)

Well, when he's done with that he wants to spread more around. So he has Sec. of the Treasury Snow talk down the dollar. By so doing he hopes to raise exports from the US and give employment and money to places like Pittsburgh.

So, the net of that is that with the dollar weaker every family has to spend more on that portion of its goods and services that come from outside the US.

So under the first method, you send a check to DC which he sends to vote rich areas. Under the second method, he makes you send more of your [lower valued] money overseas so that more cash flows to vote rich areas.

I suspect you are at least partly right. For years, the Bank of Japan has begged the U.S. for help in coordinating policy against the Chinese Renbei, which is pegged to the U.S. dollar.

And for just as many years, Greenspan and the Federal Reserve cabal have been loathe to stem the stampede of American investment in and cheap imports from China, lest their globalist masters complain.

However, with the growing national debt and the Japanese preference to park their excess capital in America versus some other country, makes a closer partnership absolutely essential. In fact, this may have been the Bank of Japan's demand this time in return for massive dollar buying. Buying a falling currency otherwise makes no sense.

Currency trading is really very straightforward.

Of the 3 majors, USD, EUR, and JPY, at any given time, one is weak, one is strong, and one is somewhere in-between. The stronger or weaker a currency is, the more that the current trend tends to persist.

USD is terrifically weak against EUR right now, and neither Dim Wim and the Bulbs (that's Willem Duisenberg, lame duck head of the Euro Central Bank, and his flunkies) nor Snowboy (our 'esteemed' SecTreas) seem inclined to try to change the situation. ECB just passed on an interest rate cut during the past week.

JPY right now is the currency in the middle. Koizumi and the BoJ/MoF crowd are busily posturing (h*ll, they've been doing that for years) as to whom has the right policy (haha) to end the deflationary spiral in their country. They loathe the idea of JPY getting stronger against USD...but they probably can't stop it.

If you ever played cards with your friends when you were young, you understand the game. It's simply an enormous game of 'Pass The Trash', otherwise known as 'Screw Your Buddy'.

Currencies are nothing more, these days, than a unit of account, each manipulated by its issuing gov't, in an attempt to gain an advantage over the nation's trading partners.

Too cynical for you? Hard lines. That's the way it is.