The dollar has reached all-time lows
against the euro
Posted on 10/18/2007 6:07:42 PM PDT by bruinbirdman
The dollar has plummeted to all-time lows against both the euro and a basket of global currencies amid growing fears of a disorderly rout as the US property slump spreads to the broader economy.
The greenback dived after the US 'Philly' business index dropped 10.9 to 6.8 in October, with a shock fall in new orders and inventory, raising the chances of further rate cuts by the Federal Reserve this month.
The dollar has reached all-time lows
against the euro
David Page of Investec Securities also noted that sales of toys and games were high due to fears that stocks would not meet Christmas demand following Mattel's toy recalls. Shoppers seem to have shrugged off any impact of the recent market turmoil, prompting economists to speculate that the Bank of England may wait until next year to cut interest rates.
Other data lent support to this view. Bank of England figures showed that growth in the country's broad money supply, which can fuel inflation, cooled in September but stayed high at 12.8pc.
Growth in total lending by banks and building societies, known as M4 lending, appeared entirely unaffected by the credit crisis, rising from 12.3pc to 13.1pc. Vicky Redwood of Capital Economics said: "With inflationary pressures still strong and retail sales figures supporting evidence that the economy grew more strongly in the third quarter than the Monetary Policy Committee expected, interest rates look likely to stay on hold until next year."
The housing market, however, showed signs of cooling. Data from the Council of Mortgage Lenders revealed a stark 12pc decline in mortgage lending over the month, around twice the average fall in August.
Separately, the ONS released data giving a gloomy picture of the state of the public finances, in a fresh blow for new Chancellor Alistair Darling.
Public sector net borrowing, the Government's preferred measure of the public finances, rose to £7.4bn last month, the highest September borrowing on record and above expectations of £6bn.
Howard Archer of Global Insight said: "With slowing growth, a softening housing market and substantially lower City bonuses all likely to weigh down on tax revenues, the prospects for the public finances look worrying."
I may as well just give in.
Yup, the dollar is going to zero...we’re all going to die, it’s all bush’s fault, Europe and China are the only places to invest, and speculating on currencies is safe. Oh, one more thing, the WSJ is going to have a fashion segment...
Maybe they are under new management.
yitbos
This is getting quite serious. The Bank of Canada kept rates unchanged, the Bank of England is indicating the same, the Aussies are considering rate hikes, the European Central Bank is holding the line, but the Fed reduces rates 50 BPS and indicates more of the same, e.g., they’re more worried about a slump than inflation of the money supply. This, while Japan and China are reducing Treasury holdings, and the Treasury is looking at covering government’s suddenly expanding deficit with increased issues at yields foreign investors already indicated lackluster interest in in August. And Alan Greenspan is proving to be the Jimmy Carter of former Fed chairmen. What a perfect storm.
It was in today’s paper actually. Scary. I just hope they don’t put a Hollywood gossip column in next.
“But back to more serious news, our plummeting dollar....
Back to you in the studio Larry...”
Man on the street interviews...”When the dollar goes to zero, do you think people will still buy imports?”
“The housing market, however, showed signs of cooling. Data from the Council of Mortgage Lenders revealed a stark 12pc decline in mortgage lending over the month, around twice the average fall in August.”
You mean the fed cut did not keep the housing bubble going?
Hmmm. Time to increase spending like handing out $5,000 bonds to every child. Good thing our President gave out prescription drugs to our seniors at no cost to anybody...
This is what happens when you run colossal trade deficits. And you “free trade” idiots — don’t bother me.
Well, we wouldn’t want any “irrational exuberance”, now would we.
Exactly right. Maybe I’ll take off tomorrow and go shopping! Gotta have a latte at Starbucks too.
So, what are you saying? Are we doomed?
What’s with this “we” stuff?
A trade deficit is only possible, if our check bounced, or their ship turned out to be empty, after we paid them. When a trade is consumated, at that time, it is exactly fair. Each party has agreed to the exchange. Unless of course fraud was involved.
The reception of cash, leads to something being done with the cash. In this case, the Chinese bought piles of our subprime loans. Mortgage pools are not counted as trade, but boy would I be pissed if I had a pile of those right now!
The Japanese, if what you say is true, should have turned out very well after the late 80’s. My silly explanation above, is why they lost, and we won. The decision of what to do with the cash, is the remaining part of the trade. Seems that these mass exporters never really understand how to handle the money...
So why is US govt, trading at sub 5% coupons?
Anyone????
Um, sorry to bother you, but just exactly are you worried about?
The dollar's dropping, American exports are increasing, imports are going down and inflation in the States is negligible.
If this is what happens when "you" run colossal trade deficits, then I'm all for them.
Dream on. Real countries have strong currencies.
Oh, so it’s just you that’s doomed then?
Those sub 5% yields can’t last - just a temporary refuge for those fleeing stocks. It should be interesting to watch how the new issues of Treasuries fare should the Fed cut 25 BPS more and lets the dollar continues its inexorable slide whilst foreign investors become more choosy. Yields might pop up surprisingly then, proving the flight to bonds “safety” is a relative and transitive thing.
What part of my comments was a dream, they are based on fact? Those things actually have happened, and for good reason? Or is Japan not a mess, 20 years later?
Do you think that Japan likes their extremely strong currency?? Where has that got them?
Do you think Americans today are anxious to pay back their current loans, with more expensive dollars going forward? No way man...
A strong currency is what we had. It meant that Americans could buy overseas goods on the cheap, and unemploy folks here at home. It also brought in enormous amounts of illegal aleins, as they could western union the money home, and spend it much farther there.
I agree, a troublesome weak currency is a problem, but so is a very strong currency. Since currencies balance themselves out through trade and trade discrepencies, really we don’t have to act liek the end of the world is coming.
Aren’t all of you glad that foreign imports are too expensive, and Americans will need to spend their money on domestic products?? Isn’t that what this site and others have bitzed about for years???
If on the other hand, we see US debt need a 7-8-9-10% coupon, then I’d agree we are facing some real trouble.
Go ahead, I dare you, give me a one word answer like “You are stupid...”. If not, feel free and give a detailed easy to understand explination why I’m “dreaming”.
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