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[zuijlen]

Originally Posted by fxPhreak

I was pretty bearish on USD until I started reading a bit more about the European economies, particularly Germany, France and Italy. Beautiful countries with wonderful people. Unfortunately, their economies are tanking. Badly.

Where does that leave us?

Your conclusion assumes that the strength of the Euro is related to the state of the European economy, which is open to debate (I don't have the answer, I just want to bring it into the discussion).

Before the Euro, the strongest currencies within the EU (or the EC before that) were the German Mark and the Dutch Guilder, which both kept there relative strength despite economic upheavel over the years. Since the end of the fixed rate exchange system in 1971, the dollar has lost a lot of value, if it hadn't, one dollar would currently be worth about 1.64 Euro.

Even though it can be argued that the US economy fared better since the seventies (as a former European, I'll readily admit that), the dollar went down all the same. It could be because it was overvalued at the time, I don't know. And even if it is in nobody's interest for the dollar to go down further, it will go down if there is a reason for it to go down, whatever the reason is. I know, this is pretty cryptic, but what do I know I just hope to be at the right side of the trade

[fxPhreak]

Zuijlen,

True enough, I do base my conclusion regarding the Euro on the relative strength/weakness of the EU just as much of what I discern about the USD and its future is based on the state of the American economy and where the current administration is guiding it.

Autofx,

I listen/read economic reports from liberals and conservatives and I will typically find some real truth where they overlap. One side says it's all sunshine for the U.S. economy and the other says "if you didn't tell me the numbers were from the U.S., I'd swear I was looking at Argentina." That's scary! It just seems that with the U.S. in the role of mega consumer with nearly every country, none of our trading partners want to be the first to say the game is over. I personally feel that the comments of the Japanese are very telling in that they wil not let a collapse occur.

[autofx]

fxPhreak,

You are astutue. Can we translate what the Japanese are saying as, "We
are hoping nervously that the impending collapse does not destroy our
economy...even the world economy..."

Some say the dollar is dropping today based partly on the realization that
Bush's budget is a sham. Nice!

It's so fun to watch this stuff.

[fxPhreak]

Autofx,

I think you could say that about the Japanese statements.

The Bush budget looks to be very creative in its ways of keeping certain costs of the books. I don't think anyone expected the deficit to grow to USD$617.7 Billion(!). It's difficult for me to see sunshine through this cloud. For the U.S. government to say with a straight face that it is on track to halve the deficit by 2009 is incredible. Leaving the costs of the war and Social Security reform off the books is not fooling anyone.

It's not all bad news though. GDP growth has been revised up to 3.8% from 3.1%. Initial unemployment claims are down substantially. U.S. exports were at a record level. Unfortunately, so were imports which eclipsed the exports thus driving the deficit up. Job growth in the U.S. looks to be strong.

To tell you the truth, the possibility of a global depression/collapse fueled by the U.S. being unable to sell enough debtor bonds scares the hell out of me. It scares Japan, China and Korea too.

I find this whole thing fascinating, but not fun. As an American, I find it depressing. When I look to what I believe are the root causes of our current fiscal troubles, I'm angered by the Bush administration's policies toward our debt and deficits. If they had not started this God forsaken war in Iraq, our world financial position would be very different. When you carry the kind of debt the U.S. carries, it makes sense to retire as much of it as possible with the projected surplus the current administration started with.

I apologize if some of this seems contradictory but that's what financial analysis is all about. Good news vs. bad news. Of course, one man's bad news is another man's good news.

What's done is done now. I'm hoping the outcome is not as bearish for the world as you believe it may be.

[autofx]

My choice of the word "fun" may have been poor. I truly don't wish bad
fortune on my fellow Americans, nor on Asians whose fate is intertwined with
ours, nor on anyone else.

[fxPhreak]

Autofx,

I didn't believe you were taking any joy in watching the dollar slide, unless you were shorting it . You are probably fascinated by what is happening, as I am.

I've now seen a deficit number for the U.S. as high as $671. Ouch! Almost a trillion dollars!

It does make for nice spikes in forex markets. Let's hope we can all take advantage of them.

[tim_nn]

Originally Posted by fxPhreak

If they had not started this God forsaken war in Iraq, our world financial position would be very different.

That is perhaps the one sentence I've ever read about the Iraq war (well, indirectly ...) that nobody can really plausibly disagree with!

[autofx]

Originally Posted by fxPhreak

Autofx,

I didn't believe you were taking any joy in watching the dollar slide, unless you were shorting it . You are probably fascinated by what is happening, as I am.

I don't care which way it goes. Today I watched as two mechanical
strategies -- one of my own and one of InterbankFX's -- took profits on short
dollar trades today. I take joy in sitting in my chair, sipping coffee, chatting
with my wife and kids, petting my dog, listening to the idiot stock market
cheerleaders on CNBC, practicing some jazz on my trombone, watching as
profitable fx trades execute automatically on my computers. I did have to
lean forward at one point early on and hit Ctrl-F12 to cover a Cable short
position when I saw the action bouncing off the 1.8510 level. Whew, that
was too much like work! Not the thinking, but the leaning forward and
reaching out my arm and using my fingers on the keyboard! And to add insult
to injury, I felt compelled to e-mail my System 1 subscribers and advise that
they do the same. I think I'm working too hard these days!

As far as the world economy, I'm morbidly fascinated with what's unfolding.
No one seems to care, but I think a depression is coming. I tell people this,
and they express dismissal and denial. We Americans have had it too good
for too long.

I'm quite sick about the Iraq misadventure. As much as I disagree with John
Kerry on many things, I have to agree that going in there was a colossal
mistake.