…And the Bears Whisper Back: "Just Watch the Dollar"!

By Duru

November 14, 2004


In my last missive, I taunted and teased the bears as the market seems to have triumphed over their dire predictions of gloom and doom. I also allowed for some caution, primarily around the ever-sinking dollar. Sure enough, as the dollar has cratered to all-time lows against the Euro, a flurry of articles have percolated to foment new worries about the soundness of the American, and global, economy. I have listed a few references below. I start with what I think is the most important quote of all that I have read on this topic. Looks like it is only a matter of time before the Bushies learn that even we cannot thumb our nose at the rest of the world and do whatever we feel like doing…at least not without consequence…

(Note that these links will not remain active indefinitely. If you are checking in late, I strongly encourage you to do an internet search and track down some primary sources on this topic. Your bank account is counting on you!).

"With more than two out of every three dollars of the world's savings now subsidizing U.S. consumption, the growing difficulty in increasing the dollar buying necessary to maintain these exchange rates has, in the calculations of some traders, raised the odds of a sharp correction. Former Federal Reserve Chief Paul Volcker sees a 75% probability of a severe dollar correction in the next five years, according to a book published earlier this year by Peter G. Peterson, chairman of the Council on Foreign Relations. "If delayed much longer, the dollar's inevitable fall is likely to be much larger and much faster," C. Fred Bergsten of the Institute for International Economics warned in a September article."

From "The Buck Stops Where?" by Spencer Jakab (Barron's, Nov 15, 2004)

Two other articles:

"Dollar's Decline Is Reverberating" (La Times, Nov 14, 2004)

"Administration Calm Despite Dollar's Woes" (AP, Nov 14, 2004)


Ó DrDuru, 2004