Right now 1 Euro buys 1.3542 US$: Chart
Will we have a counter trend rally now, or will the US$ just dive through any defense?
Back to Main
December 24, 2004
Just Wondering
Comments
With the Euro or “Teuro” as some call it we have lost track of where the dollar used to trade. For example, unless my math is wrong the dollar is currently trading at 1.45 DM. It has been lower than this…in 1994 I found it trading at 1.38 DM.
Now if the euro hits $1.80 as some predict that will be significant.
I have never guessed the trend before and do not attempt to do so anymore. Likewise I do not perform brain surgery, these things are best left to those with a lot of training and practice.
Posted by: dan of steele | Dec 24 2004 12:33 utc | 1
I would bank on a big counter-trend rally back to at least $1.20. There is way too much pessimism and belief that the dollar will continue to fall. Remember when oil hit $55 that everyone thought it would keep rising. I am also bearish on gold for the same reason. Oil has a little more room to correct, perhaps down to $38, but then I have no opinion.
Posted by: ct | Dec 24 2004 18:03 utc | 2
Even the WaPo Editorial gets bearish The Holiday Spirit
The flaw is that American consumption is based on borrowing: People are spending money that they don’t actually have. The nation’s net borrowing from foreigners has risen to a massive 6 percent or so of gross domestic product, up from 4 percent in 2000, a level that was then considered dangerously high. The more consumers fling credit cards around this holiday season, the bigger will be the savings deficit — and the greater the crunch if foreigners tire of lending the money needed to keep the machine humming along.
…
Mr. Bush declares that his tax cuts are fueling the economy and that reversing them might slow it down. But this defense, like the stock market’s holiday exuberance, seems disconnected from reality: To correct its addiction to foreign borrowing, the United States actually needs a mild economic slowdown. If savings have to rise, consumption has to fall commensurately, and lower consumption will mean lower economic growth. Mr. Bush can effect this transition smoothly via government policies — if not by raising taxes, then perhaps by requiring extra individual savings in private accounts (those savings would have to come on top of any diversion of Social Security taxes). Or he can look the other way and wait for the markets to force an economic slowdown in their own way, and at a time that no one can predict. That latter course, which would involve a further fall in the dollar and a jump in long-term interest rates, could be considerably more pain
Posted by: b | Dec 24 2004 21:58 utc | 3
Nouriel Roubini and Brad DeLong had a good exchange on a “rollover crisis” in Treasury bonds/bills and the dollar here and here. So good, in fact it lured Billmon out of his bunker to add some comments.
Posted by: Tom DC/VA | Dec 24 2004 23:34 utc | 4
CT, I agree about the magnitude of pessimism, but that doesn’t necessarily mean a change is imminent. Even if the market is suffering from irrational dyspepsia rather than a badly overdue case of reality check, markets have a habit of undershooting/overshooting.
Dan: If brain surgeons had the same record as professional economic forecasters, they’d be fighting medical malpractice suits even more often than they hit the links!
Posted by: Harrow | Dec 25 2004 6:33 utc | 5
Really too bad about Billmon closing the bar, here is something from him found at the site Tom sends us to.
“As democracy is perfected, the office of President represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.”
H.L. Mencken
Hallalujah! We’ve reached the promised land!
Merry Christmas to all.
Posted by: dan of steele | Dec 25 2004 10:03 utc | 6
Personal prediction: $2 per Euro within a year.
Dive. Dive. Dive. [Bush has the Con.]
Posted by: gylangirl | Dec 28 2004 21:30 utc | 8