At what point will the Feds do something about the US$….

[JWM in SD]

JWM in SD

When the bond market makes them defend it…..

[Daniel]

I think it’s a big misconception that the falling dollar is somehow the Fed’s fault. First of all, the dollar has weakened, but this doesn’t make it cheap. A different point of view is that it was extremely overvalued not long ago, because of all the capital inflows chasing the new economy supposedly built here. I remember talking to a friend at UBS in 1999, and she was very nervous back then about the dollar being “obscenely overvalued”, as everybody from Europe, Asia and the Middle East was busy piling into it.

Now we see the same thing in reverse. On top of that, we’ve had rather large budget and trade deficits lately. That’s not really the Fed’s fault, either. The administration is mostly to blame for the budget deficit, and the overvalued dollar itself (and China’s policies, to some extent) for the trade deficit.

If you think interest rates are to blame for the dollar’s fall, think again. Fed fund rates are now just a tad lower than ECB euro rates, and were actually quite a bit higher in 2006 and 2007. It’s not higher euro rates that caused the dollar drop, it’s fundamentals. The dollar was way overdue for a correction, and like all “bubbles”, the only question about the dollar unwind was its timing. My friend was way early in 1999, Buffet was kind of early as well (in 2003, I think), but it finally happened. Don’t blame the Fed for it.

[Daniel]

I think it’s a big misconception that the falling dollar is somehow the Fed’s fault. First of all, the dollar has weakened, but this doesn’t make it cheap. A different point of view is that it was extremely overvalued not long ago, because of all the capital inflows chasing the new economy supposedly built here. I remember talking to a friend at UBS in 1999, and she was very nervous back then about the dollar being “obscenely overvalued”, as everybody from Europe, Asia and the Middle East was busy piling into it.

Now we see the same thing in reverse. On top of that, we’ve had rather large budget and trade deficits lately. That’s not really the Fed’s fault, either. The administration is mostly to blame for the budget deficit, and the overvalued dollar itself (and China’s policies, to some extent) for the trade deficit.

If you think interest rates are to blame for the dollar’s fall, think again. Fed fund rates are now just a tad lower than ECB euro rates, and were actually quite a bit higher in 2006 and 2007. It’s not higher euro rates that caused the dollar drop, it’s fundamentals. The dollar was way overdue for a correction, and like all “bubbles”, the only question about the dollar unwind was its timing. My friend was way early in 1999, Buffet was kind of early as well (in 2003, I think), but it finally happened. Don’t blame the Fed for it.

[Daniel]

I think it’s a big misconception that the falling dollar is somehow the Fed’s fault. First of all, the dollar has weakened, but this doesn’t make it cheap. A different point of view is that it was extremely overvalued not long ago, because of all the capital inflows chasing the new economy supposedly built here. I remember talking to a friend at UBS in 1999, and she was very nervous back then about the dollar being “obscenely overvalued”, as everybody from Europe, Asia and the Middle East was busy piling into it.

Now we see the same thing in reverse. On top of that, we’ve had rather large budget and trade deficits lately. That’s not really the Fed’s fault, either. The administration is mostly to blame for the budget deficit, and the overvalued dollar itself (and China’s policies, to some extent) for the trade deficit.

If you think interest rates are to blame for the dollar’s fall, think again. Fed fund rates are now just a tad lower than ECB euro rates, and were actually quite a bit higher in 2006 and 2007. It’s not higher euro rates that caused the dollar drop, it’s fundamentals. The dollar was way overdue for a correction, and like all “bubbles”, the only question about the dollar unwind was its timing. My friend was way early in 1999, Buffet was kind of early as well (in 2003, I think), but it finally happened. Don’t blame the Fed for it.

[Daniel]

I think it’s a big misconception that the falling dollar is somehow the Fed’s fault. First of all, the dollar has weakened, but this doesn’t make it cheap. A different point of view is that it was extremely overvalued not long ago, because of all the capital inflows chasing the new economy supposedly built here. I remember talking to a friend at UBS in 1999, and she was very nervous back then about the dollar being “obscenely overvalued”, as everybody from Europe, Asia and the Middle East was busy piling into it.

Now we see the same thing in reverse. On top of that, we’ve had rather large budget and trade deficits lately. That’s not really the Fed’s fault, either. The administration is mostly to blame for the budget deficit, and the overvalued dollar itself (and China’s policies, to some extent) for the trade deficit.

If you think interest rates are to blame for the dollar’s fall, think again. Fed fund rates are now just a tad lower than ECB euro rates, and were actually quite a bit higher in 2006 and 2007. It’s not higher euro rates that caused the dollar drop, it’s fundamentals. The dollar was way overdue for a correction, and like all “bubbles”, the only question about the dollar unwind was its timing. My friend was way early in 1999, Buffet was kind of early as well (in 2003, I think), but it finally happened. Don’t blame the Fed for it.

[Daniel]

I think it’s a big misconception that the falling dollar is somehow the Fed’s fault. First of all, the dollar has weakened, but this doesn’t make it cheap. A different point of view is that it was extremely overvalued not long ago, because of all the capital inflows chasing the new economy supposedly built here. I remember talking to a friend at UBS in 1999, and she was very nervous back then about the dollar being “obscenely overvalued”, as everybody from Europe, Asia and the Middle East was busy piling into it.

Now we see the same thing in reverse. On top of that, we’ve had rather large budget and trade deficits lately. That’s not really the Fed’s fault, either. The administration is mostly to blame for the budget deficit, and the overvalued dollar itself (and China’s policies, to some extent) for the trade deficit.

If you think interest rates are to blame for the dollar’s fall, think again. Fed fund rates are now just a tad lower than ECB euro rates, and were actually quite a bit higher in 2006 and 2007. It’s not higher euro rates that caused the dollar drop, it’s fundamentals. The dollar was way overdue for a correction, and like all “bubbles”, the only question about the dollar unwind was its timing. My friend was way early in 1999, Buffet was kind of early as well (in 2003, I think), but it finally happened. Don’t blame the Fed for it.

[Eugene]

When the bond market makes them defend it…..

Yeah…

As long as bond market is happy, weak dollar is good for the economy.

Will the Feds ever step in to stop the devaluation of the Dollar or will we see the Euro at $3 by the end of the year?

I don’t expect to see the Euro at $3 by the end of the year, not because the Feds would step in to stop the devaluation, but because Europeans will either cut rates or be forced to do a currency intervention.

I wouldn’t rule out the Swiss Franc at $1.50 by the end of the year, though.

[Eugene]

When the bond market makes them defend it…..

Yeah…

As long as bond market is happy, weak dollar is good for the economy.

Will the Feds ever step in to stop the devaluation of the Dollar or will we see the Euro at $3 by the end of the year?

I don’t expect to see the Euro at $3 by the end of the year, not because the Feds would step in to stop the devaluation, but because Europeans will either cut rates or be forced to do a currency intervention.

I wouldn’t rule out the Swiss Franc at $1.50 by the end of the year, though.

[Eugene]

When the bond market makes them defend it…..

Yeah…

As long as bond market is happy, weak dollar is good for the economy.

Will the Feds ever step in to stop the devaluation of the Dollar or will we see the Euro at $3 by the end of the year?

I don’t expect to see the Euro at $3 by the end of the year, not because the Feds would step in to stop the devaluation, but because Europeans will either cut rates or be forced to do a currency intervention.

I wouldn’t rule out the Swiss Franc at $1.50 by the end of the year, though.

[Eugene]

When the bond market makes them defend it…..

Yeah…

As long as bond market is happy, weak dollar is good for the economy.

Will the Feds ever step in to stop the devaluation of the Dollar or will we see the Euro at $3 by the end of the year?

I don’t expect to see the Euro at $3 by the end of the year, not because the Feds would step in to stop the devaluation, but because Europeans will either cut rates or be forced to do a currency intervention.

I wouldn’t rule out the Swiss Franc at $1.50 by the end of the year, though.

[Eugene]

When the bond market makes them defend it…..

Yeah…

As long as bond market is happy, weak dollar is good for the economy.

Will the Feds ever step in to stop the devaluation of the Dollar or will we see the Euro at $3 by the end of the year?

I don’t expect to see the Euro at $3 by the end of the year, not because the Feds would step in to stop the devaluation, but because Europeans will either cut rates or be forced to do a currency intervention.

I wouldn’t rule out the Swiss Franc at $1.50 by the end of the year, though.

[kewp]

Don’t blame the Fed for it.

Um, cutting interest rates increases the money supply. This weakens the dollars purchasing power relative to commodities and other currencies with a more limited supply.

But yeah, you are correct that there is more than the Fed at work here. They still swing a big stick when it comes to dollar valuation, however.

[kewp]

Don’t blame the Fed for it.

Um, cutting interest rates increases the money supply. This weakens the dollars purchasing power relative to commodities and other currencies with a more limited supply.

But yeah, you are correct that there is more than the Fed at work here. They still swing a big stick when it comes to dollar valuation, however.

[kewp]

Don’t blame the Fed for it.

Um, cutting interest rates increases the money supply. This weakens the dollars purchasing power relative to commodities and other currencies with a more limited supply.

But yeah, you are correct that there is more than the Fed at work here. They still swing a big stick when it comes to dollar valuation, however.

[kewp]

Don’t blame the Fed for it.

Um, cutting interest rates increases the money supply. This weakens the dollars purchasing power relative to commodities and other currencies with a more limited supply.

But yeah, you are correct that there is more than the Fed at work here. They still swing a big stick when it comes to dollar valuation, however.

[Author]

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