why is the dollar rallying?

[stansd]

I can tell you as someone who is very close to how companies respond to the current economic forces that this is simply untrue.

The first part of your argument presumpposes that supply is constant and demand is decreasing. The recessions that you use to illustrate your point were demand driven recessions, but you conveniently leave out the 1970’s, which aremuch akin to what we are seeing now (incidently, in a speech in 2004, Bernanke said the 1973 recession was the most severe since the great depression). You can’t discount the commodity cost pressures that are still rippling through the system.

You are correct that it is as simple as supply and demand. I don’t disagree that demand is shifting left, but so is supply. Where I sit, the supply forces are currently stronger than the demand ones, with the net result being increasing prices, not decreasing. That’s not to say demand won’t go far enough into the tank to reverse this, but we aren’t there yet.

Your argument is highly Keynesian with a bit of monetarist flair…don’t forget the S part of the SD equation. I lean Austrian, and am moving further in that direction given what I’ve seen in the last year.

Stan

[peterb]

I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.

If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.

If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?

I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.

[peterb]

I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.

If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.

If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?

I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.

[peterb]

I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.

If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.

If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?

I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.

[peterb]

I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.

If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.

If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?

I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.

[peterb]

I see your point.I wasnt clear about supply being flexible as well….as supply shifts to the left,I’m guessing unemployment rises and thus is very strong demand destruction. I think we’re seeing this right now.

If you look at the production capacity created by the Chinese in the last 6 years, it’s through the roof. And they are nearly the lowest cost producer on the planet. But there’s also Eastern Europe’s build-up as well as emerging areas of Asia. I’d say that equals a global level of supply/capacity that’s unequaled in history.

If one believes Roubini’s analysis that a global recession is at hand, then I have trouble seeing how this cannot lower demand in a world of incredible supply. I think this is why I’ve heard Both Jim Rogers and Marc Faber talking about agricultural commodities lately. Lots of people on the planet these days and food is not very discressionary. So perhaps we could see inflation hitting food. Or maybe it already has?

I think from an Austrian point of view, we are in a deflationary cycle or just starting one. But it’s hardly my area of expertise.

[(former)FormerSanDiegan]

Thanks Stan.

So I’m interpreting this to mean that it’s more like
the business cycle at play [1] than a nutjob conspiracy theory [2].

[1] The US is starting to suck less than the rest of the world on a relative basis due to phasing of the business cycle.

[2]A conspiratorial market manipulated by the elite in which we are the outsiders and insiders control the game.

[(former)FormerSanDiegan]

Thanks Stan.

So I’m interpreting this to mean that it’s more like
the business cycle at play [1] than a nutjob conspiracy theory [2].

[1] The US is starting to suck less than the rest of the world on a relative basis due to phasing of the business cycle.

[2]A conspiratorial market manipulated by the elite in which we are the outsiders and insiders control the game.

[(former)FormerSanDiegan]

Thanks Stan.

So I’m interpreting this to mean that it’s more like
the business cycle at play [1] than a nutjob conspiracy theory [2].

[1] The US is starting to suck less than the rest of the world on a relative basis due to phasing of the business cycle.

[2]A conspiratorial market manipulated by the elite in which we are the outsiders and insiders control the game.

[(former)FormerSanDiegan]

Thanks Stan.

So I’m interpreting this to mean that it’s more like
the business cycle at play [1] than a nutjob conspiracy theory [2].

[1] The US is starting to suck less than the rest of the world on a relative basis due to phasing of the business cycle.

[2]A conspiratorial market manipulated by the elite in which we are the outsiders and insiders control the game.

[(former)FormerSanDiegan]

Thanks Stan.

So I’m interpreting this to mean that it’s more like
the business cycle at play [1] than a nutjob conspiracy theory [2].

[1] The US is starting to suck less than the rest of the world on a relative basis due to phasing of the business cycle.

[2]A conspiratorial market manipulated by the elite in which we are the outsiders and insiders control the game.

[blahblahblah]

So I’m interpreting this to mean that it’s more like the business cycle at play [1] than a nutjob conspiracy theory [2].

Call it a “nutjob conspiracy theory” if you wish, but go back a year ago when oil prices started rising and just look at all of the explanations we were given in the MSM. Peak oil, increased demand from China and India, blah blah blah. Of course as soon as the bubble deflates, we find out the real reason — insiders with huge amounts of money moving the market for their own gain.

Of course only nutjobs believe things like this, we live in a land where markets are perfect and no one cheats. No if you’ll excuse me I’ve got to go finish papering my walls with Enron stock certificates.

[blahblahblah]

So I’m interpreting this to mean that it’s more like the business cycle at play [1] than a nutjob conspiracy theory [2].

Call it a “nutjob conspiracy theory” if you wish, but go back a year ago when oil prices started rising and just look at all of the explanations we were given in the MSM. Peak oil, increased demand from China and India, blah blah blah. Of course as soon as the bubble deflates, we find out the real reason — insiders with huge amounts of money moving the market for their own gain.

Of course only nutjobs believe things like this, we live in a land where markets are perfect and no one cheats. No if you’ll excuse me I’ve got to go finish papering my walls with Enron stock certificates.

[blahblahblah]

So I’m interpreting this to mean that it’s more like the business cycle at play [1] than a nutjob conspiracy theory [2].

Call it a “nutjob conspiracy theory” if you wish, but go back a year ago when oil prices started rising and just look at all of the explanations we were given in the MSM. Peak oil, increased demand from China and India, blah blah blah. Of course as soon as the bubble deflates, we find out the real reason — insiders with huge amounts of money moving the market for their own gain.

Of course only nutjobs believe things like this, we live in a land where markets are perfect and no one cheats. No if you’ll excuse me I’ve got to go finish papering my walls with Enron stock certificates.

[blahblahblah]

So I’m interpreting this to mean that it’s more like the business cycle at play [1] than a nutjob conspiracy theory [2].

Call it a “nutjob conspiracy theory” if you wish, but go back a year ago when oil prices started rising and just look at all of the explanations we were given in the MSM. Peak oil, increased demand from China and India, blah blah blah. Of course as soon as the bubble deflates, we find out the real reason — insiders with huge amounts of money moving the market for their own gain.

Of course only nutjobs believe things like this, we live in a land where markets are perfect and no one cheats. No if you’ll excuse me I’ve got to go finish papering my walls with Enron stock certificates.

[Author]

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