Greenback Surges, Euro Shrivels

[Crewleader]

The Incredibly Shrinking Dollar? Think Again ...

By MIKE WHITNEY

The greenback has surged 6 per cent in the last month alone. The euro, on the other hand, has been caught in the same recessionary downdraft that is buffeting a number of other currencies, all of which are unwinding at the same time although unevenly. Currency markets don't move in straight lines, but don't be fooled, most paper money is steadily losing value due to the unprecedented expansion of credit. Investors are moving to cash and hunkering down; the stock and bond markets are just too risky and real estate is in a shambles. As the equity bubble continues to lose gas, balance sheets will have to be mended and lending will slow to a crawl. At present, Germany's slowdown and Spain's housing crash are drawing most of the attention but, the spotlight is shifting fast. Next week it could be shining down on the America's failing banking system or poor corporate-earnings reports in the US. Then it will be the dollar marching off to the gallows.

Europe's troubles have put to rest to idea that other countries can "decouple" from the US and prosper without the help of the US consumer. That might be true in the long-term, but falling demand is already visible everywhere. Retail and auto sales are taking a thumping and 2009 is shaping up to be even tougher. It's looking more and more like the Europeon Central Bank was faked-out by the early signs of inflation and missed the deflationary sledgehammer that was about to come crashing down. It was a catastrophic blunder by European Central Bank (ECB) chief Jean Claude Trichet and it could cost him his job. Raising interest rates while sliding into the jaws of recession is madness. Now all of Europe is headed for a hard landing and there's no way to soften the blow. The ECB doesn't have the same tools as the Fed; Trichet can't simply backstop the whole system with green paper and T-Bills like Bernanke. He can either slash rates or sit on his hands and hope for the best.

Deficits are expected to soar in the European south (particularly Spain, Greece and Italy) while growth in the industrial north, e.g., Germany, will continue to shrink. Also, Spain, Ireland and England are undergoing the biggest housing meltdown in history after indulging in the same mortgage hanky-panky that took place in the US. Billions of dollars of low interest loans, that were issued to unqualified mortgage applicants, are gumming up the whole system and sending foreclosures skyrocketing. Now the losses have to be written down and thousands of unoccupied houses sold at auction.

http://www.counterpunch.org/whitney08202008.html?

[mckara]

1. The Dollar Had a Bad Day Today

It's truly sad that our currency only gains in value when foreign currencies suffer from greater economic mismanagement than ours. Fundamentally, the dollar remains very weak!

[Art_from_Ark]

3. They just use that as an excuse to move the markets

The dollar doesn't suddenly rebound because of strong fundamentals one day and crash because of some negative indicators the next. It's mostly just a ruse by manipulators to "shake out the weak hands" that are holding whatever currency they want to buy. Rinse, lather, repeat.

And you are right, fundamentally, the dollar is weak.

[Doctor Cynic]

2. The British Pound is getting killed by all the bad news from the UK.

[Eclipsenow]

4. Think oil, not housing bubble

The average American is addicted to consuming double the oil of the average European. As oil is about to peak and go into it's inexorable, permanent decline sometime in the next 10 years, most probably in the next 5, then the American dollar will self-destruct.


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