US Silent As Euro Rushes Higher

CVX · Post by **CVX** » Sat Nov 13, 2004 3:21 pm

WASHINGTON (AFP) - US President George W. Bush's administration was conspicuously silent even as Europe agonizes over the plummeting dollar, a policy analysts described as "benign neglect."

"Euroland policymakers are sounding the alarm bells," said Merrill Lynch chief North American economist David Rosenberg, as the euro hit a record high 1.2987 dollars in early trading.

The dollar had plunged 36 percent from the high of four years ago, and was dropping "like a stone" since the Bush's re-election, which stoked worries about the US trade and budget deficit, Rosenberg said.

"This probably would have happened no matter who won but in the case of a Bush regime what is on the market's mind is the implications for the fiscal and current account deficit from all the measures that are being proposed since proposals like making tax cuts permanent alone will add nearly one trillion dollars to federal debt over the next 10 years," Rosenberg said.

Planned changes to the minimum tax rate would cost another 500 billion dollars, he estimated.

And overhaul of social security could add another two trillion dollars to the debt.

"So how the deficit ever comes down without some sharp spending cuts in other areas is a near impossibility, especially considering that this president was the first in 175 years that didn't veto one spending bill," Rosenberg said.

"And the foreign exchange markets are pricing this in early -- basically pricing in the reality that we are going have to depreciate our way out of this, and we are now just 11 percent shy of the greenback hitting new post-gold standard lows against the European currencies and the White House will probably greet further dollar declines, so long as they are not destabilizing, with, shall we say benign neglect."

Treasury Secretary John Snow has repeatedly issued an endorsement of a "strong dollar policy" while stressing that currencies must reflect underlying economic strength.

But the markets are skeptical of the Bush administration position on the dollar.

"The US is far less concerned about the dollar than they are in Europe," agreed New York-based Societe Generale economist Steven Gallagher.

"The dollar is not seen as a problem from a US perspective."

On Monday, European Central Bank head Jean-Claude Trichet described the euro's soaring value against the dollar as "brutal" and unwelcome.

"I would only say that recent moves ... which tend to be brutal, on the exchange markets between the euro and the US dollar are not welcome from the standpoint of the ECB," Trichet said in Basel, Switzerland, after a meeting of central bankers from the Group of 10 industrialized powers.

French Finance Minister Nicolas Sarkozy pressed the United States to cut its trade deficit, reminding Washington it had signed a Group of Seven statement in Boca Raton, Florida, in February saying excess exchange rate volatility was undesirable.

"The euro has hit a record against the dollar and that shows that the markets are concerned by the size of the US balance of payments deficit," he said, referring to the broadest measure of Washington's commercial and financial relations with the rest of the world.

"There has to be a reduction in the US public deficit -- that's the unanimous message from Europe and the International Monetary Fund to our American friends," Sarkozy said in Rome following a meeting with Italian Industry Minister Antonio Marzano.

LottomagicZ4941 · Post by **LottomagicZ4941** » Sat Nov 27, 2004 4:07 am

""The US is far less concerned about the dollar than they are in Europe," agreed New York-based Societe Generale economist Steven Gallagher. "

This is probably due to the fact Americans are so bad at math!!

My current employer is having us work 5% more for the same money. But because we are having more days off in a row my co-workers actually believe we will have more time off!!!

With the Euro going up will it become harder for new countries to join the EU?

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Bothwell · Post by **Bothwell** » Sat Nov 27, 2004 4:17 am

Dollar Ã‚Â£ rates are also soaring its now 1.88, good news for us Brits visiting the US not so good the other way around.

The way the Euro is governed should not make it more difficult for new countries to join. It is however a problem for any countries signed up to the EMU (European Monetary Union). this dictates interest rates centrally (ie the Bundesbank

. The Uk has not signed up yet and I for one do not want my mortgage rate decided because farmers in Poland may be having a hard time.

Lon · Post by **Lon** » Mon Nov 29, 2004 7:50 pm

The devalued dollar is by design and is quite necessary in light of current deficits. It is not that much of a negative, in that, foreign goods are now more expensive and U.S. exports are cheaper abroad. In theory, this should create more expansion and hiring by U.S. businesses as they steadily grow the economy. Europe will suffer the most with the U.S. $ devalued. Could this be payback by the Bush administration? China could pose the biggest problem if they sell off Gov. paper en masse. This scenario has happened before and the U.S. has survived. Time will tell with the current scenario. Me? I am optimistic, long term.

illuminati · Post by **illuminati** » Tue Nov 30, 2004 9:57 am

Bothwell wrote: Dollar Ã‚Â£ rates are also soaring its now 1.88, good news for us Brits visiting the US not so good the other way around.

The way the Euro is governed should not make it more difficult for new countries to join. It is however a problem for any countries signed up to the EMU (European Monetary Union). this dictates interest rates centrally (ie the Bundesbank

. The Uk has not signed up yet and I for one do not want my mortgage rate decided because farmers in Poland may be having a hard time.

A buddy of mine just got back from England. Fast food burger = $12.50

I hope they included a napkin with that!

illuminati · Post by **illuminati** » Tue Nov 30, 2004 9:58 am

Lon wrote: The devalued dollar is by design and is quite necessary in light of current deficits. It is not that much of a negative, in that, foreign goods are now more expensive and U.S. exports are cheaper abroad. In theory, this should create more expansion and hiring by U.S. businesses as they steadily grow the economy. Europe will suffer the most with the U.S. $ devalued. Could this be payback by the Bush administration? China could pose the biggest problem if they sell off Gov. paper en masse. This scenario has happened before and the U.S. has survived. Time will tell with the current scenario. Me? I am optimistic, long term.

Good points and analysis. I'm glad you are optimistic long term. I wonder what the short and mid term will bring.

Bill Sikes · Post by **Bill Sikes** » Tue Nov 30, 2004 10:42 am

illuminati wrote: A buddy of mine just got back from England. Fast food burger = $12.50

I hope they included a napkin with that!

Kinell. I've never had a Mac Donalds or similar, but I thought they were about Ã‚Â£2.

That means the exchange rate is now.. erm... 6.25 Dollers to the Pound!

LottomagicZ4941 · Post by **LottomagicZ4941** » Wed Dec 01, 2004 11:11 pm

I forgot about the Big Mac index the Ecconomist use to and probably still does publish.

I moved 1K to New Era and am going to contribute $300 a month to it.

I have stoped contributing to International Discovery, Global Teck, and my REITS.

I do think REITS will continue to do well as long as they pay up to a 3% dividend.

Right now REITS are over 12% of my profolio.

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