Reinko

Forex: Why the Dollar Is Staying Strong

We have to take into account that dollar moves these years are often not good to explain, for example lately European inflation was reported at 1.6% instead of 1.8% (while core inflation still above 2%).

That gave an intraday swing of 2% on the €/$ pair.

Later Obama stated that trillion deficits will be there for a couple of years and almost nothing happens...

There simply is no economical theory that explains such weird behavior; one thing is clear:

Those who have the deep pockets to steer the value of the dollar neglect large parts of what the real value should be.
Don't forget: In the 600 trillion nominal value in the OTC derivative markets a tremendous amount is bounded to currencies; if we would have more insights who has what kind of derivatives you might better understand the weird weird behavior of the US dollar.

It might very well be that if the dollar gets too weak, a few trillions must be paid in the derivative markets...

That is not unreasonable.

Intense Inflation Pressure: Fed, Bank of England Have Their Hands Tied

Hello Grace, again one of your beautiful articles.

You mention that producer prices grew 1.4%, the highest in six months. Well, this is very nice but are these month on month figures or year on year stuff?

Let me quote from your source (gracecheng dot com):

The report showed that the producer price index rose 1.4 percent in May following an unrevised 0.2 percent increase in April. The increase came in well above economists’ expectations of an increase of about 1.0 percent.

Comment: This means that it is a mom figure... (Because April was not revised...)

So yoy fun is 1.014^12 = 1.18 hence 18% year on year producer fun.

Of course core inflation without that stupid food and energy is only 0.2% so the populace will be protected against that nasty inflation. Really true...

Week in Review: Dollar's Biggest Advance Vs. Euro in 3 Years

Correction: It must be 'everybody' instead of 'everybode'.

Week in Review: Dollar's Biggest Advance Vs. Euro in 3 Years

Oh Grace your articles are always a feast for the eye:

Bernanke suddenly sees no economical downturn any longer and points to the inflationary dangers of a low US$.
In fact when we are supposed to believe the inflation reports, in Europe and the USA they are about the same size of about 4% yoy right now.

And we have a rather strong currency...

But when you, just like me, digg a bit deeper in the wonderful world of US financial stuff you can calculate that from the top of 2006 US family home equity will get a ram of over 10 trillion.

Since Bernanke, just like me, is an academic; he too is capable of making such easy to understand macro calculations. That leaves you wonder why Bernanke tells crap like this?

Very simple: Because everbode wants to hear that kind of crap.

Yet rather likely the law of gravity will also apply to US housing value (let alone commercial real estate) so a few more trillion of home equity will fade away and it is hard to see economical recovery under such conditions...

The Push for a Stronger Dollar

It is a habit of this Republican governemnt (not that the Democrats are much better) of stating that the fundamentals of the US economy are 'strong' or 'good'.

But they never ever name one of those fundamentals.....

Only Dubya lately came up with a 'good fundamental', namely exports were up.
Yeah yeah, it's only up because of the weak dollar.

Lets look at another fundamental: Worker productivity is still up year on year.
Hmmm, interesting; here in Holland minimum wages are about 10 US$/hour while in the US it is only 6 to 7 dollar. So simply on the minimum wages jobs there has to be about 50% more worker productivity to get the same worker productivity as in Europe.

No, the only fundamental that is better is unemployment. Indeed it is much lower in the USA compared to Europe.
But if you live in the USA and you only have a 40 hours the week minimum wage job, your standard of living is below that of an unemployed in Europe.

Of course the Americans will argue: Here are the taxes far lower!
Ok, they are lower, that is true. But the US economy has over 50 trillion of debt on herself and at a reasonable level of interest, say 5%, there would be 2500 billion needed a year just to pay for the interest. That is about the same amount as the US government takes in as revenue.

So Republicans, I dare you:

Bring up those so called strong fundamentals!

Compared with Canada, U.S. Economy Looks OK

Canada having a problem because there was a small contraction?

After all these years I still do not understand why the Americans think that (small) contractions equal to death.

Contractions are just as natural as your sleep.

And don't forget: If you adjust the US GDP growth for all that extra debt, the USA is contracting for a lot of years already. Right now the US economy has over 50 trillion of debt standing over herself and it routinely grows about 8% a year (that's about 2 to 3 times the long term GDP YoY growth by the way).

No no Grace: Your looks are charming but your brains are not...