Lou Thomas

Job Numbers Don't Freak Out Dollar Bulls

Data was "quite bad, but not terribly bad." Just bad enough, then. Is that what we mean these days by the Goldilocks economy?

This column doestn't tell us a lot that we couldn't have read from the charts, but it does provide a nice little irritating grain of sand around which we unwashed folks can post our little pearls of wisdom.

Some of the other posters have opined that deflation might be the reason that the dollar is up vs. the Euro. Certainly, when you wipe out huge amounts of financial paper through write-downs and deleveraging, you reduce the number of dollars in circulation.

But consider that there is over $6 trillion in cumulative trade surplus waiting to rush in to fill that hole by buying up our businesses for a fraction of their earlier values. Did you notice that there are now 26 Sovereign Wealth Funds with over $2 trillion in dollars waiting to roll into the U.S. with their carpetbags? The IMF tried to get them to subscribe to a voluntary code of behavior last week, and they said, "OK, so long as there is no transparency and no enforcement mechanism." They are getting ready to put those dollars back into circulation.

With the U.S. consumer tapped out, there is less incentive for these export-oriented nations to continue to prop up the dollar so that they can sell to the U.S. Maybe if Europe is in better (not good, just better) shape they will buy some Eurozone treasuries to prop up the Euro so that they can start selling more there. And, of course, they will start to grow their middle classes, but that could take a few years to accomplish.

When the SWFs get here with their big empty shopping bags, will there be enough desirable businesses to consume all of those foreign-held greenbacks, given the cratering of the stock market and the U.S. economy? Already, we see Lehman walking around with its hat in its hand, sipping on a bottle of low cost gin and hallucinating contributors out of the shadows. Financials have been a rather harsh experience for foreign investors. If they don't get something more to their liking, how long will it be before those dollars find their way onto the forex markets to obtain the currencies of other nations that still have something to export? Then where will the dollar be going?

And let's not forget about *dis*-investment. The market is tanking. Fannie and Freddie are tanking. Oops - breaking news - U.S. is assuming Fannie and Freddie's debt - which makes me wonder: will the U.S. Treasury be able to retain the AAA rating on its bonds? Just one of those vile thoughts that sneaks in when everything is going to seed (and that's a euphemism).

Yes, the Euro has problems, but nothing like those of the U.S. The dollar is heading down. I live in the U.S., but still with all of our aggressive, illegal invasions, its hard to complain about this present turn of events. Hope that we can patch things together eventually and become a kinder, gentler place that only invades other nations, say, every twenty years or so. Here's a wild thought: make them save up the money in advance *before* they can have a war. *That* should keep things relatively peaceful. We U.S. citizens need to work on developing a sense of shame and disgust; this is my little contribution to that project.