gabe borenstein

The Most Important Price in an Economy

What Paul Volcker thought about the relative value of the currency as reflective of economic performance as perceived by the global investors is not aplicable to the current status quo.Over the past twenty years we have seen the advent of massive speculative elements(i.e hedge funds)which tend to create volatile distortions which are not related to the economic performace .Furthermore,since September 11,2001 the forex dynamics are influenced by political and
military violence/events which creates Forex flows based on the "flight to quality " perceptions.These flows are likely to expand geometrically seeking dollar and the dollar denominated assets .While under Mr.Volcker (he was responsible for many monetary blunders),the dollar very well may have been a barometer of the relative economic performance,today the dollar equilibrium represents to some degree perception of the global violence and political instability.These events strengthen the dollar .As the European economies weaken, the dollar strength will be enhanced by relative economic performance comparison.