House of Paine

dollar value jitters

 here's a "nice"
semi stupid
 piece 

on the fate
of 
 uncles "uber tender" 


=====================================


 seems
thw auhor
"bubbles'  DeLong 
is a prof at berkley 


" The United States' current-account deficit
 reached 5.7% of GDP in the second quarter of 2004
 Yet the dollar remains at a relatively high value
 less than 20% below its early 2001 highs 
and more than 10% higher in real terms 
than in the early to mid-1990's. 

As the US current-account deficit 
rose over the past half-decade,
 international economists 
have lined up to predict doom:
 returns on assets 
invested in the US are relatively low
, so at some point
 - probably all at once - 
holders of dollar-denominated securities 
will realize that the risk
 of suffering a major crash 
in value 
is not being adequately compensated.

 Once portfolio investors 
start selling their dollar-denominated securities,
 a stampede will follow, 
causing the dollar's value 
to crash
 and triggering 
the first major global financial crisis 
of the twenty-first century.

 How far will the dollar have to fall? 
The first historical rule of thumb 
is 10% on the dollar 
for each percent of GDP's worth 
of unsustainable current-account deficit
 
 < in this case 5.7%x 10 = 57% 

we're talking  a 60% dollar value  drop here >

 The second historical rule of thumb 
is that currencies 
on the decline 
tend to overshoot:
 near the bottom, 
international currency speculators 
require a substantial risk premium
 out of the fear
 that the currency crash 
might trigger something even worse.
< i.e.
  the dollar 
ought to  drop 
well beyond 60% at its trough>

So when will this promised 
dollar collapse and crisis come? 

 The late Rudiger Dornbusch 
used to say 
that unsustainable situations 
lasted longer than economists
 who believed in market rationality
and equilibrium could imagine possible.

 They then tended 
to collapse 
more quickly 
than anyone could believe
 In his view,
 currency overvaluations 
go through five stages:

·        First,
 short-term speculators 
seeking higher returns, 
or investors overanxious for safety,
 drive a currency's value 
to unsustainable levels.

·        Second,
 trend-chasers 
keep buying 
because the returns have been so good 
in the recent past, 
thus pushing the overvaluation 
to a height and duration 
that orthodox economists cannot explain.

·        Third,
 highly intelligent economists,
 puzzled by the duration 
of the overvaluation, 
evolve theories 
of why things are different this time,
 and why this time the overvaluation 
is perhaps sustainable after all.

·        Fourth,
 market bulls, 
encouraged by theories 
of a "new economy" 
that justify 
the extraordinarily good returns 
seen in the recent past,
 keep buying 
and keep the currency suspended 
above economic fundamentals 
even longer.

·        Fifth, 
the supply of eager purchasers
 and trend-chasing investors 
comes to an end,
 producing a crash 
that resembles the collapse 
of a Ponzi scheme.

In the past six months,
 the current round 
of the US dollar cycle
 entered stage three

<"the double domers one off alibi" >




 "there's a unique
  co-dependent relationship
that has arisen
between the US 
and its trading partners," 

 
 "this could last for quite some time," 

 
 "the US and its main trading partners
 have a vested interest 
            in the status quo."

  

Japan, China,
 and other export-oriented
 East Asian economies
 are indeed eager 
to keep 
"the value of the dollar"
 relatively high

so their central banks 
have piled up 
close to $2 trillion 
in dollar-denominated assets



 

China's government 
regards the threat 
of capital losses 
on its dollar-denominated 
securities 
as less important 
than 
the need to maintain 
near-full employment 
in coastal manufacturing cities 
like Shanghai

< but ain't that true
 across the board
if you are a hevy growth oriented exporter of commodities
and importer of capital
and besides 
who personally
gets hurt 
when
  the value of the ass hole 
stooge dummy hand playing
   "public'
 sees its   foreign  reserves  croak?>
 

But 
if international currency speculators 
get the scent 
of near-inevitable profits 
from an ongoing dollar decline 
in their nostrils....




 all the Asian central banks 
put together 
w can't keep the dollar high

in fact 
 Only the Federal Reserve 
          can do that 

 and the Federal Reserve 
is very unlikely to sacrifice 
the jobs of American workers 
on the altar 
of the strong dollar"

      


< now after taking a jump in the text
we land on ....>

"There may yet be a soft landing"

< you wishy washy fuck u 
taking a last gasp u-turn on uz
he plows on plowing under his whole point ...>


 
 "during the last major dollar cycle,
 between 1985 and 1987, 
the dollar fell by 40% 
without ever causing panic"

< see 
my god!>


"no  major bankruptcies, 
nor any demand by investors 
for a substantial dollar risk premium "

< see what shit thissudden stage right
entrance of history
does to his tale?

fuck the facts of the dollars course
in the last cycle

 makes  every thing up to here
garbage 

a real article 
would state this contradiction
between the behaviour of the dollar and all other currencies
 at the top
and set out to explain 
what the fucks up
or at least say
shit I don't got a model 
that makes sense out of this bald set of facts

just like he admits 
he  don't got one
that models bubbles
 why can he admit 
bubble bafflement
admit
and not the dollars unequal nature

how come 
he's willing to cry 
help
over
 how and why
 bubbles inflate
in the first place
and why 
they go as far as they go
and last  as long as they do
or
why  when
 they  burst
they burst
  so suddenly
and collapse back to nothing 
so damn quickly 
 
and as kind of a whammy on a whammy
 why da fuck

uncle's fuckin dollar
 "don't do that"
 
state it flat out
the dollar ain't 
like other currenciesand hasn't been at least since keynes and white
consecrated its specialness at bretton woods 
nope
not even other first world ones
not even hard ass ones


 admit the dollar defies your 
"rules of thumb"
and your 5 stages of a curency cycle

maybe since 
you're a hot shot
                tenured type
why don't you 
stop the pontificating
in a void 
and  see about 
the history 
of the prior 
global top currency

take a  look at the rise and fall
                of the  pound sterling 
                             1815-1945 >
 
  
  
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