18 April 2008
Facing Life Head-On
Posted by Joy Bischoff under: World Economy .
After reading on the News and Comments thread this morning, I decided to post part of the following article out of the UK. Wall Street really doesn’t get it. Optimism is a great thing and it is important that we hold on to it. Hope is an eternal principle that gives us the courage to go forward with faith. Yet, at the same time we need to function in the real world and deal with hard facts, not fantasy. Covering our eyes and pretending problems aren’t there keeps us from dealing effectively with those challenges.
I do disagree with the premise of why the dollar is weak. It isn’t because the euro is so strong. The dollar weakened due to policy and circumstances such as: a 9.4 trillion dollar national debt, the war, huge trade deficits, drastic cuts in the interest rates to 2.25 from 5.25% in 8 months, and printing money as fast as possible to bail out Wall Street.
That said, I do think it is absolutely crucial that after we have apprised ourselves of the situation and taken steps to steer a wise course, we need to then focus on the present, seek the sunshine and enjoy life. We should be a source of good cheer and optimism for all around us because God is in the Heavens and we love Him and He will give us peace if we seek Him.
Authorities lose patience with collapsing dollar
By Ambrose Evans-Pritchard
Jean-Claude Juncker, the EU’s ‘Mr Euro’, has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.
Jean-Claude Juncker, who is calling for Washington to
take steps to halt the slide of the dollarMomentum traders have blithely ignored last week’s accord by the G7 powers, which described “sharp fluctuations in major currencies” as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.
“I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting,” he said.
Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising “protectionism” in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar…
David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. “They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn’t happened. There are no signs that the dollar decline has turned disorderly,” he said…
Silvio Berlusconi, Italy’s newly elected premier, has called for a change in the ECB’s mandate, proposing a dual mission akin to the US Federal Reserve’s mandate to promote growth as well as fighting inflation. He has the support of France’s Nicolas Sarkozy.
A key reason for the 30pc rise in the euro agasint the dollar over the last two years has been the move by Asia central banks and Mid-East wealth funds to parking huge sums of newly acquired wealth in European bonds as an alternative to the dollar.
BNP Paribas said Asian surplus countries and commodity exporters have accumulated $1,160bn in reserves over the last year alone. US Treasury data shows that only 19pc of this was invested in dollar assets. This is a sharp break with past practice. A large chunk of the money was invested in euro-zone securities. The question is whether China, Saudi Arabia, and others, have now reached euro saturation.
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7 Comments so far...
Anon88 Says:
18 April 2008 at 11:20 am.
Joy, I completely agree with your analysis. Our fiscal policies have weakened the dollar and if they aren’t changed, the dollar won’t rebound in a significant way. Printing more money for the bailout is the same mistake that has brought down other currencies. Fiat money is as worthless as thin air when crises become severe enough. Outsources our basic needs will come back to bite us badly.
E.E. Says:
18 April 2008 at 11:43 am.
I have the impression that his impression is right that Wall Street doesn’t understand the situation.
Matt Says:
18 April 2008 at 11:46 am.
Good blog.
Nalvy Says:
18 April 2008 at 1:32 pm.
Wall Street doesn’t understand. Joy I do agree with your analysis as well. The dollar is going down and it is all because of the people making those stupid policies!!! Ridiculous isn’t it? Look how we get ourselves into this mess and we all panic when we can’t find a way out. BLEGH
T. Fan Says:
18 April 2008 at 1:43 pm.
What I liked best was your suggestion that we look what is happening realistically and act in a prudent way for the well being of our families, then set it aside and enjoy all the good right now. We can always do that no matter how hard things get if we praise the Lord in our hearts and keep him first. He promises that his peace will be beyond understanding to be with us.
Carrie Says:
18 April 2008 at 2:39 pm.
T. Fan. I think it is so sweet that a Protestant and a Mormon can agree that being close to the Lord will bring us peace. There is hope for the world.
Hank Says:
18 April 2008 at 8:18 pm.
As the Brits would say, your take on this is spot on. It should be getting obvious to people by now.
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