Originally Posted by styla21
Maybe you guys can answer this question; Gray, i'm interested to hear your response in particular.
The U.S. dollar: It's continually strengthening across world markets, but why? Is there some sort of good news about the U.S. economy I've missed? Is the U.S. tax code suddenly more capital friendly? Are national levels of wages and household incomes rising? Is the labor force suddenly more focused on producing goods that the world wants to buy by the boatload? Are government expenditures suddenly under control? Really, where's the good news? For two months now the dollar has been strengthening.. I must be missing something.
Also, the U.S. government just seized Fannie and Freddie. Don't these firms count as major banks, what with their $5 trillion and more of liabilities? They're both too big to fail, yet too big to bail. Really does anyone have a spare $5 trillion lying around?
The US Fed, (Mattk) is socializing the financial side of the US housing market. That is a disastrous move, that doesn't stablise the markets. It gets everyone high, has a good trip for a few hours, then comes crashing down.
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currencies, like commodities, are traded only partially on reality. the rest of the price is made up by the perception of future reality by the players in the game. right now the dollar will continue to gain steadily, and perhaps far faster than expected, simply because the usa story is now less bad than the european or asian stories. the usa economy doesnt need to be great, and some of you have rightly pointed out that it is actually poor (i agree), but europe is just now dropping into the abyss, with far fewer tools or a plan to get itself back out. same story with japan and maybe china/india. add a few events like georgia, and gdp drop in germany france and italy, and pretty soon the dollar actually looks good - on a relative basis. but a relative basis is all forex ever is.