US dollar is rising, and many prices and currency values are falling because everybody wants dollars: the new gold standard.
I guess, Paul is waiting for the next dead cat bounce to write another “Is it bottom yet ?” article. 
Paul
Your article would make people believe that a strong dollar is a good thing. Unfortunately we are sffereing from our own success. The political stability in the US has made us the currency and investment safe haven for most of a century. That has gone a long way to pervert the basic economics. In a politically equal world our trade deficits would have weakened the dollar back in the sixties. Imports would have been more expensive and our manufactured goods would have been cheaper overseas. We would have exported many fewer of our good manufacturing jobs.
We can’t undo history, but moving forward we can learn from it. As our good jobs have been exported the middle class has stagnated and even gone backwords. For decades I have read that my generation would be the first American generation to do worse than their parents since the great depression. I now look at my children and think that they will be the second.
The strong dollar has exported American wealth and concentrated what remained here in fewer and fewer hands. Before Reagan CEO pay was usually about 40 times the companies average wage, last year it was more like 200 times. The new generations, striving to maintain the lifestyle their parents had borrowed more and more money. It wasn’t smart, but they were just trying to stay even.
I don’t know how much can be done, but the US should be pursuing a weak dollar policy, or at least a policy where the dollar’s strength reflects the economic level rather than the inflated level it gains from being a political “safe haven.”
Mike, I would be really careful about any conclusions of prices falling or raising.
The entire situation is highly muddled by the change in the cost of one commodity. Oil. Something effected by many factors in addition to money supply.
For “inflation” or “deflation” to apply to economic theory, it has to be an indication of the value of money. Not the value of goods. The idea being that there is too much or not enough of it. (Money)
Prices dropping because too much of something was built (houses) or because the demand for the particular thing dropped (oil) or raising because of a shortage (food) may effect our budgets, but do not indicate overall inflation or deflation.
It will take time to see on each of these issues. But it seems to me that the money supply has been hugely increased over the last 10 years, and particularly over the last 2. Overall inflation is my bet.
I think it is time to provide some cheer to beleagured folks out there.
The market (Dow Jones Industrial Average) has essentially bottomed, give or take another 1000 points.
I would look to start buying sometimes late Aug 2009.
God gratnted one wish that DELL trade below $8.
My next wish is MSFT trades between $12 and $14 before markets start moving upwards during last part of this year.
Happy Tradings.
Actually, I think it’s a depression (prices are falling on many items, such as oil, housing, food, etc.) more than it is a recession (it looks like a recession because GDP is falling, but it might be accounted for solely by falling prices, more units at lower prices).
Yes, the US will emerge first, possibly as soon as the second half of this year. It all depends on the ARRA Stimulus Program, with its back-to-basic approach of education, energy, and health, which are all onshore job-makers. That’s why the foreign countries were lobbying so hard to get pieces of it, but they lost. Thank you, Congress.
Canada, Mexico, Japan, and Europe will recover next, in order, as they are our largest trading partners. I don’t know as much about countries I have not visited.
China has some problems: they were way too dependent on cheap exports, and they have massive poor populations, to start. They had a big bubble, and it will take them longer to recover.
From first hand experience, I can tell you that the dollar will continue to get stronger. My products are manufactured in Germany and let me tell you, the Germans, the europeans, they don’t get it. They’re in trouble just like the US and they are slow to react. It’s an ego thing.
Furthermore, Deutche Bank, the worlds largest currency trader of the Euro has stated that they forecast the dollar to be 1.20 vs. the Euro by end of 09.
What happens here in the US is not isolated. It’s happening everywhere. The first to react wins.
Dollar may drop at some point, but not as fast as everybody dream of.
It may sound like a nice plan for many people: what if hyperinflation wipes it all: your debt, you 30-years mortgage, everything disappears and you start free and clear.
Dollar ? What to cry about since nobody been keeping too much in cash ? Let it burn !
HE, HE, HE ! Ain’t happening !
Specifically because of that that reason. First will be devalued what people DO have: 401Ks, houses, whatever those pyramid schemas they been brainwashed about for decades.
Yes I do think US will lead the way out of the recession and the dollar value going up proves it.
It is true that economy is in bad shape now and we have lot of work to do to fix it. It is true that lots of money being printed as we speak. But look around the world. Every government is doing the same thing. And compare with the size of their economy with the money they printed, US is in relative better shape. To me, that explains why dollar goes up against other currency: There is no safe place for the money and US is safer for the money than anywhere else.
Despite of the current DOW low and all the bad news, I do see a sliverlining that the current crisis is close to its bottom.
I agree with Sybil about the dollar drop, and Tony from Austin is right-on. A real problem is that we have lost much of our manufacturing base and all the middle-class jobs that go with it. And we are giving away all of our Information Technology jobs to incompetent guys from India who come over on H1B visas, a program that is supported by Congresspeople paid off to perpetuate this disgusting program by big American IT firms like Microsoft. It’s really sad how we’re throwing away job opportunities for our college graduates this way.
The recovery of the US real economy, i.e. the working class, depends on a dramatic drop in the Dollar. Our labor needs to be able to compete with the world and that is the only way I can see to so that.
“luckily” for us, our government is printing like crazy (i.e. creating dollar debt), so the drop will be coming soon.
Then, whether we do it “first” or not depends on how fast the rest of the world figures out how to survive doing something other then selling junk to US consumers and lending us the money to do it.
The US will not emerge from this Depression until the Weasels of Wall Street have been exorcised excommunicated excreted and eviscerated from the financial industry. We The People – I dislike including some of the knotheads I personally know – do not appreciate the Federal Government continuing to feed these parasites at the public trough, we are tired of reading Wall Street missives telling us what to do with our money (which is give it to them with no strings attached) and we are tired of reading how Wall Street keeps trying to boss our Federal and State governments around, through the pronouncements of analysts and journalistic busybodies.
Look at the demographics – in the US the huge Baby Boomer population is 50 years old, on average, and they cannot do the physical work they did when they were 20 or 30, even if they were very good at it at that age. Their bodies just can’t do it for 8 hours a day in the summer heat. So, they cannot take some jobs.
The Baby Boomers are also not interested in as much as they once were, new gadgets – so what? Don’t need it. The garage and attic is full of stuff anyway, and some of it is the parents’ stuff and grandparents’ keepsakes.
The Baby Boomers have become their grandparents, and their grandparents remembered the Great Depression vividly. History is repeating itself.
I predict China will emerge first, and here is why. China has a huge population of young adults willing to work hard and willing to move where the work is. The United States, by comparison, has a high percentage of greedy grasping manipulators and country-club types who think they are above real work, whose attitude is “I boss people around, people don’t boss me around.”
What China has to do is develop its internal economy, where factory workers are paid enough wages to afford living quarters and food and have enough money left over for incidental and discretionary purchases. The idiotic demands of the likes of Wal-Mart on their suppliers to constantly lower prices killed the wage levels necessary for the factory workers in China to have that discretionary income.
Time for this above-average-age Baby Boomer to take his nap.
TonyRB
Adding stimulus to the economy is only going to make the recovery slower since it was stimulus that got us where we are. Since the rest of the world can’t apply the degree of stimulus we are, I believe they will recover faster as a result.
As far as the dollar, I believe there is more to it than discussed in the article. I believe a lot of it has to do with deleveraging and the speculation that the ECB will cut rates significantly this week.
I don’t think the strength in the US$ is a sign the US economy is about to recover or that it will recover before other countries. The US$ is the best of the ugliest at this point, but I don’t expect that to last much longer. Both the US$ and US treasuries will get clobbered as the US fiscal deficits balloon out of control. The only buyer for that huge supply of government debt will be the Treasury itself given the other CBs are struggling with their own economies and that there is no advantage in subsidizing the US consumer to buy their exports since the consumer is flat broke. In the end the currency of choice will be gold since it cannot be inflated by increasing it’s supply infinitely as the can the US$ and other currencies. The CBs are doing a very good job of destroying their own currencies as it is a race to the bottom.
dollar is not the new gold standard but of all fiat currencies it has traditionally been the strongest.
Having said that, it will not last. The contagion has spread throughout the entire economy and it’s only a matter of time before we are hit with another crisis. There will be several other crises this year and the dollar will not hold up.
If you don’t think an alternative reserve currency is being planned at this moment think again.