The question has always been for the observant, how long can the “spin”, spin the economy and the share market as it is intended to???
When the U.S Dollar failed to break below the .80 level in Dec 2004 (.8048 low USDX Futures) which would have created some serious trouble for the U.S Dollar. Such a concern developed as never before had been considered up until then.
This led the spin doctors to pronounce the “Current Account” as having little relevance in the grander scheme of things.
The U.S Current Account is the measure of Dollars leaving and/or leaving the U.S.
As the Current Account moves into surplus the measure is an indication of inflow of U.S Dollars into the U.S economy from the International economy. This increase in supply in the U.S economy and decreases the supply in the International economy which in turn leads to a lower value or price of the U.S Dollar.
Obviously the reverse comes into play if there is a deficit. The outflow of U.S Dollars from the U.S economy into the International economy increases the value or price of the U.S Dollar because of lower levels in supply.
So the spin can from time to time succeed in influencing the markets but only to a certain degree. Because each time it requires more co-ordination which requires the same level of co-operation from the participating players not to mention creditability to create the required facts to support the argument in favor of the “spin”.
However, to reverse the ‘currency market’ which has an estimate currency trading well into the trillions of dollars a day, yes a day, that “NO” Central Bank or all Central Banks collectively have the ability, for any length of time, to fight, they simply ‘do not’ have the money to compete.
Thus it would require some massive “spin” to bring about a level of psychology in order for the continued “spin” to ultimately succeed.
This is why “GOLD” as an insurance policy has historically proven to be the ultimate storehouse of wealth …
The U.S Dollar is currently bouncing slightly above the .82 level and should it falter and break the support level the .80 level will once again be challenged and possibly further south as an equilibrium price is sought between “GOLD” and the U.S Dollar.
Because the U.S Dollar will do what it has to do in time without the influence of Central Banks because of the very nature of the ‘Currency Market’ and the nature of ‘Currency Trading’. A market which over powers and dwarfs the commodity and securities market together …
So there can be no doubting the fact that it is a bear market in the U.S Dollar and will remain so until the ‘Currency Market’ is convinced that new policies have been put into place by the U.S Government of the day.
As would any entity or individual whose budget was showing a deficit need to re-consider the financial management of their affairs.
In order to reduce the budget deficit, turn around the trade deficit and therefore turn around the current account deficit which continues to spiral out of control.
Thus, with mountain of U.S dollars exiting the U.S economy into the International economy and increasing the supply of U.S Dollars internationally the value or price of the U.S Dollar must fall and to a level where the U.S economy is able to balance it’s budget or bring it into surplus by encouraging the excess dollars internationally to return into the U.S economy.
As things stand today there is little in order of policies being touted but reliance on market forces to correct any imbalances.
With the thought of allowing the U.S Dollar to fall low enough to make U.S goods and services cheap enough internationally, however it must be noted very little is manufactured in the U.S today.
You cannot continually ‘spin’ or create an illusion that all is well when the foundations are crumbling beneath you.
