Posts Tagged ‘forex markets’

Feldstein: Worry About the Dollar, Not the Euro: Keep an Eye on Sterling

Feldstein: Worry About the Dollar, Not the Euro: Keep an Eye on Sterling

Courtesy of JESSE’S CAFÉ AMÉRICAIN

Here is Marty Feldstein’s view of the economic fundamentals in the euro and dollar portion of the forex markets.

Fundamentals mean little in the short term for trading purposes, at least in my own judgement. However, it does look as though the euro/dollar cross is a bit overdone. If that is correct, then it is likely that this correction in the precious metals should be almost done as well. But we will have to see what happens. The markets are shallow and edgy, almost wobbly. In a liquidation everything gets sold on the short term. Selling and buying on the margins makes price, no matter what size the market. Such it is with most auction markets disconnected from rational valuation.

On the fundamentals, however, Feldstein makes some good points. The problem with Europe is that it is sitting on the fence with its union, and the Greek debt crisis merely highlights their weakness which are largely structural. What is the EU likely to become.

As for the US, its day is fading, and it is in the grip of financial interests that will wring the last drop of vitality out of it given their way.

There are several roads to losing weight. One is to engage in healthy exercise and a good diet. The other way is starvation either through deprivation or disease. In both instances one ‘loses weight.’ The modern day Liquidationists favor starvation, for the other guys, not themselves. The modern day Keynesianians seem to wish to indulge in overeating with a change in diet to be left for another day.

The American economic system cries out for meaningful reform. Deficit spending without reform is futile, the road to addiction. But no government led structural repair efforts is the sure road to stagnation and a zombie-like existence such as has been seen in Japan, or even worse, a third world status and regional fragmentation.

My own bellwether is the UK. I believe quite strongly that Britain will reach its crisis before the US. And it may provide a proper warning, but all things considered, it may be too late. While…
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