GLOBAL MARKETS-Asian stocks hit 4-year lows on economy fears (click here)
* Asian stocks slump on fears about global economy, earnings
* Credit spreads surge on Argentina pension move
* Dollar hits 2-yr high vs basket of currencies
* Oil slumps to below $70 a barrel
By Kevin Plumberg and Rafael Nam
HONG KONG, Oct 22 (Reuters) - Asian stocks slumped to their lowest since December 2004 on Wednesday as poor U.S. corporate results and falling commodity prices fanned worries of a protracted global economic slowdown.
The U.S. dollar surged to a two-year high against a basket of currencies on expectations that central banks around the world will react to slowing growth in their economies by catching up to this year's deep interest rate cuts by the Federal Reserve....
Just because it appears as though the USA Dollar is gaining in value doesn't mean the global crisis is over. It simply means that ALTHOUGH all currency is suffering losses due to the way their governments have been dumping money into circulation, the USA is trading higher today. It means NOTHING to the fact the USA dollar has grossly lost value CONSISTENTLY over the past year.
The 'thing' is this, Wall Street will trade currencies for profit as a means to maintain an edge against 'losses.' It may be that the USA Dollar is gaining in strength simply because other currenies are simultaneously lossing value due to the actions of their governments to release funds to banks.
THE ACTUAL 'value' of the currencies globally are masked by the turbulent reaction of the markets to escalating devaluation of currency with ever increasing debt. For the USA Treasury and or Federal Reserve to view any of these increases in US Dollar 'revaluation' as something substantial while still dolling out billions upon billions of 'unsecured' deficit spending is simply going to bring a larger collapse to the USA Dollar as other currencies begin to realize their folly and start to rein in their deficit 'free fall.'
The current Administrations in DC are riding the 'potential' of sustaining a revaluation of the USA currency, when in FACT it is NOTHING but margin and attempting to justify their actions in doing so. This 'free handed frenzy' at the Fed has to stop.
More recently, however, the dollar has experienced a dramatic reversal of fortune (click here), as the economies of Europe and Asia weather the same economic storm that first hit the U.S. last year. Is the dollar just bouncing off its summertime lows, or is this rebound the beginning of a new upward trend?
This is an article from a year ago that illustrates better what I am trying to convey.
April 13, 2007
Surprise Currency Trends in 2007 (click here)
...The U.S. dollar, which is down 2.1% versus the euro, has dropped 4.4% against the Hungarian forint, one of Europe's most heavily indebted currencies. Also, the Norwegian krone, one of the better-managed European currencies and a major oil exporter, has gained 3.8% this year -- no surprise there. But look at the Turkish lira, an EU candidate over the next few years. The Turkish unit has rallied 2.9% in 2007 against the dollar. But the best-performing European currency is the Slovak koruna, up 5.1% this year. Now that's a surprise, considering what a tiny economy the Slovak Republic sports compared to her larger European majors....
The Fed and US Treasury needs to stop playing Russian Rolette with global currencies if we are to stop this slide. They can't keep 'upping' the odds by their continued dumping of monies into the economy. As the USA Dollar increases in value, it isn't because the economy or assets of the USA has improved. It is because everything else is devaluating as well based upon the increase of debt abroad to assist stabilizing the markets.
The point is that this 'strategy' is NOT a good one. It is devaluating global currency on a slippery slope to what they 'hope' is stabilization. There is no guarantee to that and it looks more and more like guess work all the time. This needs to stop to acquire a plateau.
The assets of countries are even in flux. If you look to the OPEC nations as they find the demand for their product dropping; oil will not serve as an asset that continues to add stability to any currency. As a matter of fact, two years ago at a global sustainability summit, the OPEC nations wanted to know what will be done to add support to their economies when oil was no longer in high demand.
It isn't as though these folks don't understand that CHANGE is needed in the energy sector. These countries are aware of the frank reality of Climate Change and contribute to the enthusiasm to finding better energy and transportation solutions.
But, from the perspective of having 'stable' currencies, when the assets of a nation change in value on a daily if not moment to moment basis there is no 'real' way to stop the roller coaster ENOUGH to counter destabilizing trends.
What appears to be 'attempts' by US Treasury and Federal Reserve to bolster stability is done with haphazard optimism than real understanding of what is actually going to bring about currency and economic stability. Its a strategy conceived and conducted in 'hope' without real foundation in reality.
The infrastructure of the USA must be rebuilt to re-establish a solid base of income to its Treasury through a sustainable widened base of taxes. That is ONLY done through job creation and a re-invigoration of the USA consumer economy.
IF the USA debt begins to look manageable 'in the long view', as its economic optimism takes place, the national debt can even begin to look like a surplus and inflationary trends can be headed off at the pass, as other countries such as China continue to grow its infrastructure to accommodate its own economy and prosperity fueled by 'internal' need of its people as they achieve higher levels of quality of life.
Feeding off economies whereby there is no sustainable growth or job creation isn't even treading water so much as continually losing ground to 'real currency value.'
Bernanke and Paulson are wrong. This has to stop. They can't continue to allow debt based on the value of 'air.'
