Dollar is Beginning to Lose its Luster

Wednesday, March 18, 2009

Ok, so the stock markets seem to be bouncing back, data releases seem to be telling a good tale and the dollar is beginning to lose its luster as online Forex investors move towards a more risky approach to their investing. I still believe there is a long way to go before we can call this crisis over – I still don’t believe we have hit the bottom yet. I would not be surprised at all to see the markets suck everyone in for a few more weeks- perhaps even a month, and then collapse once again. The problem here that everyone needs to see is that this “turnaround” in the economy came overnight – on the heels of a dismal employment report in the US. It was protracted based on a better than expected retail sales report – a report that does not take into account the fire-sales and going out of business sales that saw retail prices drop in some cases, by 80%.

Forex traders and the Forex Broker companies are smarter than that. Have you ever wondered why when the stock market’s fall the currency gets stronger and vice-versa? It is because the Forex tends to work more on economic logic than raw emotion. If people are losing money in equities, they look for a quiet and safe place to park their cash – and what better place to park cash than in Cash, or rather, in foreign currencies. Forex traders know that the economy is no beeter now than it was two weeks ago – and they are preparing themselves for the fall while in the mean-time, taking advantage of some good shot-term trading opportunities to earn some extra money.

We must not forget that the EU is in trouble and still cannot agree on anything related to a solution. What is good for France is not good for Germany and what is good for the West is not good for the (or available to) the East. It’s a problem being connected at the hip when economically when your individual economies are in need of different things. The US is not out of the woods by far. All of this money printing and debt issuing by the US government will come back to bite them, big-time. IF anything, these Trillions – with a capital “T” – have made recovery in the long term a difficult task because deflation can creep up at any moment. The worse situation is retreating to the stagflation days of the seventies after Nixon nixed the gold standard and made deficit spending possible.

History is there for us to learn from it. Why can’t our bright and educated leaders see that?


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