re: big trouble at mill: flight of cash
The US Govt has attracted a lot of foreign monery but difficult times are coming up.
The FED's interest rate is about 5% and that of the Euro is 2.5%.
There are several Institutions who want the USD down. It is now 85.32, oil is 70.35 and Gold is 680.
However, while the USD is moving down, the Euro is moving up, now 1.27 and rising.
Even now, when investing, the combined rise in the Euro Currency and its interest rate look better than a higher FED interest rate, offset by a falling dollar. So, US interest rates need to rise.
However, the Euro can take more interest rates rises if it has to, because 2.5% is still low.
Not so the FED's rate in theory, because that would impact severely on the economy. If it has to stop raising interest rates, then cash will flee to Europe and the US debt interest payments will run short. The USD will fall further and interest rates will normally rise again to attract foreign capital.
Bernanke will most likely monetize much debt as well as interest payments to prevent the economy from seizing up (Hence no data on M3).
That ought not to stop the Euro and Gold from rising further till there is some equilibrium, if there is one.
I don't like predicting as to how low the USD will fall apart from suggesting that the US and other nations will have a cruel road ahead of them.
