Thursday, October 21, 2004


Yet more news about the dollar (and the global economy)

Jack Crooks does a daily foreign-exchange commentary for Asia Times. His adjective of the day yesterday was "depressing." So let's get right to his worries about the dollar—
Until this depressing trend of global economic news subsides there is little reason to believe bonds won’t go higher. And if they do, traders could really pile on by selling dollars.

So what's the depressing economic news? Basically, that China's economy is slowing. Crooks notes that—

The economic news is depressing the price level. But even more depressing may be the precarious position of global demand. It appears perched on the collective backs of China's proletariat.

Crooks quotes Stephen Roach of Morgan Stanley who finds—

In 2003, about 45% of the total growth in Japanese and Korean exports was traceable to surging exports to China; for Germany, the figure was 28%. Lacking in sustainable domestic demand and without another major trading partner to fill the void left by China, these three countries seem likely to see economic growth slip as the slowdown in the Chinese economy gains force.

Let me add for my Australian readers that the Dept. of Foreign Affairs and Trade (DFAT) is showing China accounting for 22.6% of total Australian exports, led by iron ore and wool. And I'm intrigued by the footnote "*Includes A$2,245,000,000 of confidential items."

Crooks continues,

And if that tidbit doesn’t look depressing enough, try on this statistic from the Financial Times Tuesday:
Global commodities prices have risen 43% over the past 12 months, but the prices of Chinese exports have gone up less than 2% over the same period. Holy global pricing pressure! No wonder US business isn’t hiring.

The housing market is looking bleak.

On Monday, the UK reported the largest price drop in housing in over nine years during September. And Tuesday, we learned US housing starts fell 6% for the month of September. Pricing pressure? Well, we are already seeing it on the producer side of the equation.

Crooks takes a look at lumber futures prices, which are a leading indicator for housing construction. They're not "declining"; they're not "depressed"—they're plunging.

Crooks concludes,

Mr Greenspan says we shouldn’t worry about soaring home prices and household debt. Well, maybe that soaring home price problem won’t be with us too much longer, but that debt thing has a way of hanging around. Talk about depressing!

Thinking about selling your home while the market's hot? Today might be the day to call your realtor—before people who don't read Simply Appalling realize what a bargain it is about to become. Make sure to set the purchase price in euros.

Previous posts
Something you should know about your dollars (9/24/04)
More comment on the dollar (10/11/04)

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