Currency Trading Market Conditions
Currency trading market conditions remain extremely volatile as the world wide financial crisis continues to grow. The confusion among world leaders was highlighted at this weeks meeting of the world financial elite at Davos, Switzerland.
As best as I can tell from a distance there was a general feeling of dismay at how quickly the Western world’s financial system has come apart and the toxic perhaps near fatal contamination that has been transmitted from the West to the rest of the world.
The financial gurus who largely got us into this messy soup of declining economic activity seem to be throwing a hodgepodge of stimulus ideas at the wall and hoping that at least a few stick. My confidence that any of these reckless, hastily conceived bailout plans will succeed is low.
The desperation of our so called world leaders is best shown by the Obama team and their soon to be one trillion dollar stimulus plan. It looks to me that the Obama crowd has turned back the pages to the FDR 1932 play book. Many aspects of the Obama plan, such as the massive “shovel ready” construction projects, the Baaaaad Bank idea, and the mish mash of spend, spend, spend, on anything plans seem to be completely unoriginal. Unfortunately, these grand spend money you don’t have programs didn’t work in the FDR years and they are unlikely to work now. My opinion is that Obama needs to add a qualified historian to his team.
The sad fact is that even the “transparent” Oh-My-God-Bama and his team of retreads will not be able to tell the America people the truth. Which is that the financial system is not only corrupt and broken but that it can not be fixed. At least not in a way that brings the economy back to where it was before all of the cracks began showing up. The government will make every effort to bring America back to what it once was in the days of yore when America was a great manufacturing power.
Alas, it is too late. When you snooze you lose and the US has been asleep for a very long time. The Obama stimulus plan and all those plans to follow are well intended but will almost surely make matters worse over the long run. Maybe the short run too. What is needed is a complete reboot. Those businesses and banks, that made bad management decisions should be allowed to fail.
The system has to be cleaned out, as painful as that would be, before a healthy economy can emerge. Politically not even President Obama has enough political capital to make that happen. The result will be that the misery index will keep on rising for a very long time. Perhaps right into the day when the unthinkable happens and the US government defaults on its treasury obligations. Now that would unsettle markets and will be the doomsday for the Dollar.
One can expect currency trading market conditions to remain exceedingly volatile under such conditions. The US Dollar has once again become the “FEAR” currency and money is pouring into the Dollar as if there is no tomorrow. Indeed, the way things seem now there may not be. Traders need to remain short term oriented under these conditions and not think that markets have to do anything.
Case in point: While the US Dollar remains a seriously flawed currency that will eventually approach zero, the fear factor and lack of any strong paper currency to move into will probably keep the Dollar elevated far longer than many “Dollar Doom” traders now think. Yes, the fundamentals of the Dollar remain terrible, and will likely remain so, but fear is a powerful motivator and where else can you place your money except under the mattress or in gold.
Ahhhhhh, gold. Now that’s another story that is heating up. Currency market trading conditions many end up seeming tame compared to the fireworks we are about to witness in the gold market. As I said fear is a powerful emotion.
