Saturday, May 06, 2006
More unease over state of dollar
Christian Science Monitor: The fallout from a falling dollar
'For two weeks, the dollar has been hammered as foreign buyers shun the US currency.'
Posted by crashedoutandburned @ 05:03 PM (221 views) Add Comment
15 Comments
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1. Bidin'matime said...
We could be in line for a round of competitive interest rate rises...
2. Harold said...
Yes, with any luck Blair will see the writing on the economic wall, and GO.
3. Uncle Tom said...
When you adjust the figures for population difference, the US economy looks much more robust than the UK.
They can probably handle the correction of their economic imbalances without hell freezing over, although they are also likely to experience severe real estate deflation, high levels of personal insolvency and distress in the banking sector.
Economically, the Americans carry a lot of fat. They have a huge bank of skills and resources to fall back on when they accept the need to re-structure their economy.
Unfortunately, the same can not be said of the UK, where we are relatively short of land, and where for over a generation, the education system has conspicuously failed to deliver the skills needed in the workplace.
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5. Denzil said...
It's interesting the market's reaction a couple of weeks back to Bernanke comment of rate tightening may be complete.
It only took a couple of days until he was quoted as saying "he didn't really mean it".
I think the US are far from at the end of the cycle.
Interesting too that I think the UK market have wind of an increase in IR's relatively soon. Depending on the quarterly inflation report which is due next week (I think) I think it there may be a .25 in the pipeline soon, possibly June. My preferred date is still August but you never know.
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7. Sirgoogle said...
When America Sneezes, The UK Catches a cold
8. Uncle Tom said...
Denzil,
I would be quite surprised to see a rate hike next month, but if bond prices take a further nosedive, the £ keeps rising, inflation makes a big jump and we get more excited noises on the property front, then it's still possible.
I've seen August looming out of the mist for three months now - I still see it as the most likely month for a hike.
9. Bidin'matime said...
We're getting to rely on you Uncle Tom..!
10. Talking_rot said...
How sure are we that a 0.25% rise or a 0.5% rise (over 2 jumps) will cause real pain? I tend not to trust average debt figures which could be skewed, for example, if the extreme debt is carried by a [relatively] small number of people. Debt from Mortgage Equity Withdrawl (MEW) is equally vague. For example compare the situation of a double-income couple who have increased their mortgage from £20K to £80K against to a sole income family MEW-ing from £120K to £180K. On both occasions it is an icnrease of £60K but with potentially different results. Even if an Interest Rate rise does push some into an IVA, how often will their house be pushed onto the market under conditions of a Forced Sale?
Let's not over-egg the omlette. A combination of factors will be required before the illusive House Price Crash is discovered by UK plc.
11. Harold said...
Given the ‘sterling’ performance of the pound against the euro this week, is it possible the money markets are already betting on a rise in UK rates before August? (Or am I talking rot...)
12. Uncle Tom said...
Correction - I meant to say £ STOPS rising..
13. Bidin'matime said...
TR - I wont say it all again, but it wont need lots of forced sales to bring prices down – just fewer purchasers – what we need is for FTB’s to stop thinking that buying a house is an urgent requirement and for investors to stop thinking that BTL is the solution to their pension problems. Interest rate rises, even small, will start this process. Then the lenders will take fright, credit will stop expanding, people will stop spending, jobs will be lost, boom will turn to bust and home ownership will go from being the solution to people’s financial problems to being their cause.
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15. Magnifico said...
BIMTime,
were we not in the predicament you advocate a year or so ago? Rates on the up, fewer buyers, house prices starting to slide, even big Property Portfolios holders beginning to offload. It only seemed a question of time before a crash would happen and we were all extremely excited.
It hasn't happened. I still don't understand why but the trend has turned upwards once again.I'm holding my nerve, but I can't blame people who won't.