rather not be rather

December 1, 2004


Hello,

Funny the Saudi’s announce a huge increase in their capacity to produce oil and oil prices raise? Consumers spent money as the expression goes like “drunken sailors”, increasing spending by a whopping 5.1% paying apparently scant attention to the “consumer confidence numbers”. Funny again that real spending has less of am impact on the pundits than consumer confidence polls? Sounds strikingly familiar to something? Wall Street continues to chant the sky is falling, the sky is falling, don’t buy it for one minute! The more the wall of worry keeps increasing the more chances for investors to be rewarded with upside surprises, and strong stock advances.

So why is the dollar really falling in value? The US for decades has been the buyer of last resort for all foreign goods. As a country we seem to have an insatiable appetite. Very good demographics have continued to propel US to consume all that is offered. A strong currency keeps prices and inflation down. Some countries like Japan have horrible demographics and need to export there way to prosperity. Because of Japans success many emerging countries have been encouraged to follow the Japanese model. The problem being that some of these countries like China have huge unmet internal demand making it entirely unnecessary for them to think that they can and should export there way to prosperity. Every country has different population demographics, skills, educational levels and resources. Common sense would suggest to anyone that different countries need differing development policies. Far too many countries are following the same model, keeping the currency cheap, and exporting there way to fame and fortune. There are simply not enough buyers. What we see is market forces attempting to rebalance the value of certain currencies to change the equation. The US can no longer afford to buy everything from everyone. The devaluation of the US dollar will pressure Asia and Europe and force shifts from export driven economies to something more balanced. Asia looks most likely to have a currency crisis while Europe looks most likely to be hurt in the long run.

Now Ridgewoods largest dealer of Iraqi Dinars,

James