Declining dollar and economic interdependence.In mid-October, the dollar fell below $1.26 per euro "for the first time since February, erasing this year's gain," reported Bloomberg financial news service on October 20. "Speculators are loading up with boatloads of euros," commented currency trader Grant Wilson of Mellon Financial Corporation. Summarized Chris Melendez, president of Tempest Asset Management in California: "We think the soft patch Soft Patch A period of economic slowdown amid a larger trend of economic growth. The term is most often used in the financial media and by the U.S. Federal Reserve to describe a period of economic weakness.Notes: This term has started to come into greater use since Fed Chairman Alan Greenspan used it in his review of the overall U.S. economy. in the U.S. economy is getting softer." In addition to the Dow descending below 10,000, crude oil reaching prices above $55 a barrel, our trade deficit approaching 6 percent of our gross domestic product, and the Treasury Department using Enron-style accounting tricks to avoid piercing the $7.4 trillion national debt limit Debt limit The maximum amount that a municipality can borrow., there were troubling indications that foreign investors might begin bailing out of the U.S. economy. Time October 19 New York Times reported that foreign investment in the U.S. declined sharply in August--to $37.4 billion, down from $72.9 billion in July. The decline would have been even more pronounced if not for the intervention of Asian central banks to prop up the dollar. "Foreign central banks saved the dollar from disaster," stated Ashraf Laidi, chief currency analyst at MG Financial Group. "The stability of the bond market is at the mercy of Asian purchasers of U.S. Treasuries." Stephen S. Roach, chief economist at Morgan Stanley, summed up the situation in ominous terms: "If all we have funding our current account imbalance is the good graces Graces, in Greek mythology, personifications of beauty, charm, and grace; daughters of Zeus and the oceanid Eurynome. Also known as the Charites, they were usually three in number and were called Aglaia, Thalia, and Euphrosyne. The Graces were associated with Aphrodite and those gods associated with the arts, such as the Muses. In Rome they were called Gratiae. of foreign central banks, we are on increasingly thin ice." |
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