Us Treasury Secretary Hank Paulson said today:
"WEAKER US DOLLAR NOT LEADING TO GAINS IN OIL PRICES; CHINA IS FREE TO COMPLAIN ABOUT WEAK US DOLLAR, EVERYONE ELSE DOES."
- He adds that the dollar to reflect economic fundamentals.
That’s right Hank, the US dollar DOES reflect the fundamentals of the United States economy. Have you looked at a chart lately Hank?
(US Dollar Index - Daily Chart)
We have listened to Hank Paulson (former CEO of Goldman Sachs) tell everybody over and over that the dollar will reflect the fundamentals of the US economy. And in this regard Mr. Paulson is telling the truth. It does reflect the health of the US economy… bad!
Media talk of late has been on the "strong dollar rally". I’m looking at the chart, strong rally? I don’t see it. All I see is a bounce along the way to even lower levels. Would the Federal Reserve be so stupid as to start raising interest rates in the middle of the nations worst housing and credit markets in many decades? The only way to get the US dollar to make any significant advance against other currencies is to raise rates "substantially’, and we know that can’t be done. So, weighing all of the current conditions facing the economy, the most logical path for the US dollar is to continue to go lower over time.
Looking at this chart, I can’t help but think of ‘Ockham’s razor’, in that all things being equal, the simplest solution is often the right one. In other words, given all of the competing ideas floating around about the state of the US dollar, the simplest explanation is the true one. And that is the economy is deteriorating, and so to will the dollar.
This morning Federal Express (FDX) reported earnings which were far less than what Wall Street analysts were expecting. On April 9th I wrote that the operating margins of the shipping companies (UPS & FDX) would continue to shrink.
