zombie banks

Foreign Exchange - Currency Outlook

Bernanke speaks again today, and because he was influential yesterday, will get more attention this time despite the content of his remarks identical. Bernanke disapproves of the phrase "zombie banks" (which we think was invented by former FDIC chief Seidman, who still appears on Kudlow’s TV show). He will also reiterate that nationalization simply isn’t necessary - every bank can be managed somehow. To some extent, this is semantics. The government already has an ownership stake and it’s silly to equate what the US government is doing today or may do in the near future with the kind of nationalization that despots have carried out in the past - oil companies in Mexico and Venezuela, banks in France, and so on. There is clearly no intent to have Chris Dodd (say) dictate banking practice, even if he can limit compensation. Kudlow’s gang doesn’t doubt Bernanke’s sincerity but thinks he will turn out to be wrong later on.

Gee, do they have access to the vast amount of information the Fed has?

All of this talk of nationalization and the ideological divide it reveals is important because of its effect on public perception and investor expectations. As Keynes said, investor expectations have a decisive effect on investment decisions and the resulting interplay with the premium or discount on the rate at which investments get made. At this moment, everyone is in hoarding mode, from the consumer to the tycoon.

Gridlock is the appropriate word, and so is fear.

Again we feel that all the bad news is not out and nearly every instance of upcoming bad news is US dollar exchange rate - supportive, whether it's sovereign downgrades, the effect of Eastern European defaults on the Western European banking system, a shock from AIG, or something we haven’t imagined yet. Even delay by the US Treasury is vaguely US dollar - supportive. The one thing that is not dollar supportive is a rise in oil that, if sustained, implies faith in economic recovery. Good for the US ,bad for the dollar. What strange times we live in. We believe in trends and think the euro downtrend is real and will be sustained, but there is still a real possibility the foreign exchange market decides it doesn’t need a safe haven because the US will lead the world put of recession.

Pounds to US Dollars = 1.4207
Pounds to Euros = 1.1150
Euro to Pounds = 0.8960
Pounds to Australian Dollars = 2.1950

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
Forex Trading Reports - Click for a free trial

Buying Euros? Buy Euros at the best euro Rates!
Buying Dollars? Buy US Dollars at the Best Dollar Rates!
Buying Australian Dollars? Buy Australian Dollars at the Best Australian Dollar Rates!

Contact IMS Foreign Exchange + 44 207 183 2790