Well yesterday was an interesting day for the Forex. You never really can tell what is going to happen. All we really know is that something will, good or bad. In this case it was both. They released the economic data reports ie; the US Non-Farm Payrolls and the numbers were not very good.
In December, the U.S. lost 524,000 more jobs. And as bad as that is, earlier speculation had the markets preparing for much larger losses. The unemployment rate also moved up to 7.2%. With that in mind, you would think the US dollar would lose ground against other currencies. But that was not the case.
In fact, following yesterday's unemployment announcement, the dollar made serious gains against the Euro and the Swiss franc. The dollar also gained some ground on the rest of the major currencies. Very strange indeed. You would think a bad economy wouldn't be good for a nation's currency. But apparently the market is reacting to one simple thing.........If the US goes down, so does the rest of the world.
In the coming months, President Obama might mean well, and we all hope he does, but it's very unlikely his stimulus package will have much effect on how the U.S. dollar actually behaves in the first half of 2009. That's because such efforts will probably prove ineffective at altering the fundamental forces that drive the economy and the markets in general. Obama's stimulus won't be much different from previous government bailout efforts, at least as far as spending goes. The fact is, his plans to put money into infrastructure are not concrete. No pun intended.
Chances are the money won't go toward the immediate and most necessary interests that would normally be defined by the free market. At the end of the day, consumers are not going to go on spending sprees when and if they get their stimulus checks. Chances are they will just hang onto it and not spend it or invest it at all. In fact spending is way down and thats bullish for the dollar.
So what can we expect from all of this? Well most likely it will mean the return of inflation. Especially with all the new money that is being thrown around at everything from banks, automakers and possibly even the porn industry, if you can believe that one. Not kidding by the way. Larry Flynt, owner of Hustler Magazine has actually approached congress for a bailout of the porn industry. Who will be next to ask for handouts?
President Obama's speech on Thursday where he says the US will "spend it's way to prosperity" may cause investors to wonder why the dollar hasn't tanked yet and why gold prices haven't risen through the roof. Many people see rising prices returning before any recovery of the global economy is possible. There is no way around that. Everyone can agree that the US economy is
in deep trouble, that much is obvious. But given the size of the US economy it needs to be given more credit in regards to its ability to turn things around.
The recent spending patterns of US consumers have caused many around the world to be worried for the future. Countries across the globe have based their economies on supplying US consumers with goods and materials. If the US consumers do not buy them, it has a ripple effect globally. This is causing governments around the world to pump even more money into their own ecomomies. But no matter how much money you throw at this, consumer attitudes have changed. Nobody wants to take on more debt and all of these "stimulus" packages will prove to be ineffective in changing those attitudes. People are not spending and you cannot make them do so. You can only buy so many cars, homes, furniture etc. It is a cycle that repeats itself from time to time and will do so in the future.
Cycles like this are necessary in order to get the US economy back on track. Unfortunately as the US slows down, so will the rest of the world. We will all just have to ride it out together and plan better futures for ourselves and our families. We also need to learn to take charge of our finances on a personal level. It is quite clear that handing our money over to investment bankers or equity brokers is not the best idea. Thats why I recommend everyone to get involved with Forex. Learn how to trade currencies and you will be protected from these cycles. If the US dollar is crashing, move your money into Euros or Swiss Francs. If something happens to those currencies, just move your money again. In fact, you can increase your wealth substantially just by doing that. How do you think the billionaires became billionaires? Using Forex. And the best part is you can do it instantly, online as soon as the need arises.
Have a great week!
Regards,
Brian Jerome
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