Dollar bubble update

Today we have comments tending in opposite directions on the dollar bubble.

Nobel Prize-winning economist Krugman points out that Europe is in sad shape. He says Spanish labor costs rose in tandem with foreign investment in Spain.(1) Then in a more general article on Europe,(2) Krugman says that European institutions were not ready for the current global challenge. Without mentioning the various referenda lost to build centralized EU institutions, Krugman nonetheless says that Europe cannot mount a centralized stimulus plan for the economy.

So Spain and others cannot drop out of the Euro to manipulate their own supposed employment and GNP levels.

At the same time, Bernanke at the Federal Reserve says fears of a depression can pass now.(3) Bernanke has taken dramatic action on the economy beyond the usual for a central banker. Bloomberg news services interprets the news as a reason why the Euro may rise. Any good news for the global economy translates into departure from the dollar as a “safe haven.”(4) Others disagree.

On December 9, panicked investors PAID the U.S. Government to take their money for three months:


“If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.”(5)

Yet again, today, we had another report of contracting U.$. banking, which would point to ongoing economic difficulty.(6) If in fact U.$. private banking is now contracting faster than the rest of the world’s, that would be bad news for the dollar.

Overall the difficulties in dollar vs. euro trade and dollar vs. yen trade are a major factor in class struggle. The United $tates and England have refused to bring currency trade and related trades under greater regulation.

Notes:
1. http://krugman.blogs.nytimes.com/2009/03/14/spanish-doldrums/
2. http://www.nytimes.com/2009/03/16/opinion/16krugman.html?ref=opinion
3. http://www.bloomberg.com/apps/news?pid=20601110&sid=aNdjSe7.0DJ8
4. http://www.bloomberg.com/apps/news?pid=20601109&sid=aGjFEUjOzYyY&refer=home
http://www.bloomberg.com/apps/news?pid=20601087&sid=angRTB5xzAQ8&refer=home
5. http://www.bloomberg.com/apps/news?pid=20601087&refer=worldwide&sid=aOGXsWKEI6F4
6. http://www.bloomberg.com/apps/news?pid=20601110&sid=andViEedFHtM

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