Hey! What a day for the currencies yesterday! Geez Louise, it’s seems like it’s been a month of Sundays since I could say that! And there’s been follow up overnight, although, I do believe I’m seeing some profit taking right now… I went to radiation yesterday with the euro trading around 1.2965… I came back 2 hours later, and it was 1.31! And it didn’t stop there, trading up to 1.3175, but running into a wall of resistance there… But that was temporary, as the overnight market pushed the single unit higher to 1.3250… It did trade all the way up to 1.33 and change on news that the German Business Confidence, as measured by the think tank IFO, unexpectedly rose for the first time in 8 months. This improvement was a result of the European Central Bank (ECB) cutting interest rates…

Of course, you know me… And I always say that one swallow doesn’t make a summer… And that can be used here, as this IFO report is just one sliver of hope for the German economy… There needs to be more, or this will report will be put in the rear view mirror soon. So, I’m not pinning my colors to the mast of a German economic recovery, just yet! But, the data did “goose” the euro higher, and for taking part in that, I give the IFO kudos!

The Big Winner of the day though, was pound sterling… In a case of an asset “falling too far, too fast”… The pound sterling has done a Super Ball Bounce from Friday’s price, and has rebounded to 1.4190… Of course, that’s a rally from Friday’s figure of 1.3570… It certainly STILL shows the rot on the vine in the U.K. from last summer’s 2.00 for pound sterling. I would be very careful here, as the U.K. is in the same boat, smaller in size, but the same boat as the U.S….

I had a great lunch yesterday with the Big Boss, Frank Trotter, and we were discussing what we would talk about next week at the Orlando Money Show. I told Frank that I really believe in the prospects of a nice big rally in Norwegian krone… Let me tell you why… First and foremost, it remains a Surplus country… A positive balance of payments… And that surplus has allowed Norway to weather the storm that’s hit just about every other country in the world… See, why I believe the Surplus countries should always be considered when buying currencies? Anyway… The main reason it lost ground from last July’s levels is the drop in Oil prices… They like the other types of Commodity driven currencies like Aussie, Canada, Brazil, New Zealand, South Africa, just got hammered due to the selling in Commodities… But… You know my outlook for the inflation in this country, and that will be driving Commodity prices higher by year-end… But the leader in the forefront of all this move will, in my opinion, be Oil prices… And IF Oil prices rebound like I suspect they will, that will be a very nice underpin for Norwegian krone…

And Gold traded above $900 yesterday… It has seen some profit taking overnight, and fallen back to $896… But, again, these are stair steps to higher levels for the shiny metal… But then that’s just my opinion. You have to make your own investment decision…

OK, the data yesterday was not good, Yes, the Existing Home Sales moved higher, but only at the expense of a falling Home Price… The median home price was $175,400 in December, down 15.3% from $207,000 in December 2007, the National Association of Realtors said Monday. The median price in November this year was $180,300. Here’s the real indication that this rise in sales wasn’t at good levels… Of all sales in December, about 45% were distress sales at discounted prices. That’s foreclosures and auctions on foreclosed homes folks… I don’t think we want to get up on the fence and crow about this report…

And then, after all my harping about how the markets should pay closer attention to Leading Indicators data, the report for December showed an unexpected gain of .3%… Again, the one swallow doesn’t make a summer, applies here too… I’m from Missouri, and I’ll need to be shown more of this to believe it…

Today, we get the color of the S&P/CaseShiller Home Price Index, which will repeat what yesterday’s Realtors report showed… Expect more rot on the vine here though, with home prices showing an -18% drop…

And we’ll see Consumer Confidence, which I suspect will bump higher in December, although in reality I don’t know why… But it most likely will, based on the stock market’s head fake rally in December…

I see that “the cheater” a.k.a. Tim Geithner was confirmed as our U.S. Treasury Sec. I really didn’t think I would ever have another punching bag Treasury Sec. like I had with King Henry Paulson, but, then along came “the cheater”… I have to tell you that this is scary stuff folks… In his confirmation he said, not once, but twice, that “President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices.”

OK folks, this is where the problems begin… If in his confirmation, he’s making statements like that, you can expect that Obama will push for legislature to put tariffs on Chinese goods… Protectionism… This is ALL GOING IN THE WRONG DIRECTION!!!!!!! And believe me now and hear me later… “the cheater” didn’t just make up this response! This was given to him by Obama, and “the cheater” made certain that everyone hear him, by repeating the answer!

I’ve told you before, folks, that Protectionism is to a currency, like kryptonite is to Superman… So… Not only is the Gov’t on the path to spending even more than the previous administration spent, they look as though they will go down this protectionism path… Add to that, the recession and zero interest rates, and you’ve got the ingredients for a huge swat at the dollar…

I read a report by Stephen Jen of Morgan Stanley, where he writes that he believes the euro will trade back to 1.20 in the coming months… Well, that may be, and would play well with my Obama bounce thing… But with this all happening so fast in the past couple of days, I might have to rethink that Obama bounce thing… We may get an Obama bounce, but it may be for the euro and other currencies!

Oh… And one more thing on China, before I go on… The IMF’s Managing Director, Strauss-Kahn, was talking yesterday, and said, “I have said repeatedly that the renminbi is undervalued” He went on to add, “What we need is for the Chinese to change their policy and shift to more domestic-led growth than to focus on exports. Most Chinese officials are convinced that this is in their own interest.”

So… The IMF believes the renminbi is undervalued, and that the Chinese should do something about it, and so does the Obama administration… And you say, “Trade wars”? I bet you can! And not a good time for them either! Not when the whole globe is suffering… Dolts, all of them, they can’t see the Big Picture… Shame, Shame, Shame!

OK… I could really get going on all that… But… I’ll shift gears and talk about the bailouts… Have you seen the Neil Young, you know THE Neil Young, video on YouTube? He’s singing about the bailouts… Here are the lyrics…

There’s a bailout coming but it’s not for me
It’s for all those creeps watching tickers on TV
There’s a bailout coming but it’s not for me
There’s a bailout coming but it’s not for you
It’s for all those creeps hiding what they do
There’s a bailout coming but it’s not for you
Bailout coming but it’s not for you

So… When guys like Neil Young know that these bailouts aren’t working, and they aren’t good… It should be very apparent to the likes of Pelosi, and Obama…

Oh… And Home Depot announced 7,000 layoffs yesterday, Sprint announced 8,000 layoffs, while Caterpillar announced 20,000…

I’ll get to the Big Finish here in a minute… But first, and finally I wanted to talk briefly about New Zealand… The Reserve Bank of New Zealand (RBNZ) meets this week, and I truly expect them to continue their interest rate cutting. 325 BPS have already been cut from their once highest interest rate in the industrialized world… Finance Minister Bill English was speaking last night and said that the “economic outlook had deteriorated since the government’s Dec forecasts, and that the economy now looked to be closer to the Treasury’s “worst case scenario”.” In that scenario, he suggested that recession would continue through to 2010, the current account deficit would balloon beyond 10% of GDP, and unemployment would rise sharply rising. These aren’t “good times” for kiwis… So… Look for the weakness in the kiwi-dollar to remain in place here…

Currencies today 1/27/09: A$ .6625, kiwi .5280, C$ .8160, euro 1.3250, sterling 1.41, Swiss .8790, rand krone 6.7325, SEK 7.9660, forint 215.90, zloty 3.2950, koruna 21, yen 89, sing 1.4990, HKD 7.7690, INR 48.93, China 6.8615, pesos 14.05, BRL 2.3120, dollar index 84.36, Oil $46.27, Silver $12, and Gold… $897.40

Source: ‘The Cheater’ Speaks

Good day… Not sure when all of you will be receiving this today, as it took nearly over a half hour for my computer to boot up this morning. But its all good news for currency investors, so I’ll get it written and out to you as quickly as I can. The dollar slowed its decent overnight, but continued to fall vs. most of the major currencies as the US Senate rejected the $14 billion bailout for the auto industry.

The big winner in the Senate rejection of the bailout plan was the Japanese yen, as Japanese car makers are predicted to grab an even bigger piece of the US auto market. The yen, which has been rallying due to global deleveraging and carry trade reversals, suddenly had another reason to rally. The yen rose to a 13 year high, trading below 90 yen per dollar, and some are now predicting a rise to 80. Finance Minister Shoichi Nakagawa boosted the yen further after telling reporters in Tokyo that Japan isn’t considering intervening in the currency markets.

But even before the automakers got the bad news from the Senate, the dollar was falling faster than we’ve seen in the past few weeks. Chuck shouted out across the trade desk around noon yesterday that the dollar index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc, had fallen below the 55 day moving average. This is a major level for technical traders, and signaled the dollar could be headed for a further fall.

The data released yesterday showed initial jobless claims in the US surged to a 26 year high as the recession deepened. Claims increased to 573,000 last week, an increase of 58,000 from a revised 515,000 the previous week. The total number of workers staying on the benefit rolls jumped to just below 4.5 million, the most since November 1982.

While the markets had predicted another increase in the jobless claims, the trade deficit numbers were a big surprise. US exports slid to a seven month low causing the trade deficit to widen to $57.2 billion in October. No one I read was predicting a widening deficit. The worsening trade balance removes what has been the sole source of support for the economy during this recession.

A separate report issued by the Federal Reserve showed US household wealth fell by the most on record in the third quarter. Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952. So we have record unemployment, a widening trade deficit, and falling consumer net worth; not a good picture for the incoming President. But President Elect Obama has a plan, we can just spend our way out of this problem!! Chuck sent me the following comments yesterday afternoon:

“So… All this week I’ve talked about the President-elect’s plan to spend more money since 1950 on infrastructure, which is fine in good times, but these are faaaaaaaaarrrrrrrr from “good times” for the economy… Well… Yesterday the P/E said this, “We understand that we’ve got to provide a blood infusion to the patient right now to make sure that the patient is stabilized. And that means that we can’t worry about the deficit.”

Can’t worry about the deficit? Did I hear that correctly? Geez Louise, here we go again, sliding down the same old slippery slope of “deficits don’t matter”! Aye, yi, yi! What is everyone smoking? I’ve said this before many times at presentations, and here in the Pfennig, but I can’t pass this up… These people, who should know better, that claim that deficits don’t matter, remind me of the guy standing on top of the Empire State Building, and decides to jump off… As he passes the 56th floor he says… “So far… So good!”

Well, that’s right, so far he hasn’t hit the ground! And… So far deficits have only bruised us, but they haven’t hit the ground yet either! A quick look at my fave book on deficits, I.O.U.S.A. tells me that we’ve passed the $10 Trillion mark for Federal Debt… “today’s deficits reduce national savings, which dramatically decreases productive investment and wealth-creating activities. Increased indebtedness to foreign lenders puts future financial decisions in the hands of people who may or may not have our interests in mind when they make them. Further, interest payments that have historically stayed home now provide more and more income to investors abroad.”

“At the current rate, with existing laws, by 2040 the federal government will be spending twice as much as it takes in from taxes. Our children and grandchildren already face a more competitive, challenging, and uncertain world than most Americans have grown accustomed to.”

Failure to recognize this by our leaders is the biggest mistake we can make… And comments like the one above from the new PE lead me to believe we’ll have more of the same old “deficits don’t matter” and that, my friends will eventually weigh heavily on the dollar…

Sorry to be so gloom and doom on a Friday… But that comment by the new PE just sent me reeling! Now, back to Chris…”

I’ve known Chuck for nearly 20 years now, and nothing gets his blood boiling as quick as the saying ‘deficts don’t matter’! The leaders of Europe sure think they matter, as the EU decided to trim down a proposed stimulus package, as Germany warded off calls by France and Britain for deficit-boosting programs. This announcement, combined with a statement by ECB council member and Bundesbank head Axel Weber caused the Euro to jump vs. the US$. ECB member Weber cautioned against reducing interest rates below 2 percent, suggesting the bank is probably near the end of its rate-cutting cycle. “If the benchmark rate sinks below 2 percent when medium to long term inflation expectations are just below 2 percent, that implies negative real interest rates,” Weber said in an interview. “I would like to avoid that.”

Weber knows the long term impacts of negative real interest rates, they are very inflationary. The generation before his lived through the German hyper inflation of the early 1920’s which helps explain why financial leaders from Germany are such inflation hawks. So the 75 basis point cut by the ECB last week, which was the biggest in ECB history, will likely be the last cut for some time. The Euro has benefited from this perceived change in attitude. As of this morning, the Euro has risen over 5 percent vs. the US$ this week.

We have been suggesting that the recent dollar rally was not a change in the long term trend for the dollar, and some big name currency traders are starting to jump on our bandwagon. Goldman Sachs Group lowered its forecast for the dollar against the euro and the yen for 2009, saying the repatriation of overseas assets by US investors and demand for the greenback for funding are ‘diminishing’. Goldman is now predicting the Euro will rally to $1.45 per euro by the end of next year, up from their previous prediction of $1.30. “We are at a turning point,” Goldman’s Jens Nordvig wrote in a research report. “We expect the dollar support from temporary deleveraging and funding flows to diminish, and, in that scenario, the underlying pressure from more standard sources should once again become more important.” Sounds like he has been reading the Pfennig, as Chuck has been calling for a return to underlying fundamentals for a while now!

The folks at Citigroup are also jumping on the dollar bear bandwagon. “There are good indications that the US dollar is likely to weaken against many Asian currencies into year-end,” wrote Tom Fitzpatrick and Shyam Devani, analysts at Citigroup. They went on to say the dollar will retreat from a two year high against an index of Asian currencies after breaching levels where orders to buy the greenback are clustered. They believe the dollar will fall vs. the Singapore dollar, Chinese Renminbi, and the Indian rupee.

The Chinese Renminbi continued to rally for a seventh day in a row, the longest winning streak since June. Assistant Finance Minister Zhu Guangyao vowed to keep the currency at a ‘reasonable and balanced’ level after the Chinese let it drop sharply on Dec. 1. China stalled the Renminbi’s appreciation in July to aid exporters after letting it rise 6.6% in the first half of 2008. I think China will continue to slowly let the Renminbi appreciate, but will keep the pace of the appreciation at a manageable rate of 6 to 7 percent per year. China’s economy is slowing, but Asia will continue to be the growth engine of the global economy. I still suggest investors allocate at least a portion of their investments into the Asian currencies of Singapore, Japan, or China.

Currencies today 12/12/08: A$ .6586, kiwi .5453, C$ .8038, euro 1.3363, sterling 1.4962, Swiss .8473, ISK 218, rand 10.2214 krone 6.8858, SEK 7.9616, forint 197.96, zloty 2.9621, koruna 19.488, yen 90.35, baht 35.01, sing 1.4918, HKD 7.75, INR 48.577, China 6.8433, pesos 13.3266, BRL 2.3684, dollar index 83.68, Oil $44.97, Silver $10.10, and Gold… $817.05

That’s it for today… Drove the side streets in to work for the last time today. The highway department shut down a 5 mile stretch of interstate which runs from the front door of our office to my house. After a full year of taking side roads to and from work, I will be able to take the newly refurbished highway on Monday. This will drop my commute big time, and is great news for yours truly!! Chuck is off on his annual Christmas shopping trip with his buddies today. They start first thing in the morning and spend the entire day spreading Christmas cheer around town. Hopefully I will be able to meet up with them this evening, as they typically end their trip at a local restaurant/bar not too far from my home. Hope everyone has a Fantastic Friday, and a Wonderful Weekend!!!

Source: Bailout Failure Accelerates Dollars Decline

More on the Bailout Package in a minute… The other thing happened on Friday was the awful Job Jamboree in which 159K jobs were reported lost by the Bureau of Labor Statistics (BLS) during September. The job losses were all over the place led by job losses in Manufacturing. And guess what? The dollar rallied on the news!

OK… I’m raising the white flag folks… This Credit squeeze has the whole world in a tizzy right now, and it appears to me that investors around the world have decided to reward the dollar for all these problems. Seems awful strange to me, since dollar denominated assets are what caused this whole problem, but that doesn’t seem to be on anyone’s mind right now. The dollar has moved the front of the class against the euro, and the rest of the currencies that aren’t Japanese yen or Chinese renminbi.

When the dollar can rally in the face of news like it received on Friday, even me, the biggest fundamental trader you’ve ever seen, can see the writing on the wall… This dollar rally goes against everything I’ve ever known or studied regarding fundamentals. I still don’t believe the dollar can maintain this strength going forward, as the funding requirements on the deficit continues to be the Sword of Damocles hanging over the dollar. But for now… I have to go to the corner and sit, for I have been wrong about how the dollar would react to all of this.

Now… I haven’t been wrong about how all of this mess has played out… I’ve warned of “risk events” and we’ve had plenty of them… I was one of the first to bang the drum and warn of a housing bubble… I’ve warned of interest rate cuts, and growing debts… And in the end, I warned that the dollar would take the brunt of all these indiscretions… And it may still… But for now, it’s the belle of the ball… Don’t ask me why… For I don’t know… And don’t remind me of my failures, I’m well aware of them…

So… As I mentioned above… The Japanese yen, and Chinese renminbi are the only currencies posting gains VS the dollar. China, just back from a week of holidays, allowed the renminbi to gain VS the dollar overnight, and that’s a good sign, given the rumors circling around regarding the slow down in China.

But the big Kahuna moving against the dollar is Japanese yen… Don’t look now, but yen has a 103 handle! Is the Carry Trade truly Dead in the water? Much like the munchkins we’ll have to see if it is truly dead… As Glenda said… “Let the joyous news be spread, The Wicked Old Witch at last is dead!”… Seriously though… The Carry Trade does very truly, look dead in the water, as the credit squeeze takes its toll on these once favorite tools of investors… They are “risk trades” as I’ve explained 100 times before, and therefore, the credit squeeze wiped them out…

And… So now… Finally, a couple of years after I first said, that the next shoe to drop for the dollar would be against the Asian currencies… It looks like the Carry Trade is dead, and that the Asian currencies, led by Japanese yen, can finally be left alone to trade straight up VS the dollar…

So… We’re taking on water with the other currencies that have been so profitable for holders for over 6 years now, but Japanese yen is finally cut free of the Carry Trade.

The Credit Crunch / squeeze is spreading folks… I told you about a few of the problems in Europe last week, and how a bank had failed in Iceland… Well… There’s even more problems for Europe… And… Iceland is looking for a bailout now. Iceland is looking for a bailout from the Nordic Central Banks… I first wrote about a banking crisis in Iceland about 5 months ago, and every week we send out a notice to Icelandic krona CD holders that they should probably look to do something with their krona CD’s… Well… I’m afraid they will have no choice pretty soon. Recall, last week I told you that offshore investments of krona are getting hammered and that interest rates had gone negative… Well… We won’t be able to offer Iceland going forward, if they remain negative… There won’t be any dealers that will take on the risk of selling us the currency forward… It’s a very sad day in Iceland, folks…

And in Europe… The rot on the vine is spreading. The Euro Summit didn’t produce any real deals or solutions to their problem… But one thing it didn’t produce was a plan that would mirror the U.S’s $700 Billion Bailout Package… I would suspect that the fact that the Euro Summit didn’t produce any answers, has weighed heavily on the euro this morning… The single unit has fallen to a 13 month low VS the dollar… I wonder where those guys from Citigroup are that were calling for a euro rally are now? I can’t blame them, I would certainly like to hide under a rock (I know it would have to be a real big rock) right now and let this blow over… But I can’t… I write this daily newsletter!

There is still a lot of talk about coordinated Central Bank rate cuts happening this week… Even after the European Central Bank (ECB) left rates unchanged last Thursday. I didn’t think the ECB would look at cutting rates as an option, but that was before the rot on the vine was exposed in Europe last week… Now… I’m 50-50 on the ECB participating…

Speaking of the $700 Billion Bailout Package… The stock jockeys sure loved the passing of the Bailout Package… But what’s there to love about it? Yes, I know… King Henry and Big Ben assure us that this will unlock the seized credit markets, and get this economy rolling again… But didn’t they tell us that back in July too, when they got the president to sign $3.9 Billion to help 400,000 home owners that would qualify… They told us then, that the mortgage bill would cure what ailed the housing meltdown… These two have been so wrong about this whole mess going back to last summer when they failed to recognize that we had a housing meltdown…

The overnight markets of Asia and Europe saw stocks sell off big… So it could be that the U.S. stock euphoria over the passing of the package will be short-lived.

Don’t expect this Bailout Package to cure what ails the economy right now folks… There are going to be more banks closing, Corporations closing, and consumer bankruptcies. Banks aren’t going to just open their vaults to the public today and offer loans to anyone that has a shirt and shoes on!

There was a great article in my local Sunday Business Section. I was surprised by that, because there’s normally not much, and I mean NOT MUCH, in my local paper’s Business Section… But that was before yesterday’s print! It’s a great look back at the financial mess we’re in, how we got there, and how our leaders don’t have a clue as to what’s going on based on the myths they keeps coming back to… David Nicklaus is the writer, and he dispels the myths and calls them out on how wrong they are, and offers a solution… I don’t have the room or time to do snippets, but if you want to read it, you can find it here.

The Reserve Bank of Australia (RBA) meets tonight… I fully expect them to cut rates at least 25 BPS and maybe even 50 BPS… It’s not really a rate cut because inflation is in check or anything like that. The Aussie economy has slowed, but not to the degree that would require another rate cut… No, this rate cut, I believe will be of the “lets reduce borrowing costs, and try to avoid a lending problem like in the U.S. and Europe” kind of rate cut… That won’t help the Aussie dollar any… The A$ is getting whacked on two fronts… The thought of lower yields from the rate cuts, and the Japanese investors repatriating funds (selling A$ and buying yen)…

The Bank of England (BOE) meets this week, and they too will cut interest rates. The BOE will cut 25 BPS and probably follow that up with 25 BPS cuts in November and December.

There isn’t a whole lot of data in the data cupboard this week… All second tier stuff, with the Sept FOMC meeting minutes being the most important data until we get to Friday, and the August Trade Deficit.

So… The dollar, will hold onto its belle of the ball title this week as the dust settles on the Bailout Package…

Next week, I’ll be out all week on the second leg of the Currency Tours. The next leg lasts 10 days, and ends in Jacksonville. That’s the home town of EverBank! We end the following Monday the 20th, and then I get to travel home on Tuesday, and back in the saddle Wednesday! I don’t know how this one will go, but the last Tour went fine for me… Travel isn’t easy when you have a small handicap like me, but, it is what it is, and you just roll with the punches!

Currencies today 10/6/08: A$ .7460, kiwi .6475, C$ .9215, euro 1.3590, sterling 1.7585, Swiss .8765, ISK 114.52, rand 6.1625, SEK 7.1990, forint 183.70, zloty 2.5410, koruna 18.25, yen 103.05, baht 34.49, sing 1.4630, HKD 7.7670, INR 47.77, China 6.8425, pesos 11.35, BRL 2.0440, dollar index 81.17, Oil $90, Silver $11.39, and Gold… $859.05

Chuck Butler

Source: The Deed Is Done…

U.S. stocks continue to get taken to the woodshed, and I don’t see any bright lights coming from this sector, as the earnings season is upon us, and I think there will be quite a few Companies that would like to skip over this earnings season, as it will not be a pretty sight… But, I’m not a stock jockey, and I’m not even your last choice as a stock jockey, so, I’ll stick to currencies… The reason I mention stocks is that they tie together with the performance of the Japanese yen and Swiss franc…

For new readers… You see, these two currencies are tied up in the Carry Trade, where they are sold, short, and the proceeds are used to buy higher yielding assets. This is considered a “risky trade” and as long as stocks are going well, there’s no “risk” in the markets… But when stocks head south, risk aversion steps up, and the Carry Trades are unwound, thus making the investors that sold these two currencies short, have to buy them back to cover their short position. The “buying back” of the currencies pushes their values VS the dollar higher…

The Brazilian real got a bit of a boost yesterday, when economists there revised upward their inflation forecasts… I know, I know, that all sounds weird, but that’s the market mentality these days… Reward a country for high inflation as that will bring about higher interest rates… Never mind the fact that inflation is higher! So… Anyway, the real got a boost, and that’s all I should care about, eh?

China announced plans this weekend to slow down the “hot money” that keeps flowing into the country… They see this “hot money” as bad, as well they should… Because this money isn’t coming into the country as anything other than a short term investment to ride what they feel is a one-way ticket to a higher renminbi value. China, as I’ve explained many times in the past, would love to throw a spanner in the works of this perceived “one-way ticket”, but just doesn’t have the heart to do it for more than one day…

The new plans won’t do anything either, at least not that one could see from the renminbi’s performance the past couple of days! Eventually, the Chinese will pull a rabbit from their collective hats and come up with something to slow down the “hot money”… But a currency that’s really only moved “one-way” VS the dollar since July of 2005 when the peg was broken, is going to be a road block for sure!

Source: Where There’s Smoke…

Just about everyone is predicting another rate cut, but will this rate cut be the last for a while?

CNN says “trading in futures markets predicts the Fed will cut its key fed funds overnight lending target by a quarter-point, to 2%, and hold the line there in coming months.”

The BBC says: “Fed ready to cut interest rate.” “Rate cut seen,” says Reuters.

“The interest-rate reduction could set in motion a series of diverse global events that will impact such seemingly unrelated areas as European inflation, global food prices, the US. dollar, American exports, and the already chilly relationship between the European Central Bank (ECB) and the government of France,” says Jennifer Yousfi in Money Morning.

Chuck Butler in The Daily Pfenning says thoughts of another rate cut by the Fed “has the dollar swinging the hammer again… And every currency has taken a hit from the hammer overnight… Except for Chinese renminbi…”

Bill Bonner has Paul Volcker in mind (and his warning that a painful adjustment is coming) but all he sees is “Ben Bernanke promising to drop dollars from helicopters, if necessary, in order to keep the economy bubbling along.

Bill says, “the Fed is unlikely to fall victim of a sudden attack of monetary integrity. The dollar is unlikely to rise very far against gold.”