So… If this is a depression, and I believe it is, and no amount of Gov’t intervention will help it, only make the “bottom line” worse… How long will this last? Oh my! Now, that’s a question for a “real economist” not just one that plays the part on TV or through a free newsletter… But since you asked… It will last several years… Or until the un-thinkable happens… And I think you know what I’m talking about here… But since I don’t want people thinking I’m a _ _ _ monger, I won’t even go down that path… Just know that if this is a depression it will last for some time, and all the Gov’t intervention will be akin to re-arranging the deck chairs on the Titanic!

Well… The currencies remained in a very tight range yesterday, with the euro and other currencies trading stronger in the overnight markets. The story / rumor fueling the euro’s bounce off of near 3-month lows yesterday, is speculation that Germany plans to help ease the financial turmoil in the Eurozone, and eastward… I told you yesterday that I didn’t want to have to say it, because this is against my thoughts on how these things should work, but that the Bundesbank needed to get involved. Well, the rumors are they will… Remember, that the Bundesbank is Germany’s Central Bank, and the most powerful Central Bank in Europe. There’s a press conference scheduled for this afternoon in Germany (will be this morning for us!) and it is expected that Germany’s chancellor Angela Merkel will announce the plans to ease the financial turmoil then.

This rumor has really pulled the euro up off the mat, as it was about to get pinned by the dollar. So… I sure hope that Merkel doesn’t disappoint the markets, or else the euro will be thrown right back into the ring with the dollar, and that hasn’t worked out too well for the single unit so far this year…

And when the euro gets going VS the dollar… The rest of the currencies come out of the woodwork… But the one currency I want to talk the most about here is the Norwegian krone… I’ve gone through all this before, so I won’t keep beating the dead horse (no animals were hurt here!)… But! I do need to point out that Norway, to me, rises above all other fiat currencies because of their fiscal position, that didn’t just happen for them, they planned, and plotted this for years…

And, since Swiss francs had been hit so hard by the news over the weekend regarding the European loan losses, this news, benefits the franc too.

Well… President Obama signed the new Mortgage Bill yesterday… Recall, that a mortgage bill was done last July, and was touted as the “cure” to what ailed the housing market… Well, that certainly didn’t come to fruition. One has to hope that this one does… But, you know me, and I just can’t sit by idly and watch, as once again the majority of people in this country get steam rolled…

Chuck! Get down off the soapbox! This has no place in your letter on currencies and economies! Chuck, you can have those types of discussions with whomever wants to listen to you carry on… But not here! So, get back to the task at hand!

Whew! OK, I’m back now… The data cupboard is chock-full-o-data today, with the Weekly Initial Jobless Claims front and center this morning. We’ll also see the Philly Fed Index (manufacturing), PPI (wholesale inflation), and Leading Indicators. In addition, a Fed Head (Lockhart) is speaking on the U.S. Economy today. The Weekly Initial Jobless Claims, which have totaled more than 600K the last two weeks, is forecast to keep the streak of 600K weekly claims going. This is really “bad” folks… With this kind of rot on the labor vine, one has to wonder what the March print of the Jobs Jamboree is going to look like… Recall, that Jan’s number was an awful looking 598K jobs lost… And we weren’t printing Weekly Initial Jobless Claims of 600K per week in January! Makes you cringe… But, then the Jobs Jamboree is two weeks away…

Japanese yen has really fallen on a sword this past week, as it now appears that Japan has some real problems with Credit-Default Swaps, just like we had here in the U.S.! Credit-Default Swaps on the books reached their highest level in 4 years here in Japan this week, and that means that people are betting on Japan having a worse time with their economy than Europe and the U.S. I think it is more tied to by belief that I told you about a week or so ago, and that is what I believe to be an end of the carry trade unwinding, which benefited the yen to the heights of 88… But now, with yen falling back to 93, one has to wonder if my belief is taking place…

Yesterday morning, I left you with Gold having seen a bit of profit taking and losing $6 in morning trading… Well, that $6 loss was wiped out immediately after the signing of yet another spending bill (the mortgage bill) in the U.S. Late in the afternoon, I yelled over to Jen and Kristin, to check out Gold, as it had rallied all the way to $987.90! WOW! But, in the overnight markets in Asia, more profit taking took place and Gold is trading at $976, down over $8… I think the Asians thought that the move to near $990 and then onto a return to $1,000, had gone too fast… And I truly believe that the Gold WILL return to $1,000, but not without a fight, as I believe it will take more than one attempt by Gold traders to push it past $1,000… You have to believe that profit taking all along the way will be in order, and thus the two opposite trades will offset each other… But, as I said above, I truly believe it will revisit $1,000, so eventually Gold will break through the resistance…

The NY Times yesterday had a feature story by Lord Rees-Mogg… And he had many things to say, but the thing I think hits the nail on the head the best is this snippet… “For individuals, gold remains the best insurance against future shocks and the best store of value.”

Recall the other day, I wrote about the Japanese Finance Minister Nakagawa’s actions at the G-7 meeting in Rome last weekend… My friend, Bill Bonner of the Daily Reckoning, (www.dailyreckoning.com) had this to say about Nakagawa that I found to be bang on!

“Things are so bad in Japan that the finance minister, Shoichi Nakagawa decided to drown his sorrows in drink. Alas, he chose the G7 meeting – at which he represented his country – to get drunk. Now, according to the New York Times, he is being forced to quit.

From what we can tell, Nakagawa is the only G7 finance minister who should stay on the job. The rest of them clearly don’t know what’s going on. Otherwise, they’d be drunk too.”

Yesterday… We saw Housing data, that showed Housing Starts had fallen a seventh straight month in January… Here’s the Wall Street Journal’s take on the data… “Home construction fell a seventh straight month during January and a sign of future building tumbled as high inventories and the recession sent builders into further retreat. Housing starts decreased 16.8% to a seasonally adjusted 466,000 annual rate compared to the prior month, the Commerce Department said Wednesday, much worse than Wall Street expected. Year over year, housing starts were 56.2% below the pace of construction in January 2008.”

Boy… Wouldn’t you like to have former Treasury Sec. Paulson, or Fed Chairman in a locked room, where you wouldn’t leave until you got the truth from them? I say this, because when I was looking at the Housing data, these two clowns flashed across my memory, for it was these two clowns that told us in August of 2007 that the subprime problem would not spread into the rest of the economy… And then a few months later, Paulson told us that the Housing market had hit bottom!

Oh, and one more thing while my memory is flashing me pictures and quotes from Paulson… When asked how the Treasury had come up with the figure of $700 Billion for the TARP program… Paulson was heard to say, that it was just a number that he pulled out of the air… Oh BOY!

Well… The Budget Deficit continues to grow… Let’s see what the tote board has so far… $1.2 Trillion forecast by the Congressional Budget Office, $787 Billion in the “new and improved stimulus package, $350 Billion of TARP left over to be spent this year, and now $75 Billion in the mortgage bill… Getting closer to a $2.5 Trillion Budget Deficit with every passing day… And still, the dollar, holds on… Apparently, dollar bulls don’t see what I see here…

Currencies today 2/19/08: A$ .6490, kiwi .5160, C$ .80, euro 1.2690, sterling 1.4385, Swiss .85, rand 9.98, krone 6.85, SEK 8.5770, forint 235.80, zloty 3.6675, koruna 22.5250, yen 93.70, sing 1.5250, HKD 7.7540, INR 49.62, China 6.8355, pesos 14.55, BRL 2.3280, dollar index 87.20, Oil $35.63, Silver $14.26, and Gold… $981

Source: Euros Get a Boost From A Rumor

But, Hey Chuck! This is not a stock letter, so get on the ball and talk about currencies and economies! Geez Louise, just drift off on a tangent and the crowd is harsh, eh?

Well… The currencies played the trading theme a “T” on Friday and overnight… A stock rebound gives everyone the feeling that things are getting better, and that means… 1. Carry Trades go back on and 2. the dollar gets sold, thus giving a rebound to currencies. Of course Carry Trades going back on doesn’t do the Japanese yen any good… So, you’ve got to deal with yen weakness, but a stronger euro and other “non-yen” currencies.

The data on Friday was interesting in that Personal Spending was worse than expected, but Personal Income was better than expected. The Personal Spending was negative -.3%, marking the low since 2005, and the sixth worst print since 1991. (see what I’m talking about regarding those Corp. Earnings, now?) And… That was September’s numbers… I can’t even imagine how bad that Spending number is going to look when October’s numbers are printed!

The Chicago Purchasing Managers Index (manufacturing) collapsed in October, falling from an index number of 56.7 to 37.8. That’s a low that hasn’t been seen since the shortened recession of 2001. Other than that one, you would have to go back to 1982 to find such a weak print. I realize that this is just the Chicago region… But is there anything that gives one a feeling that the other regions will be immune to this? NO… And Manufacturing can thank… 1. the stronger dollar, 2. the credit squeeze, and 3. the recession… For their misery…

OK… I’ve gotten a ton of emails asking me about the Hal Turner video on the Amero… I thought I addressed this all last week… I don’t believe in the Amero as the story has it all going down… Now someday, maybe two decades off, when the Social Security fund goes negative because of all the retired baby boomers, the dollar will collapse and there will have to be a “new currency”, but now? In February 2009? I put that all down as a hoax… Sort of like… The guy that claimed back in the 80’s that there was going to be the mother of all earthquakes in the Midwest… Browning was his name.

The European Union released a statement this morning that say they believe that the EU may be in recession… I find this interesting that they decided the week of a European Central Bank (ECB) meeting to announce this… Well, it does grease the tracks just a bit more for the ECB to cut rates this Thursday when they meet… So, expect rate cuts from the ECB and the Bank of England (BOE) this week… Neither Central Bank will “want” to cut rates… But both will feel the need to, given the slowdown in the U.S. and its history of causing major problems for the world when it does slowdown. Of course, I’ve argued that the rest of the world is in a better position to weather the storm of a U.S. slowdown, but a deep, dark recession… Now that’s the horse of a different color folks… And unfortunately, that’s what I think we’re going to see in the U.S. as we go through the cold, short days of Winter…

There’s a story on the Bloomie this morning that says: “Templeton, Sydbank see Won, Rupiah, Rupee bottoming”… OK… We don’t deal in won, or rupiah, but we do deal in rupees… And renminbi, which in the story says is being bought by Franklin Templeton Investments… So, it’s nice to see others with large research teams jumping on the Asian currency bandwagon that I’ve been taking memberships to join for some time now. Sydbank is Denmark’s third-largest Bank, and they like rupees.

The idea with talking about this story is simply that Asian currencies are catching the eyes of more investment firms, and that’s a good thing!

OK… I’ve been asked about the Big Mac Index say 100 times in recent days, and why I didn’t see the euro as being overbought, since it was so out of line on the Big Mac Index. Well… That’s because the Big Mac Index has a tendency to be ahead of the actual currency move. For instance, in 2001, the dollar showed it to be totally overbought on the Big Mac Index, but didn’t lose ground to the euro until a year later.

Instead of the Big Mac Index, I’ve been watching the ipod index… That’s right, there’s a new kid on the block to compare trade competitiveness and “Purchasing Power Parity”… And guess what the latest ipod index shows? It shows that Australia has the cheapest ipods in the world!( well, really the top 62 industrialized countries) That means the A$ is very cheap, and oversold! The last time the index was printed, Australia had the 14th cheapest price… Guess when that was? Yes, July, when the A$ hit 98+ cents! Now, this doesn’t make up for the fact that the A$ has fallen from the sky and fallen very hard, causing some major losses since July, but it does give a glimmer of hope that the selling could be coming to an end… It’s just a glimmer folks, don’t hold my feet to the fire here…

One thing that won’t help the A$ right away is a Reserve Bank of Australia (RBA) rate cut, which is most likely to happen at their next meeting tomorrow night.

Well… Recall when I told you that the Fed was going to open up the Commercial Paper market and buy the paper from Corporations in an attempt to revive this form of funding for Corporations? Well, last week was the first week, and in the first day (Monday) Commercial paper sales were strong, spiking to $232 Billion that day. Think it was overdue? That’s the most Commercial Paper done in one day in 5 years!

Again, I’m a free markets guy, and don’t care for Gov’t intervention in any way. I would rather see markets work things out for themselves, whether it causes pain or not. But… If the Gov’t is going to stick their hands in the cookie jar… This is probably the one thing they’ve done that doesn’t give me as bad of a rash. This market is essential to Corporate borrowings, and could get things moving in the credit squeeze. And the credit squeeze is the BIG KAHUNA with regards to getting things back to the fundamentals, which we all know spell weak dollar…

I saw an article in my local newspaper’s business section yesterday that made me laugh out loud… The article inferred that now that October was over, the threat of a stock market crash was over! Who writes these things, and where is the editor? Just because we’ve seen some major stock moves in October, doesn’t mean they can’t happen any old time! Strange…

So… I expect to see 50 BPS rate cuts in Australia, England, and The European Union this week… We’ll also have the U.S. election tomorrow, which ought to bring the markets to a standstill until the dust settles on the outcome… If the polls are correct, then it won’t be a close election result… I’ve been asked by many people while on the road, etc. to outline the markets with an Obama or McCain win… I’ve steered clear of that stuff… All I’ll say is that in my opinion, neither one were addressing the important things, like the deficit spending, and how are we going to pay for the baby boomers… I heard one party say they would balance the budget by the end of their term… That’s 4 years from now? We have to add to the National Debt for 3 more years? YIKES!

So… There you have it… Chuck’s election coverage! And that’s all I have to say about that!

Data this week… We’ll see the National ISM (manufacturing) Index this morning… Look for more rot on the vine from manufacturing as I stated above. We end the week with a Jobs Jamboree, which right now is looking awfully bad… Really bad… And that, I’m afraid will do nothing but add to the deep dark dangerous days for the U.S. economy, which will cause the trading theme to buy dollars once again… But it does add to the awful economic fundamentals, which when this trading theme gets turned off, should come to the front of the class once again and cause dollars to be sold… Should… That’s just my opinion… Should…

Currencies today 11/3/08: A$ .6775, kiwi .5890, C$.8395, euro 1.2845, sterling 1.6190, Swiss .8640, ISK (still no quote), rand 9.71, krone 6.5940, SEK 7.6666, forint 200.50, zloty 2.7720, koruna 18.95, yen 99.15, baht 34.95, sing 1.47, HKD 7.75, INR 48.65, China 6.8380, pesos 12.73, BRL 2.1725, dollar index 85.20, Oil $68, Silver $10, and Gold… $735.10

Source: Rate Cut Week…