Late news, I know, but the headline only caught my eye today: “Dollar down as data raise fears of US hard landing,” Financial Times, December 2 & 3, 2006.
All this “hard landing”/”soft landing” talk is getting pretty popular in articles about the US economy. It sounds technical, but don’t let it confuse you. It is meant to be analogous to an airplane’s landing–a soft landing is when you barely notice that the plans is now on the ground, it’s descent gently concluded; a hard landing is when your plane smacks the runway with a force that has you calling your dentist for an appointment to check your fillings. Everyone agrees that the US economy is in “descent” mode and due for a “landing.” The outstanding question has been whether or not the “pilots” can successfully engineer a “soft landing.” Recent reports have that possibility looking very shaky. Hopefully everyone paid attention to the stuff the flight attendants mentioned before take off and have noted where the emergency exits are located.
From the article mentinoed above:
The dollar fell further on currency markets yesterday as weak US economic data heightened investor fears that the country’s economy could be heading for a hard landing.
Later, the article says that recent reports have…
…provided evidence that the slowdown in the US is spreading from housing to other parts of the economy.
“Combined with other soft US data, the ISM data will reinforce fears of a hard landing and will add to the momentum behind the dollar sell-off,” said Martin Slaney at GFT Global Markets.
Ashraf Laidi of CMC Markets said: “Traders are going to be less cautious about selling the dollar against the euro and sterling going into next week.”
“…the slowdown in the US is spreading from housing…” “add to the momentum behind the dollar sell-off…” “…less cautious about selling the dollar against the euro and sterling…” Spooky stuff, but not unexpected for those who know what’s ahead. Revelation 18 describes a global economic powerhouse in the end times, but other scriptures (as explained in our booklet) make it clear that the US will be no part of it.
The article ends with an analysis (or at least a speculation) by Marc Chandler, a currency strategist (perhaps Susan B. Anthony and Sacagawea should have consulted him (and, yes, I think I am funny)) at Brown Brothers Harriman in New York. He says that concerning the direction of the US economy and the ”wisdom” of US monetary policy, ”the Fed and the market” are currently duking it out. I suppose much like a north-bound sailor and a northern wind duke it out. Is the northern wind a stubborn annoyance or a gale force monstrosity? I don’t know, but in either case I’d highly recommend a life jacket…
Actually, I notice that in yesterday’s Financial Times (yes, I am behind–expect to hear about tomorrow’s articles some time next week…) has a follow-up article, where the same Marc Chandler says, “In the battle for control of US monetary policy, we suggest betting on the Fed.” The market, however, is beginning to show “a growing desire to ignore Fed comments,” says Adrian Schmidt at Royal Bank of Scotland. As we’ve noted in this blog before (particularly in our posts related to Gabor Steingart’s book), the dollar is floating on a wave of pretense: Nations continue to fantasize that the dollar is a good investment because they realize that their fantasy is the only thing holding back the reality–reality being that the dollar is a bad investment.
But as Mr. Steingart stressed: Markets get itchy trigger fingers, and they only put up with fantasy for so long. And as my previous post on Europe’s blasé attitude about the dollar’s recent drops, Europe is tiring of fantasy as well and beginning to question its need to participate in the delusion. Yesterday’s FT article aluded to a “meeting of the minds” as it were–those of the market and Europe–when it said, “They [currency markets] have also been encouraged to buy the euro by the lack of concern expressed so far by ECB [European Central Bank] officials about the rise of a single currency.”
Basically, it would seem that what is currently preventing a plummeting dollar is the world’s concern about a plummeting dollar. But the way in which that concern is expressed may be shifting–from anxiously trying to prop it up, to cutting losses and insuring against the inevitable. That’s a dangerous shift in the weather for a plane that so desperately needs a “soft landing.”