more on ANY OPPOSING VIEWPOINTS djf Krugman: Economic Crisis a Question of W...

[David Farber <dave () farber net>]

Begin forwarded message:

From: Travis Kalanick <travis () redswoosh net>
Date: November 26, 2004 6:55:42 PM EST
To: dave () farber net
Subject: RE: [IP] more on ANY OPPOSING VIEWPOINTS djf Krugman: Economic 
Crisis a Question of W...
Reply-To: travis () redswoosh net


Dave,

There are a few facts that are not covered in the articles regarding the
possible catastrophic devaluation of the dollar you have forwarded.  
Some of
them, I would argue, fly in the face of the catastrophe being painted by
those pundits.  Here are a few of those facts I spent some time 
aggregating
from the EU's site as well as the CIA Factbook (whose numbers basically 
jive
with each other).

End of 2003 figures for the EU-15
GDP--$9.6T
Real GDP growth--0.9%
Debt as % of GDP--69.1%

End of 2003 figures for the U.S.
GDP--10,990
Real GDP growth--3.1%
Debt as % of GDP--62.4%


It's a hard sell to a prudent currency investor to convince them that he
should make a long-term, wholesale move of his dollars to Euros when:

1) the public debt issues are more substantial in the EU than in the 
U.S,

2) the economic outlook for growth is substantially weaker in the EU 
than in
the U.S.


Clearly, the Euro is showing its relative strength vs. the dollar in the
short term, but too much devaluation too quickly against the Euro will 
have
a much more serious impact on the European economy--an economy with more
rigid labor structures than to be able to nimbly adjust to major 
currency
devaluations against the dollar.  And given that the Euro has *weaker*
fundamentals than the dollar (does this qualify as a Euro "bubble"?), 
it is
unlikely that any long-term investor could rationalize a rapid move to 
the
Euro.

I believe what we will see instead is a mid-to-long-term, slow 
devaluation
of the dollar currency where U.S. politicians will likely *have* to 
mitigate
overspending while investors mitigate currency risk during that period 
by
hedging against that slow devaluation.


Travis Kalanick
Red Swoosh, Inc.
Founder
travis () redswoosh net
(v) 310.666.1429
(f) 253.322.9478
AIM: ScourTrav123

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