Saturday, September 08, 2007

Dollar Falls to 15-Year Low

For all those folks out there who have not been listening to folks (like me) who have been saying over and over that we’re going to see corrections soon on all sorts of financial levels in this country, especially with the dollar, comes some **gasp** startling news:

NEW YORK — The dollar fell to a 15-year low against major currencies on Friday as data showed U.S. payrolls fell last month for the first time in four years, raising recession fears and pressure for an interest-rate cut.

Traders dumped the dollar after the government said the United States shed 4,000 net jobs last month, the first contraction since August 2003. It also reduced estimated June and July job gains.

The payrolls data followed a larger-than-expected decline in July pending home sales reported earlier this week — more evidence that a credit crunch that began with losses on bonds tied to risky U.S. mortgages was starting to put the brakes on growth.

“Today’s employment report and the revisions are enough to justify several interest rate cuts by the Federal Reserve,” said David Kotok, chief investment officer at Cumberland Advisors in Vineland, New Jersey. “It is clear from this report that the U.S. employment situation is worsening.”

Markets are now pricing in a 74 percent chance that the Fed slashes its 5.25 percent benchmark interest rate by half a percentage point when it meets on September 18.

“The Fed cannot keep ignoring the fact that the subprime and credit crisis has indeed hit the real economy,” said Kathy Lien, senior currency strategist at DailyFX.com in New York.

“Americans are feeling the pain and this will translate into weak consumer spending, which will drive speculation for a possible recession,” she said.

The dollar index, which measures the greenback against a basket of major currencies, tumbled to a 15-year low.

The low-yielding yen was the biggest beneficiary, at one point rising 1.8 percent to a three-week high of 113.28 yen per dollar as investors fled risky trades funded by borrowing the Japanese currency at low interest rates. The dollar also fell 1.1 percent to 1.1890 Swiss francs.

The euro was up 0.6 percent at $1.3765, near a session peak of $1.3799, according to electronic trading platform EBS.

Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Conn., called the payroll report “one of the bigger real surprises we have had for some time, and (it) can only add significantly to building negative dollar sentiment.”

If these guys are seriously surprised the payroll news this week, or the market drops, or the housing market drops, they’re either so naive that they shouldn’t be employed at their current jobs or they’re a bunch of evil swindlers who need to be fired as soon as possible.

Many Americans are about to get a very rude awakening in how the markets work when you’re printing worthless dollars to pay your debts and float the economy.  This is exactly why it’s a terrible idea to have a central banking system.

The piper’s about to come calling.  And it’s entirely the failure of a government system that was 99.9% likely to end up here.  And it’s the fault of the American people for continuing to allow themselves to be fed the lie that big government and socialism is a better solution than the free market which has worked for us so well for hundreds of years.

Hold on tight, everyone.