we still have massive problems in the US that could derail the stock market and fuel greater fear - rational fear, not irrational

Foreign Exchange - Pounds Sterling and Euro Exchange Rate Outlook

The US budget deficit will be $1.75 trillion, and that the US dollar did not fall on this horrendous amount is a tribute to faith in the US economy and perhaps also the government's recovery initiatives. We don’t like the opposition GOP outright wanting the US to fail - why is that not unpatriotic? - but we admit that if there is too much pork in the stimulus and if the plan fails to deliver some significant signs of recovery by year-end, they will have proven the point that government is a bad actor on the economic stage and its role needs to be severely limited. Are we getting a return of attention to hard economic data? We propose that developments in Japan are making it unavoidable. The giant trade deficit yesterday shoved that point home painfully. The comparison of zombie banks between the US and Japan is on everyone's mind, too.

Japan acted too slowly and got a lost decade.

Comparsons of other countries with the US favor the US - "it's worse elsewhere." Meanwhile, Europe has yet to deal with what some critics called its subprime - Eastern Europe, which barely has a foothold on coming up to western standards. As far as we can tell, Western Europe feels responsbility, having initiated integration talk, but (as with the wars in the former Yugoslavia), lacks the guts and political will to take real action. How long will it be before we hear of US aid to (say) Croatia or Hungary? It should be someone else delivering aid.

But before these big-picture issues ripen,

we still have massive problems in the US that could derail the stock market and fuel greater fear - rational fear, not irrational.

We could get a bombshell from AIG, as rumored yesterday. Today we have General Motors reporting a worse-than-expected quarterly loss for a full-year net loss of $30.9 billion for 2008. Reuters says "That ranked as the second largest annual loss for the 100-year-old automaker on record behind only the $38.7 billion loss recorded for 2007. Revenue plunged by more than a third, and the pension plan is underfunded by about $12.4 billion as of the end of 2008. "GM said it could receive a 'going concern' notice from auditors, who will assess the risk that the automaker might not be able to continue as a going concern."

The failure of GM—is that fully priced in to the dollar? Be careful.

Pounds to US Dollars = 1.4313
Pounds to Euros = 1.1219
Euro to Pounds = 0.8906
Pounds to Australian Dollars = 2.1901

Bye For Now

Barbara Rockefeller
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