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Fresh glimmers of hope for the eurozone

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  • jk
    replied
    Re: Fresh glimmers of hope for the eurozone

    gec, you're right. ej refers to dtwexm, not the broad index. i guess in my mind i always translated this as the broad index, since the so-called "major" index makes so little sense.

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  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    In the course of researching this, I decided to look up the weights for the various Dollar Indexes. I discovered something interesting. The Fed is no longer publishing the weights for the major currencies index. Instead, they refer you to the doc from 2005 and tell you to "make your own":

    Weights for the major currencies index and for the OITP (other important trading partners) index can be derived from the weights, shown below, for the broad index of the foreign exchange value of the dollar. The method used to construct the weights is described in an article (73 KB PDF) in the Winter 2005 Federal Reserve Bulletin. The broad index and the other exchange rate indexes calculated by staff of the Federal Reserve Board are presented on the page of summary measures of the foreign exchange value of the dollar.
    Why would they leave out such an important fact? The Fed has literally thousands of charts on every aspect of economics. Why leave this one out? I think it is an embarrassment to them. The major currencies now represent about 40% of all trade and are no longer "Major". I will put together some charts showing the weights in time series.

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  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by jk View Post
    try "trade weighted BROAD" http://research.stlouisfed.org/fred2/series/TWEXB
    THIS IS THE INDEX THAT EJ REFERS TO.
    Humm... No.

    This is a recent example:
    http://www.itulip.com/forums/showthr...lar#post233272

    or this one:
    http://www.itulip.com/forums/showthr...lar#post232339

    a quote:
    The Fed will worry that the strengthening dollar may push the CPI below 1% as the dollar approaches 79. The Fed may blink before that and institute QE3 when the dollar reaches 75. In any case, I don't feel comfortable maintaining the Whites of his Eyes trade with the dollar at 75 or higher.
    Please don't tell me you are turning into one of those biblical literalists that are an embarrassment even to the pope. You are too sharp a guy for that.
    Last edited by globaleconomicollaps; 09-03-12, 02:52 PM.

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  • jk
    replied
    Re: Fresh glimmers of hope for the eurozone

    try "trade weighted BROAD" http://research.stlouisfed.org/fred2/series/TWEXB
    THIS IS THE INDEX THAT EJ REFERS TO.

    Leave a comment:


  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by jk View Post
    gec, i think you are confusing the "dollar index," dxy, with the trade-weighted index. the trade-weighted index is so-called, because it is weighted by.. um... trade.

    a google search on "trade weighted dollar index" will quickly reveal the truth. or you could just ask metalman.
    You know I frequently make mistakes. I would not be surprised to see that I had totally screwed this up, but I'm feeling pretty sure of myself right now. I went right to the source rather than consulting the inimitable Mr. Metal, I consulted The Federal Reserve:
    http://research.stlouisfed.org/fred2/series/DTWEXM

    who have been good enough to provide a detailed explanation of how they calculate the various "Dollar Indexes"
    http://www.federalreserve.gov/pubs/b...er05_index.pdf

    The one that I am referring to is the same one the EJ likes and it has a name that you might recognize:
    Trade Weighted U.S. Dollar Index: Major Currencies

    Notes:

    A weighted average of the foreign exchange value of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue.
    Major currencies index includes the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. For more information about trade-weighted indexes see http://www.federalreserve.gov/pubs/b...er05_index.pdf.
    would you agree that that was a Trade Weighted index?

    This not the first time that I have tried to educate you about the Dollar Index. See here:
    http://www.itulip.com/forums/showthr...sdx#post231287

    Leave a comment:


  • jpatter666
    replied
    Re: Fresh glimmers of hope for the eurozone

    Well, looks like many companies are preparing for the Grexit at a minimum.

    Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.
    No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.
    That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together. On Thursday, the European Central Bank will consider measures that would ease pressure on Europe’s cash-starved countries.
    JPMorgan Chase, though, is taking no chances. It has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeedthe euro in other countries

    http://www.nytimes.com/2012/09/03/bu...ewanted=1&_r=1




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  • jk
    replied
    Re: Fresh glimmers of hope for the eurozone

    gec, i think you are confusing the "dollar index," dxy, with the trade-weighted index. the trade-weighted index is so-called, because it is weighted by.. um... trade.

    a google search on "trade weighted dollar index" will quickly reveal the truth. or you could just ask metalman.

    Leave a comment:


  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by Techdread View Post
    So you believe the Northern states will abandon the Euro?
    I think the Euro will stay together. Greece is willing to undergo a literal great depression to stay in. Merkel is willing to shoot her election chances in the head. Everybody is pulling together. Whether or not this is good is open to debate, but the anti-euro movement is non-existent. We have had several elections. The public has had a chance to vote on the Euro and the Euro has won.

    The route to saving the Euro is a general devaluation against the Dollar. This is what is happening now.

    Leave a comment:


  • Techdread
    replied
    Re: Fresh glimmers of hope for the eurozone

    So you believe the Northern states will abandon the Euro?

    Leave a comment:


  • BadJuju
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by globaleconomicollaps View Post
    weaker. It will eventually go to 4 to the dollar (mid 2015)
    This is what I am saying dollar UP Euro DOWN. Not the other way around.
    Well, crap! It was the ordering of it that threw me off since the graphs I usually see go EUR/USD when measuring the EUR versus the USD. Thanks for the information, my fellow Inebriate!

    Leave a comment:


  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by BadJuju View Post
    Ah, I see, thank you. So you see the Euro being in a stronger position long-term then?
    weaker. It will eventually go to 4 to the dollar (mid 2015)
    This is what I am saying dollar UP Euro DOWN. Not the other way around.

    Leave a comment:


  • BadJuju
    replied
    Re: Fresh glimmers of hope for the eurozone

    Ah, I see, thank you. So you see the Euro being in a stronger position long-term then?

    Leave a comment:


  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by BadJuju View Post
    Is this a chart of Euro vs the USD or a combination of the currencies?
    I don't know what a "combination of the currencies" is, but this is the same thing you see here:
    http://finance.yahoo.com/echarts?s=E...rce=undefined;

    Leave a comment:


  • BadJuju
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by globaleconomicollaps View Post
    Let's move this discussion forward. I have no reputation to protect. Nobody is going to bet their life savings on my predictions, so I can go out on a limb. This is what I think is going to happen:
    http://buildengineer.com/itulip/USD-...projection.png

    Is this a chart of Euro vs the USD or a combination of the currencies?

    Leave a comment:


  • globaleconomicollaps
    replied
    Re: Fresh glimmers of hope for the eurozone

    Originally posted by metalman View Post
    what? look at the chart... euro starts off a tad stronger than the usd @ 1.1 to the $$$... putts down to .75... climbs to 1.6... bounces between 1.2 & 1.5 for yrs while zerocred publishes 9000 articles re the death of the euro next week. fact... euro remains stronger than the usd.
    I thought I would publish the actual numbers from the graph you posted:
    start 1.1812
    end ( as of Friday) 1.2580
    (1.2580-1.1812)/1.1812 = 0.065
    or a 6.5% rise
    that is stronger than the dollar, but I've got to say, you are not making your case. I'm not going to defend ZH. In fact I posted this article in the first place to poke fun at them, but this is not a plug for Itulip either.


    Originally posted by metalman View Post
    ever head of Google? you must have your reasons for not locating the facts.

    for example, from the most recent article...

    CI: Europe?
    EJ: There are many more chapters to go for Europe and the euro, including assistance from the US, before that idealist experiment ends. Europe’s eventual final existential crisis after several more near death experiences in a few years will also be the end of Japan’s 20-year experiment in using Keynesian theory to grow government debt from 63% of GDP to 245%, to move credit bubble era debts from private to public account. Flight out of Japanese bonds and yen will get the Japanese government default ball rolling there finally.
    Why should I use Google when you are available and the wellspring of all knowledge?

    EJ has studiously avoided making a Euro prediction, with good reason. Euro predictors have been losing their shirts for 10 years, over and over again. He has however been kind enough to make a dollar prediction, which has the odd property of being a oblique Euro prediction.

    You see, EJ is fond of the Trade Weighted U.S. Dollar Index: Major Currencies or just the "Dollar index".
    This index has the interesting feature of tracking the Euro very well. This is because it is a "Trade Weighted" index that neglects the major trading partner of the US. For this reason I call it the "Idiot Meter", because anybody that uses it to foretell the future state of the US dollar is an idiot. I spell out some of the problems with it here:
    http://www.itulip.com/forums/showthr...sdx#post231287

    these are the weights in the index:
    It is a weighted geometric mean of the dollar's value compared only with

    Euro (EUR), 57.6% weight
    Japanese yen (JPY) 13.6% weight
    Pound sterling (GBP), 11.9% weight
    Canadian dollar (CAD), 9.1% weight
    Swedish krona (SEK), 4.2% weight and
    Swiss franc (CHF) 3.6% weight

    To the Euro area number you can add the Swiss Franc which is now explicitly pegged to the Euro. This brings the weight of the Euro in the Dollar Index to ~60%.
    in effect more than half of the thing that EJ measures in the dollar index is the USD/EUR cross. EJ predicts an eventual goal of 60 for the dollar index. This represents a ~20% rise in the value of the currencies in the dollar index over a period of ( how long?) some years. He doesn't say exactly.

    But to directly address your critique, ZH consists of at least a dozen writers with different points of view. I do indeed hear about The End Of The Euro about once a week. However there do seem to be more reasoned "personalities" playing Tyler Durden. In fairness, EJ is also bleak about the future of the Euro. EJ has the advantage being a single individual with a single (not so shrill) voice.

    As an aside I want to point out that there is precisely zero cognizance of a currency crisis here in France.

    Let's move this discussion forward. I have no reputation to protect. Nobody is going to bet their life savings on my predictions, so I can go out on a limb. This is what I think is going to happen:
    http://buildengineer.com/itulip/USD-...projection.png

    Leave a comment:

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