The Oil Drum

242 comments on DrumBeat: May 22, 2006

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Nate Hagens on May 22, 2006 - 10:38pm

OK. last 2 weeks its been pretty constant. I guess I meant last 8 weeks, when it has gone from 1.18 to 1.29 vs Euro. thats a big move for 2 months, historically.

I dont remember what was happening in the weeks leading up to 10/19/1987 - was the dollar selling off before stocks did?

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IFeelFree on May 22, 2006 - 11:01pm

I don't have charts at my fingertips, but I recall reading that the dollar fell sharply, and the stock market was very weak, in the days leading up to the 1987 crash. That was the warning sign - the dollar was falling simultaneous with the stock market. In the present case, we have the dollar holding up (even though it's been weak in the past few months) while the stock market has been dropping over the past 2 weeks. If the dollar and the stock market start falling together, it greatly increases the chance of a real crash.

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wstephens on May 23, 2006 - 5:51am

Here is a dollar index chart (June contract):

http://www.futuresource.com/charts/charts.jsp?s=DXM06

There has been a dollar selloff recently -- ahead of many of the market corrections. The biggest drop was in April. Then we got market corrections starting in mid-May, but the dollar decent stopped.

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wstephens on May 23, 2006 - 5:58am

Nuts on that link format.
http://www.futuresource.com/charts/charts.jsp?s=DXM06

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tate423 on May 23, 2006 - 9:49am

The only reason the dollar has held is due to a worldwide drawdown of riskier assets (foreign equities) & into USD "safe" investments. So again, it's like recycling dollars. In the absence of M3 info, I think it's clear that inflaton it starting to take a firm hold.

To combat that they will have to raise interest rates to maintain the dollar. Problem is they will do so to the detriment of the working people and boom UNEMPLOYEMENT!