Tossing and Tortured 'Till Dawn

I come back to you now, at the turn of the tide.

Tuesday, October 28, 2008

What is going ON here?

Since I've been tracking this and making notes for a while, look at this Yahoo finance chart tracking the USD / CAD exchange for 1y.



When last I visited BC, they had been trading at almost parallel for some time.

What's happened in the past weeks and months?

* The US economy is in, or almost in, depending upon who you query, a full-blown recession.

* The Fed has reduced the fed funds target rate such that real interest rates are negative

* Stocks are crushed, but fluctuating wildly. The Dow had dropped below 8,000 briefly, and also had record gaining days. On the whole, significant losses.

* Let's not even talk about the banking crisis and the unfortunately-named "bailout."

* Balance of payments shows tilts further into a negative current account

WHY IS THE DOLLAR RISING?



Silver prices, 2008

AND :



Oil prices, weekly.

(yes, I borrowed these charts from Kitco and Omega Research / Tradingcharts dot com. Sorry.)

This is not "supposed" to happen like this. It's time for me to break out some economics textbooks and dust off my memory of how marginalism and the IS / LM model is described in economic orthodoxy.

Thankfully, this all works out for yours truly, not being yet bitten by the recession bug, who has a job, pays more interest than he earns (on student loans), and is contemplating travel abroad.

Still.

It gives one pause.

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