EURO vs USD

[J. Abizeid]

(Here is an August report that suggests the dollar is the one in jeopardy.
It is obvious there is a system in place to rescue it when needed but the question is for how long and at what cost?)
http://www.marketwatch.com/news/story/us-europe-japan-mulled-dollar/story.aspx?guid=%7B0E8AFCB7%2DEA4F%2D49DB%2D83A8%2 DD92D155BC2BA%7D


U.S., Europe, Japan mulled dollar support: report
Reported dollar rescue plan in March suggests U.S. could act if ever needed

By Lisa Twaronite, MarketWatch
Last update: 6:34 p.m. EDT Aug. 28, 2008
SAN FRANCISCO (MarketWatch) -- Authorities in the U.S., Europe and Japan reportedly put together a plan in March to halt the dollar's slide, and the fact that officials considered joint intervention is potentially supportive should the greenback ever resume another downtrend, analysts said.
According to a report Thursday in Japanese business daily Nikkei, officials from the U.S. Treasury Department, Japan's Finance Ministry and the European Central Bank drew up the currency intervention plan over the weekend of March 15-16 to jointly shore up the greenback.
"If anything, the fact that officials recognized the concern about the dollar's decline seems somewhat supportive for the dollar as maybe benign neglect was not so neglectful," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, wrote in a note to clients Thursday.
The U.S., Europe and Japan last jointly intervened in the currency market in September 2000, to support the then-slumping euro.
The latest reported dollar rescue agreement came four years to the day after the end of Japan's unprecedented intervention campaign, in which Japan spent about 35 trillion yen ($350 billion, at current market levels) over 15 months to keep the yen down. Japanese authorities intervened for the last time on March 16, 2004.
Flight from dollar
On Sunday, March 16, the U.S. Federal Reserve took the extraordinary step of cutting its discount rate by a quarter percentage point to 3.25% and offered to lend money to an unprecedented list of firms. This, combined with news of J.P. Morgan's Fed-blessed fire sale purchase of ailing brokerage Bear Stearns Cos., sent the greenback plunging.
Against its Japanese counterpart, the dollar slid to a 12-year low of 95.75 yen. The euro rose to $1.5903, which at the time was its highest level since it began trading in January 1999.
As U.S. stocks and the dollar sold off, the U.S., Europe and Japan also considered issuing an emergency statement through the Group of Seven industrialized nations, Nikkei reported.
Although the administration of President George W. Bush had expressed caution toward such intervention moves, the flight from the dollar essentially forced a shift in U.S. policy, Nikkei said.
The parties did not set a specific exchange rate for initiating an intervention or outline the potential scale of the operation. In the event the dollar faced the risk of a free-fall, however, the plan called for their respective central banks to aggressively buy dollars while selling yen and euros, the Nikkei said, citing sources familiar with the matter.
Under the intervention framework, Japan was to supply the yen necessary for the underlying currency swaps. A previously established swap mechanism between the U.S. and Europe was to be used as well, the report said.
But although the greenback buckled, a free-fall scenario never materialized.
While the dollar is still down more than 2% against the yen for the year, it's well off its March low, which currency analysts say was most likely its bottom for now. On Thursday afternoon, it was trading around 109.40 yen.
The dollar hit a new record low against the euro on July 15, when the European unit bought $1.6038. On Thursday, the euro was trading far below that, at $1.4693. See Currencies.
"The markets did the central banks jobs for them," said Andrew Wilkinson, senior market analyst at Interactive Brokers.
"The dollar's had its big rally, and now it's pulling back a little bit, and you've got heightened degrees of uncertainty," Wilkinson said.

[Raficoo]

Things are changing..where's the guy who posts updated good news about the dollar when you need him

[J. Abizeid]

Originally Posted by Raficoo

Things are changing..where's the guy who posts updated good news about the dollar when you need him

According to the above report the euro didn’t go high enough (1.6038) to trigger the dollar rescue plan.
In my opinion, the rescue system has been used more than once ever since; once just before the Olympics and the last time last week.
It’s as simple as creating artificial shortage like they did with oil last summer.
By looking at the charts, I can tell when left alone, the dollar starts trickling down until they cut its supply at which time it reverses course in a hurry.
I wouldn’t be surprised if I see the same scenario happen one last time just before the elections.
I know many disagree with my analysis but it’s my style to go against the flow and expect the unexpected.
As far as manipulations and bailouts, they don’t come free and they can’t do it indefinitely. They do it with oil and gold as well over a certain period of time while the insiders are buying what you are selling and before you know it hell breaks lose.

[Raficoo]

Euro is now 1.3475, with a low of 1.3456

[J. Abizeid]

The Great Depression and its Results

I. The Great Depression

In 1929 a panic on the New York Stock Exchange introduced a world-wide decline of business activities. International trade and industrial production dropped sharply. Wages shrank, unemployment rose, and widespread misery proved that something was wrong with the economic system. The whole world felt the impact of this economic dislocation but some countries suffered more acutely than others.

The effects of the Great Depression in the United States you are no doubt familiar with by now. Here I will simply attempt to estimate its influence on the world as a whole. This is a difficult task because values and currencies fluctuated sharply and accurate statistics are unavailable for many regions. Even when dependable calculations on production and consumption were compiled, and on prices, wages, and unemployment, such figures did not tell the whole story. There is no yardstick for measuring human misery, no formula for computing what the loss of a job, increasing privation, and the necessity of asking for public relief may mean to a man and his family. Still less is it possible to estimate what the shrinkage of international trade meant to inarticulate millions in Asia, Africa, and Latin America, who found they could not sell their crops and raw materials in the declining world markets.

For the nations that felt its effects most severely the Great Depression had the qualities of a nightmare. Some malign irresistible force seemed to have seized control and all efforts to arrest the decline appeared futile. Banks collapsed, factories closed down, millions of workers were discharged from their jobs. The disaster had struck without warning. No one could explain clearly what had gone wrong; no one could foretell how much worse conditions might become. These uncertainties produced a sense of helplessness and despair.

The Great Depression left an indelible memory behind, particularly among the people of the United States. Fears that a similar economic collapse might overtake the world again still haunt millions of people even yet. It is important, therefore, to judge the Great Depression calmly in the perspective of history. It was a great misfortune, but it was neither so ominous nor so mysterious as some of the legends told about it suggest.
A. Reduction of Incomes

What people in America and Europe noted most inescapably about the Depression was the reduction of their incomes. In addition to millions of wage earners who were thrown out of work entirely, millions more became part-time laborers. Even those who kept full-time jobs often had to accept a reduction in wages. In the United States the per capita income fell from about $700 in 1929 to some $400 in 1933. Most of the European people suffered in similar fashion.

Only Soviet Russia, which had almost isolated itself from the rest of the world, escaped the effects of the Depression. But the Russian people, especially in the Ukraine, suffered severely for several years after 1929 from other causes. The forcible attempt to establish collective farms brought misery and death to millions of Russian farmers. (Note The Harvest of Sorrow by Robert Conquest).
B. Trade and manufacturing shrank

A second effect of the Depression which filled many people with apprehension was that international trade and manufacturing shrank rapidly. In 1929 the estimated value of United States imports and exports had reached almost ten billion dollars. By 1933 the value had dropped to three billion. Furthermore, American industrial output was cut in half.

The world as a whole, however, weathered the storm somewhat better. Although prices dropped sharply and the "dollar value" of international trade fell more than 60 per cent, the actual decline in the cargoes shipped was about 25 per cent. World industrial output likewise suffered less sharply than that of the United States, falling about one-third in four years.

It is important to realize the statistics on the decline of national income, of industrial production, and of international trade provided a gloomier picture from 1929 to 1933 than the actual world conditions warranted. The majority of the world's workers did not make their living from industry or trade; they supported themselves through agriculture. If the world world food supply had dropped 60 or 50 or even 25 per cent between 1929 and 1933, mankind would have faced a much greater tragedy. It is true that the market prices paid for agricultural produce dropped. But in the world as a whole the number of acres cultivated and the amount of food produced actually increased during the years of the Depression.

In 1933 the world acreage devoted to wheat, rice, rye, maize, barley, and oats was larger than in 1929. Other crops, such as potatoes and sugar, that furnish calories for human consumption likewise rose. As six out of seven human being depend on cereals for most of their nourishment this gain in agricultural production was a matter of the utmost importance.

To humanity as a whole, therefore, the Great Depression brought hardships but it did not bring acute disaster. There was no sharp rise in deaths from starvation and disease. On the contrary, the world death-rate declined in the 1930's, and life expectancy continued to rise. These encouraging trends may be seen in the statistical table compiled by the League of Nations. But these tables also reveal certain negative effects in the 1930 for which the Depression was almost certainly responsible. Although the world population continued to drop, there was a perceptible decline in the world birthrate in the 1930's.
C. Decline in the world birthrate

When people feel increasingly insecure and view the future with deepened apprehension, they are less likely to marry and less eager to have children whom they may find it impossible to support. During the period of the Great Depression and for some years afterwards the world birthrate averaged about one-tenth lower than it had during the "prosperous" 1920's.

A decline of one-tenth in the birthrate may not seem very significant. It meant that during the 1930's there were about three less births per year for each thousand people than there would have been if the birthrate of the preceding decade had continued unchanged. By 1930 the global population had reached two billion, so a drop of three per thousand in the birthrate meant some six million fewer babies were born in a year.

It meant that, between 1930 and 1940, approximately 550 million babies were born into the world instead of perhaps 600 million that might have been born if there had been no Depression. Fifty million human beings is a total greater than all the soldiers and civilians killed in both world wars.

When the Great Depression is judged by its effect on the birthrate it takes on the shape of a massive calamity. It is possible to argue, of course, that the decline in the birthrate after 1929 was not due to the Depression at all but to other factors. But no other factors appear to provide a more adequate explanation.

If the statistics that are available may be trusted, the global birthrate fell steadily between 1930 and 1935, when the Depression made its effects felt most acutely, remained low until after 1940, and then began to rise again in the midst of World War II. In other words, the Depression seems to have had a more unfortunate effect on the birthrate than the turmoil of a world war did.
II. Programs for Economic Recovery

The dislocation of trade and industry, the falling prices, and the rising unemployment that came with the Depression forced statesmen and economists to seek remedies. But the experts could not agree in their diagnoses of what was wrong or what measures would prove most effective in restoring prosperity. Each nation sought to improve its own condition and some of the selfish measures adopted by individual governments made world conditions worse. Why this was so becomes clearer when the programs followed by the leading states are examined.

On June 20, 1931, President Herbert Hoover proposed a moratorium, a suspension of payments on intergovernmental debts for one year. But the Depression had grown too serious and involved for any simple remedy, and Hoover's proposal failed to arrest the decline.
A. Gold Standard Abandoned

The spread of financial confusion, constricting the flow of world trade upon which Great Britain depended for prosperity, forced the British government to abandon the gold standard in September, 1931. The pound sterling immediately fell 20 to 30 per cent in value. For the British this result was not entirely a loss, for their debts could now be paid in devaluated pounds; and the reduction in wages made British manufactures relatively cheaper and therefore more welcome on the international market.

Eighteen months later (April, 1933) the United States likewise abandoned the gold standard, although the major share of the world gold reserve was in this country. Soon the currencies of all the leading nations were unhinged from any fixed value, and the unpredictable fluctuations of the dollar, pound, franc, mark, or lira added a further hazard to discourage businessmen from the risks of international commerce. Without fixed policies, respect for contracts, and a stable unit of money with which to reckon costs and prices, traders could not negotiate or bankers calculate the prospects of a project or the worth of securities.

All of these factors, which were at once causes and effects, increased the disastrous fall in world commerce after 1929. For that year the total international trade within Europe exceeded $11 billion (1929 dollar value). Trade between European and non-European countries reached $15 billion. Five years later foreign trade within Europe had shrunk to $4 billion (1929 dollar value), and European trade with the rest of the world to $5 billion.
B. Social Unrest

So sharp a reduction in the value of international transactions could not fail to bring ruin or unemployment to millions. The economic prosperity of all the leading nations was very largely dependent upon the profits of manufacture, transportation, banking, and insurance, and upon the dividends from money invested in these lucrative activities. The Depression had repercussions which struck at all classes, for with factories idle the output of the mines, the crops from the fields, and the cargoes from distant quarters of the earth all declined.

In countries like Germany and Italy, where the average income of the workers and their per capita wealth were about half that enjoyed by Englishmen or Frenchmen of equivalent station, the loss and hardship were naturally more pressing. Social unrest impelled all governments to experiment with panaceas which promised to bring temporary relief to a critical situation. The widespread suffering, the mood of bewilderment and anger that stirred the masses, and the demand from the destitute and the unemployed that their leaders find a remedy, must be kept in mind by the student who wishes to understand this clamorous decade 1929-1939.

The grandiose national programs, the inflation of the currencies, the mad chauvinism preached by European leaders, were in part dictated by the exigencies of the Depression. It was almost inevitable that politicians who could not conquer the economic ills should distract the attention of discontented and angry electors by seeking some minority as a scapegoat for the general misery, or by pointing abroad at some foreign rival as the cause of national frustration.

It is important to note, too, that in countries which had no long discipline in the methods of democratic self-government, there was a general readiness to look to the government or to a strong and dictatorial leader for a solution to the crisis. In countries where democracy was more firmly rooted and free economic enterprise had flourished more sturdily the individual citizens recognized that recovery must depend very largely upon their own energy and their own constructive efforts.

None of the many plans proposed by statesmen and economists to stimulate the return of world prosperity by conferences, proclamations, cancellation of debt payments, or manipulation of currency rates, produced the result desired. In every state, therefore, the leaders turned to measures which might aid in solving their local problems and bring about recuperation in their national economy.

The world was too large and complex for legislators to prescribe a program for world recovery, even if they could have agreed upon one; and although the rapidity with which the Depression spread from continent to continent proved that all trading nations were interdependent, they were not cooperative but competitive in their policies. It was therefore of little use to plan measures or promulgate rules for international application, because no real agreement or control or enforcement was possible in a world where each nation-state might adopt a course that weakened its neighbors and nullified any general program for world recovery.

Nations which contained within their political frontiers the raw materials most vital for their economic well-being were fortunate. The United States possessed varied and abundant resources and the population formed a domestic market which could absorb the output of the mills and the farms.

The British Empire-Commonwealth, with colonies and possessions and self-governing Dominions in every clime and continent, could likewise plan to revive its economic life within a framework of "imperial preference." Soviet Russia, where all foreign trade was a monopoly of the state, had its own economic program, its own resources, and its own industrial, agrarian, and social needs to satisfy. Self-sufficient states, especially the United States and Soviet Russia, might restore order within their own borders and meet their own needs even if the rest of the world drifted into economic anarchy. But many countries were largely dependent upon one or two products which they must sell in the world market, on coffee or tin or nitrates which they produced in abundance but could not consume themselves.

For industrialized states, such as Germany and Japan, which had highly developed manufactures to produce and sell, the dislocation of trade and the division of the world into jealously guarded preserves caused increasing difficulty. The ingenuity of their chemists might produce synthetic substitutes for some of the raw materials which they could no longer import. But unless they could achieve complete self-sufficiency (and very few countries could find all the commodities needed within their borders) these states had to export in order to pay for imports, and they could not export to areas which some other power had sealed against them by raising an insurmountable tariff wall.
C. Armaments and Wars of Conquest

When their attempts at economic penetration were frustrated, businessmen could hardly fail to remind themselves that the situation might be improved if their government could secure control over the area they desired to exploit. Nations which lacked a large colonial empires were easily persuaded that this lack exposed them to undue restrictions and hardships.

In Rome, Berlin, and Tokyo the industrialists, the statesmen, and the militarists all recognized that a war of conquest might offer the most obvious solution to their immediate problems. That such a program might prove costly and tragic in its ultimate effects they understood; but they were realists, the pressure of events and the clamor of the people compelled them to offer some positive program, and they craved power. A bold armament campaign might mean increased taxes but it also meant that the government would have large sums of money to spend. Expanded orders for weapons and equipment would assure activity in the heavy industries.

By calling additional classes of conscripts for army training, the government could reduce unemployment and provide itself with trained and obedient soldiers who would break a strike or repress internal disorders. Whether a war came or not, military preparedness was the most persuasive argument a dominant party or dictatorial clique could invoke to justify the arbitrary acts, extraordinary expenditures, and illegal usurpation of power practiced by all the totalitarian dictatorships.

It was recognized by thoughtful men everywhere that the "planned recovery" instituted by the German, Japanese, and Italian governments as a means of escaping from the Depression was a threat to peace. The existence of a powerful army is in itself a powerful argument for using it. Armament programs, moreover, are always competitive, and even in the less militaristic countries some part of the revenue voted for economic recovery was turned to increased production of arms. As unemployment declined and armaments mounted, it began to seem as if preparation for war was the most certain cure for an economic Depression. This grim enigma led one writer to ask the disturbing question: "Is modern industry then, a sick giant which can rouse it self only to kill?"

[J. Abizeid]

http://video.google.com/videoplay?docid=7065205277695921912

This is a two hour movie with more than one topic. I you have the patience to see it all, it’s very interesting,

[Frisbeetarian]

The Great Depression and its Results

I. The Great Depression

In 1929 a panic on the New York Stock Exchange introduced a world-wide decline of business activities. International trade and industrial production dropped sharply. Wages shrank, unemployment rose, and widespread misery proved that something was wrong with the economic system. The whole world felt the impact of this economic dislocation but some countries suffered more acutely than others.

The effects of the Great Depression in the United States you are no doubt familiar with by now. Here I will simply attempt to estimate its influence on the world as a whole. This is a difficult task because values and currencies fluctuated sharply and accurate statistics are unavailable for many regions. Even when dependable calculations on production and consumption were compiled, and on prices, wages, and unemployment, such figures did not tell the whole story. There is no yardstick for measuring human misery, no formula for computing what the loss of a job, increasing privation, and the necessity of asking for public relief may mean to a man and his family. Still less is it possible to estimate what the shrinkage of international trade meant to inarticulate millions in Asia, Africa, and Latin America, who found they could not sell their crops and raw materials in the declining world markets.

For the nations that felt its effects most severely the Great Depression had the qualities of a nightmare. Some malign irresistible force seemed to have seized control and all efforts to arrest the decline appeared futile. Banks collapsed, factories closed down, millions of workers were discharged from their jobs. The disaster had struck without warning. No one could explain clearly what had gone wrong; no one could foretell how much worse conditions might become. These uncertainties produced a sense of helplessness and despair.

The Great Depression left an indelible memory behind, particularly among the people of the United States. Fears that a similar economic collapse might overtake the world again still haunt millions of people even yet. It is important, therefore, to judge the Great Depression calmly in the perspective of history. It was a great misfortune, but it was neither so ominous nor so mysterious as some of the legends told about it suggest.
A. Reduction of Incomes

What people in America and Europe noted most inescapably about the Depression was the reduction of their incomes. In addition to millions of wage earners who were thrown out of work entirely, millions more became part-time laborers. Even those who kept full-time jobs often had to accept a reduction in wages. In the United States the per capita income fell from about $700 in 1929 to some $400 in 1933. Most of the European people suffered in similar fashion.

Only Soviet Russia, which had almost isolated itself from the rest of the world, escaped the effects of the Depression. But the Russian people, especially in the Ukraine, suffered severely for several years after 1929 from other causes. The forcible attempt to establish collective farms brought misery and death to millions of Russian farmers. (Note The Harvest of Sorrow by Robert Conquest).
B. Trade and manufacturing shrank

A second effect of the Depression which filled many people with apprehension was that international trade and manufacturing shrank rapidly. In 1929 the estimated value of United States imports and exports had reached almost ten billion dollars. By 1933 the value had dropped to three billion. Furthermore, American industrial output was cut in half.

The world as a whole, however, weathered the storm somewhat better. Although prices dropped sharply and the "dollar value" of international trade fell more than 60 per cent, the actual decline in the cargoes shipped was about 25 per cent. World industrial output likewise suffered less sharply than that of the United States, falling about one-third in four years.

It is important to realize the statistics on the decline of national income, of industrial production, and of international trade provided a gloomier picture from 1929 to 1933 than the actual world conditions warranted. The majority of the world's workers did not make their living from industry or trade; they supported themselves through agriculture. If the world world food supply had dropped 60 or 50 or even 25 per cent between 1929 and 1933, mankind would have faced a much greater tragedy. It is true that the market prices paid for agricultural produce dropped. But in the world as a whole the number of acres cultivated and the amount of food produced actually increased during the years of the Depression.

In 1933 the world acreage devoted to wheat, rice, rye, maize, barley, and oats was larger than in 1929. Other crops, such as potatoes and sugar, that furnish calories for human consumption likewise rose. As six out of seven human being depend on cereals for most of their nourishment this gain in agricultural production was a matter of the utmost importance.

To humanity as a whole, therefore, the Great Depression brought hardships but it did not bring acute disaster. There was no sharp rise in deaths from starvation and disease. On the contrary, the world death-rate declined in the 1930's, and life expectancy continued to rise. These encouraging trends may be seen in the statistical table compiled by the League of Nations. But these tables also reveal certain negative effects in the 1930 for which the Depression was almost certainly responsible. Although the world population continued to drop, there was a perceptible decline in the world birthrate in the 1930's.
C. Decline in the world birthrate

When people feel increasingly insecure and view the future with deepened apprehension, they are less likely to marry and less eager to have children whom they may find it impossible to support. During the period of the Great Depression and for some years afterwards the world birthrate averaged about one-tenth lower than it had during the "prosperous" 1920's.

A decline of one-tenth in the birthrate may not seem very significant. It meant that during the 1930's there were about three less births per year for each thousand people than there would have been if the birthrate of the preceding decade had continued unchanged. By 1930 the global population had reached two billion, so a drop of three per thousand in the birthrate meant some six million fewer babies were born in a year.

It meant that, between 1930 and 1940, approximately 550 million babies were born into the world instead of perhaps 600 million that might have been born if there had been no Depression. Fifty million human beings is a total greater than all the soldiers and civilians killed in both world wars.

When the Great Depression is judged by its effect on the birthrate it takes on the shape of a massive calamity. It is possible to argue, of course, that the decline in the birthrate after 1929 was not due to the Depression at all but to other factors. But no other factors appear to provide a more adequate explanation.

If the statistics that are available may be trusted, the global birthrate fell steadily between 1930 and 1935, when the Depression made its effects felt most acutely, remained low until after 1940, and then began to rise again in the midst of World War II. In other words, the Depression seems to have had a more unfortunate effect on the birthrate than the turmoil of a world war did.
II. Programs for Economic Recovery

The dislocation of trade and industry, the falling prices, and the rising unemployment that came with the Depression forced statesmen and economists to seek remedies. But the experts could not agree in their diagnoses of what was wrong or what measures would prove most effective in restoring prosperity. Each nation sought to improve its own condition and some of the selfish measures adopted by individual governments made world conditions worse. Why this was so becomes clearer when the programs followed by the leading states are examined.

On June 20, 1931, President Herbert Hoover proposed a moratorium, a suspension of payments on intergovernmental debts for one year. But the Depression had grown too serious and involved for any simple remedy, and Hoover's proposal failed to arrest the decline.
A. Gold Standard Abandoned

The spread of financial confusion, constricting the flow of world trade upon which Great Britain depended for prosperity, forced the British government to abandon the gold standard in September, 1931. The pound sterling immediately fell 20 to 30 per cent in value. For the British this result was not entirely a loss, for their debts could now be paid in devaluated pounds; and the reduction in wages made British manufactures relatively cheaper and therefore more welcome on the international market.

Eighteen months later (April, 1933) the United States likewise abandoned the gold standard, although the major share of the world gold reserve was in this country. Soon the currencies of all the leading nations were unhinged from any fixed value, and the unpredictable fluctuations of the dollar, pound, franc, mark, or lira added a further hazard to discourage businessmen from the risks of international commerce. Without fixed policies, respect for contracts, and a stable unit of money with which to reckon costs and prices, traders could not negotiate or bankers calculate the prospects of a project or the worth of securities.

All of these factors, which were at once causes and effects, increased the disastrous fall in world commerce after 1929. For that year the total international trade within Europe exceeded $11 billion (1929 dollar value). Trade between European and non-European countries reached $15 billion. Five years later foreign trade within Europe had shrunk to $4 billion (1929 dollar value), and European trade with the rest of the world to $5 billion.
B. Social Unrest

So sharp a reduction in the value of international transactions could not fail to bring ruin or unemployment to millions. The economic prosperity of all the leading nations was very largely dependent upon the profits of manufacture, transportation, banking, and insurance, and upon the dividends from money invested in these lucrative activities. The Depression had repercussions which struck at all classes, for with factories idle the output of the mines, the crops from the fields, and the cargoes from distant quarters of the earth all declined.

In countries like Germany and Italy, where the average income of the workers and their per capita wealth were about half that enjoyed by Englishmen or Frenchmen of equivalent station, the loss and hardship were naturally more pressing. Social unrest impelled all governments to experiment with panaceas which promised to bring temporary relief to a critical situation. The widespread suffering, the mood of bewilderment and anger that stirred the masses, and the demand from the destitute and the unemployed that their leaders find a remedy, must be kept in mind by the student who wishes to understand this clamorous decade 1929-1939.

The grandiose national programs, the inflation of the currencies, the mad chauvinism preached by European leaders, were in part dictated by the exigencies of the Depression. It was almost inevitable that politicians who could not conquer the economic ills should distract the attention of discontented and angry electors by seeking some minority as a scapegoat for the general misery, or by pointing abroad at some foreign rival as the cause of national frustration.

It is important to note, too, that in countries which had no long discipline in the methods of democratic self-government, there was a general readiness to look to the government or to a strong and dictatorial leader for a solution to the crisis. In countries where democracy was more firmly rooted and free economic enterprise had flourished more sturdily the individual citizens recognized that recovery must depend very largely upon their own energy and their own constructive efforts.

None of the many plans proposed by statesmen and economists to stimulate the return of world prosperity by conferences, proclamations, cancellation of debt payments, or manipulation of currency rates, produced the result desired. In every state, therefore, the leaders turned to measures which might aid in solving their local problems and bring about recuperation in their national economy.

The world was too large and complex for legislators to prescribe a program for world recovery, even if they could have agreed upon one; and although the rapidity with which the Depression spread from continent to continent proved that all trading nations were interdependent, they were not cooperative but competitive in their policies. It was therefore of little use to plan measures or promulgate rules for international application, because no real agreement or control or enforcement was possible in a world where each nation-state might adopt a course that weakened its neighbors and nullified any general program for world recovery.

Nations which contained within their political frontiers the raw materials most vital for their economic well-being were fortunate. The United States possessed varied and abundant resources and the population formed a domestic market which could absorb the output of the mills and the farms.

The British Empire-Commonwealth, with colonies and possessions and self-governing Dominions in every clime and continent, could likewise plan to revive its economic life within a framework of "imperial preference." Soviet Russia, where all foreign trade was a monopoly of the state, had its own economic program, its own resources, and its own industrial, agrarian, and social needs to satisfy. Self-sufficient states, especially the United States and Soviet Russia, might restore order within their own borders and meet their own needs even if the rest of the world drifted into economic anarchy. But many countries were largely dependent upon one or two products which they must sell in the world market, on coffee or tin or nitrates which they produced in abundance but could not consume themselves.

For industrialized states, such as Germany and Japan, which had highly developed manufactures to produce and sell, the dislocation of trade and the division of the world into jealously guarded preserves caused increasing difficulty. The ingenuity of their chemists might produce synthetic substitutes for some of the raw materials which they could no longer import. But unless they could achieve complete self-sufficiency (and very few countries could find all the commodities needed within their borders) these states had to export in order to pay for imports, and they could not export to areas which some other power had sealed against them by raising an insurmountable tariff wall.
C. Armaments and Wars of Conquest

When their attempts at economic penetration were frustrated, businessmen could hardly fail to remind themselves that the situation might be improved if their government could secure control over the area they desired to exploit. Nations which lacked a large colonial empires were easily persuaded that this lack exposed them to undue restrictions and hardships.

In Rome, Berlin, and Tokyo the industrialists, the statesmen, and the militarists all recognized that a war of conquest might offer the most obvious solution to their immediate problems. That such a program might prove costly and tragic in its ultimate effects they understood; but they were realists, the pressure of events and the clamor of the people compelled them to offer some positive program, and they craved power. A bold armament campaign might mean increased taxes but it also meant that the government would have large sums of money to spend. Expanded orders for weapons and equipment would assure activity in the heavy industries.

By calling additional classes of conscripts for army training, the government could reduce unemployment and provide itself with trained and obedient soldiers who would break a strike or repress internal disorders. Whether a war came or not, military preparedness was the most persuasive argument a dominant party or dictatorial clique could invoke to justify the arbitrary acts, extraordinary expenditures, and illegal usurpation of power practiced by all the totalitarian dictatorships.

It was recognized by thoughtful men everywhere that the "planned recovery" instituted by the German, Japanese, and Italian governments as a means of escaping from the Depression was a threat to peace. The existence of a powerful army is in itself a powerful argument for using it. Armament programs, moreover, are always competitive, and even in the less militaristic countries some part of the revenue voted for economic recovery was turned to increased production of arms. As unemployment declined and armaments mounted, it began to seem as if preparation for war was the most certain cure for an economic Depression. This grim enigma led one writer to ask the disturbing question: "Is modern industry then, a sick giant which can rouse it self only to kill?"

Thank you for posting, that was insightful.

[Abou-Eddie]

The Great Depression was in 1929. A similar scenario cannot happen in 2008 as the world had become hugely inter-dependent. The car you drive, the TV you watch, the plane you fly have parts which are produced in various parts of the world. I foresee a mini depression which will return people's feet on the ground. The basics have to be re-learned, you should not spend before you make, you should not embroil yourself in debt which you are unable to pay back etc... It is the American system as it stood prior to the last crisis which is faltering. It was a system whereby it is never enough, where greed has no limits, where each individual, no matter how educated, no matter what type of income level, firmly believes he has a right to own a house, 2 SUV's in the garage, 2 exotic vacations a year, etc... So, the market needed a correction to put everyone's feet back on the ground. The problem now facing the American Government is that they waited too long and dangerously approached the cliff. This is mainly due to this being an election year. An Obama win will restore some confidence that at least some change is on the way, it will surely have a psychological boost. A Mc Cain win will be perceived as a continuation of Bush policies.
Going back to the dollar which is the topic of this thread, I still believe that it will reach 1.30/1.32 by year end simply because they are using it as the branch they are hanging onto while all is falling. In an environment of bad news, when possible, try to stimulate and exacerbate the one piece of good news going around.

[J. Abizeid]

[admiral]

Next week will be a decisive week for the destination of the Euro ,the Euro falled till 1.3258 however it bounced back to 1.36 before ending the week at 1.34.

Let us see if next week the Euro will be able to move higher and break above its short term downtrend spike high at 1.3785 . if it cannot break the 1.3785 level there is a big probability it will try to push lower and test the 1.30 level .

I am attaching 2 charts , the first one is a short term chart , and the second one is a very long term chart dating back to 1989 till today , it is very important to look at the long term chart to have a better idea of the larger moves of the currencies . usually currencies move in function of rally and retracement , if we take the lowest point the euro reached which is 0.82 and the highest point which is 1.60 , we can see that the euro till now only retraced 38% from its highest point at 1.60 , if the euro doesn't bounce back from the current 38.2 % level , there will be a very big probability it will retrace to the 50% level around 1.20 .