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USD Slumps Floorlessly On Bear Stearn Woes
By Benny Nardino | March 14, 2008
Bear Stearns pulls them all down today. The greenback, USD drops to a record 13 year low. Dollar acquires a new status, that is, parity with the swissy, USD/CHF, swiss franc and loonie, USD/CAN canadian dollar and on equity DOW falls by a further 194 points. What is going on? How will the economy recover? What is the USD, dollar’s worth right now on your travels? What impact does this have on the global economy in the long-term?
Well, it’s easy for the politicians to say they have the safe pair of hands at the moment. These promises are no different from Eliot Spitzer saying to his wife “Oh, I have a safe of willy trust me”. Needless to say the rest.
The effect of the dollar slump is already being felt globally from the oil price. In recent weeks the speculation in the Oil market have been generally spiked by the dollar weakness and its inflationary measures.
This dramatic bail out for Bear Stearn investment bank yesterday unnerved an already volitile market and the banking sector yesterday. Thus resonating a falling knife syndrome in the markets.
The emergency cash lifeline thrown at the bank by the Federal Reserve and JP Morgan Chase to prevent a meltdown was an equivalent of the Bank of England rescue mission to Northern Rock a few months ago. 
The sharp deterioration is something that has not fully played out yet. The curiosity is how far this could go on Wall Street in the coming weeks. There are detractors who already believe it may now be vulnerable to a takeover, serving further reminders of the Northern Rock debacle.
What is bothering to forex traders like me is the spineless attitudes these companies’ CEOs adopt after running them to the ground. This was evident in Norther Rock - Britain, Societe Generale - France and now Bear Stearns in the US. How many more of these poor managements are yet to come out of the woods?
Rather than address their woes, they blamed “market chatter” for its deteriorating cash position. What on earth is market chatter? How did they get to this precarious situation in the firts place? Isn’t responsible management and productivity part of what they get paid millions and unwarranted bonuses for every year?
I was perplexing to read the group’s chief executive, Alan Schwartz saying that, “Bear Stearns has been the subject of a multitude of market rumours regarding our liquidity.” This was nothing but adopting the “teflon shoulders” again. Rather than internalising his managerial recklessness he’s put up shields, which devoid him of any responsibilities. What arrogance - it underrmines the fact that some innocent people would bear the brunt of his actions, children would go to bed without food and many more parent would lose their jobs, to some homelessness as a result. Yet he came up with that.
My take on this is that these mens should be held responsible for their actions when these things happen. Little long a go it was Enron and Worldcom. Recollection?
Today the dollar can’t even buy a hundred yen. Something that had never happened for fifteen years. The implication is that we have oil price soaring to $110 a barrel because of its lost strength. While it might be cool to blame OPEC for not raising production, the real problem has been the strength of the fallen by more that 30 per cent since Christmas.
In addition, while American public may be blindfolded about the state of the economy but Foreign Investors cannot be fooled. Their investments have been flowing out of the USA economy to more stable and gold-backed currencies for some time now. This have made like the Swiss franc, CHF, Canadian and Ausie dollar and gold commodity very attractive. The full extend of the dollar inflation is yet to be played out in the open.
While the FEDs and JP Morgan may have been swift to providing temporary cash for the troubled bank, can we continue to pay the price for this reckless few? If Bear Stearns’voracious appetite for risks had yielded positively, will they had shared the profits with the rest of the world?
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