Monday, August 25, 2008

Bank Holiday Poem: The Dollar

(With apologies to William Blake)

Dollar! Dollar! burning bright
In the markets of the night
What subtle hand has bolstered thee
And caused the woeful buck's rally?

In what distant deep or land
Dwells the invisible hand?
Or as Europe sinks in the mire
Have euros been thrown in the fire?

Was it the ifo? GDP?
That caused the euro bulls to see?
Or was it oil? The fall of gold,
That turned the dollar bear trend old?

Who's the hammer? Make it plain,
Behind the rally, who's the brain?
Or is it just the P & L
Of the market, gone to hell?

When the market ran the stops,
And turned the dollar bears to flops,
Did the dollar start to smile,
To see itself now back in style?

Dollar! Dollar! burning bright
In the markets of the night
What subtle hand has bolstered thee
And caused the woeful buck's rally?


Itamar Shtull-Trauring said...

My English professor Leo Damrosch, who actually wrote a book about Blake, always liked to point out that Blake's illustration of the tiger was very wimpy looking, making the original poem seem rather ironic.

Macro Man said...

Actually, the tiger's expression isn't dissimilar to George Washington's on the dollar bill....

Coincidence? You make the call!

Anonymous said...

Brilliant poem, capturing my frustration about the USD's move. I had started to write my own ditty-- There once was a man name of Macro-- but I'll spare you the rest unless and until it can compare favorably with this masterful , but unlikely, poetic combination of literature and currency drivers. Cheers- Anon

Anonymous said...

Japan CB is the invisible hand just like always.

Macro Man said...

Anon @ 4.24, I'm glad that at least one person enjoyed it. I do have this regrettable habit of inflicting my doggerel on an unsuspecting readership on bank holidays....

calvino said...

stupendous.. do you see an impenetrable wall at 110 on the jpy and chf both, or do you see Uncle Buck getting juiced along with crude until November 4?

still waiting for the definition of financial Calvinism?

CV said...

Marvelous Macro Man ...

Brings me right back to high school and A level English where Shakespeare (Macbeth in our case) and William Blake were mandatory parts of the curriculum.

I enjoyed this one much more than the original version which probably comes dow to the ensuing essay we had to write about it :).

Nice come-back post on the USD (well both of them really). It could seem as if the "smile" is here to stay.


Macro Man said...

Calvino....the reference to "financial Calvinism" refers not to predestination, but rather to a certain level of asceticism.

To wit, central bankers who preach about the need for sacrifice or rail against financial risk-taking qualify as financial Calvinists. Not all financial Calvinism is unjustified, of course...but Mervyn King in particular grates with his preaching.

Celal Birader said...

hey macro man, do you think we could be seeing a dollar bubble in the making ?

shtove said...

"Rally" at the end of the line doesn't scan. Call the police.

Macro Man said...

You have to put the emphasis on the second syllable: woeful buck's ral-LEE.

Still, it's better than Blake's original, which rhymes 'eye' and 'symmetry'.

Mike said...

Cool poem in the heat of the night. Just think bout the dollar bubble. During the last few weeks...

- Equity markets worldwide were closing ever lower
- Commodities were trading ever lower

Obviously, investors stay away from stocks and from commodities after being burned. So where does the investment money go nowadays?

- US 2-year treasury notes are ever rising
- Strong currencies (hawkish-bias = Euro and Swiss Franc) were trading ever lower

Obviously, investors see dollar treasury notes as "safe haven", which is why they are back to levels seen last in March 2008. The dollar's strength is based on the assumption that Europe will see a recession while the US will grow in 2009. How true is that?

- US house prices are coming further down rather than going up in 2009, which leaves consumers indebted with not much to spend.
- The great majority of Euro economies will not experience asset devaluations because there was no house price bubble in the first place.

Obviously, the Eurozone remains in a substantially better shape by not having to cope with extreme asset devaluations. Internal consumption and exports to other parts of the world (except the US) will remain but at reduced levels. Due to declining purchasing power in the US (house prices down), exports to the US have decreased. This does reduce Eurozone growth in the 2nd and 3rd quarter 08, as the ECB correctly predicted 3 months ago. But exports to the US only account for 13% and the Eurozone has no substantial underlying problem. For the US, the substantial underlying problems are not only in place, they got even worse with house prices falling and ever more unconstrained fiscal policy. As the euphoria about the "artificial" growth injected by the tax breaks fades away, be prepared for a radical dollar downturn. This IS a dollar bubble.


PS: some also see central bank intervention...