Finance And Investment

Psychologist Bruno Bettelheim in his book "The benefits of magic" ( "The Uses of Enchantment"), saw the light in 1976, brings a lot of evidence that the tales teach children to think and understand the fictional world through the categories, because fantasy is rooted in human emotion . Words Bettelheim that adults who feel a fairy tale "set of false stories, should not even try to tell them," may well be addressed to the foreign exchange market.

Peculiar magic narrative can be called and the actions of the U.S. Treasury Department, says Marketwatch (marketwatch.com). They did not cheat again and again speaking about the power of the dollar. While their words no longer provide investors with direct signals on further steps in the market, they still provide real support for the U.S. currency, constantly reminding the market that a "green" is the government.

"Belief in the national currency and its reliance on force must support the government", - said Cathy Liane, chief specialist of the company's strategy in Forex Capital Markets. According to Liane, "to stimulate the economy, the U.S. needed a weak dollar."

At the same time, the specialist noted that the country needs to attract foreign investment, and for this, however, useful to the tale of a strong dollar that can give confidence to investors.

To remain impartial

Talk about "strong dollar" is well known to specialists and market participants, who often know by heart all that the officials said, and often roll their eyes, hear such speech. Traders with short positions are simply not pay attention to these remarks.

"It is clear that a strong dollar is in our interests," - repeated again, Treasury Secretary Henry Paulson last Thursday. Nevertheless, his speech made at a press briefing at the White House on that day could not keep the dollar from falling against most of its competitors.

"The Finance Minister Paulson had the strength to calmly repeat the phrase" strong dollar is in our interests. "This phrase was yet another attempt to revive the" green ", which did not help even the growth of stock markets," - wrote in a research note shortly after the speech the Minister for Senior Specialist of currency strategy David Watt of RBC Capital Markets.

Later, Watt was asked to clarify written. The specialist noted that although Paulson's statement did not impact on the market, his impassive face once again the U.S. administration's intention to give the market a signal that the dollar is not always strong, but its significance remains. According to Watt, the Minister of words actually mean the following: "We do not care which way the dollar moves as long as people's confidence in our currency." Paulson uttered those words so many times that it suggests that people want to see a strong dollar, but nobody wants to admit that there was no objection to the weak dollar.

Getting started in a beautiful fairy tale and why over

In the 1990's to pursue a policy of strong dollar began to former Treasury Secretary Robert Rubin. Repeating the phrase about "a strong dollar in U.S. interests," Rubin gave investors understand that the authorities do not intend to intervene in the currency market to weaken. These words serve as a signal to foreign investors that they can fearlessly to invest in U.S. assets without fear of depreciation of the dollar, which could adversely affect profitability.

According to the chief expert on strategy at CMC Markets Eshrafa Leydi, "the use of certain messages is significant for market participants began to lose effectiveness in the spring of 2002, when President George W. Bush gave the calls of American manufacturers, who demanded to do something to prevent excessive overvalued national currency .

Then, to protect American steel producers, Bush imposed tariffs on imports of certain grades of steel and steel products, which aroused a negative reaction from the foreign market participants. At the same time sounded a complaint that it goes against the norms of international trade law. In 2002, the dollar lost 15% against the euro about 10% against the yen.

Rubin's successors as Minister for Finance Secretary John Snow and Paul O'Neill continued to talk about the power of the dollar, using the long-familiar market momentum. However, even then, it became clear that the United States exchanged the policy "really" a strong dollar for some indifferent attitude towards him.

Real benefit

Of course, the weakness of the dollar could bring an increase in exports and economic growth. However, its strength also can be used. According to a senior expert on foreign exchange strategy at Bank of New York Mellon Maican Woolfolk, a strong dollar is in U.S. interests because it allows you to control inflation, attract foreign investors and allow the national currency at the center of the global financial system. "

Last enables the U.S. to cope with large current account deficit, as well as helping to maintain rapid economic growth and high employment.