...and the same is true for tops." Jim Rogers

This being a serious political economy blog (well, some of the time) readers will know that Jim Rogers was not challenging the orthodoxy of a different, entirely unrelated and politically incorrect topic. In fact, the point Jim was making is that in excessively depressive or ecstatic circumstances actors in the economic and financial markets temporarily forget the laws of supply and demand and become blinded to changes in trends.

Last week Alan Greenspan spoke at the European Banking Congress in Frankfurt and traders used his comments about the potential dangers of the American current account deficit as an excuse to sell the US dollar. This was slightly odd. The great majority of what was said was yet another repetition of earlier speeches such as that Mr Greenspan made in March to the Economic Club of New York. But here's the thing. Right at the top of his remarks Mr Greenspan said "I should emphasize that I speak for myself and not necessarily for the Federal Reserve."

What? This is the first time in 2004 that in discussing the current account deficit Mr Greenspan has invited his audience to guess which sections of his remarks might not be endorsed by the Fed. However, since he also spoke for the first time this year of the dangers of "cumulative" deficits, reasonable guesses can be made. But who knows for sure.

In the greater speculative scheme of things, though, might this evolution of Chairman Greenspan's current account rhetoric mark a step towards fulfillment of the Large Bottom Law? In other words, now that even America's Central Banker has tossed fodder to dollar bears, there will be yet more folks on the already crowded sell-side of dollar trades.

Speaking of a turn is premature: right now it's a struggle looking at a picture of the euro/dollar rate to spot even a pert Minogue-esque dollar bottom (see below), much less anything of J-Lo proportions. In fact, it's been pretty much a dollar slide since the euro's introduction. Nonetheless, it is the case that to sell dollars is to sell the world's largest, most resilient and most dynamic economy.

And that's why it's long been the view of this correspondent that the unwinding of the current account deficit in the US represents a great opportunity for steady buyers of a weakening dollar to position themselves for eventual US equity purchases.

But it's a long game.



Note that Jim Rogers has been recently quoted as being a dollar bear too, and that for the next 20 years .

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