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Dollar to 50 yen?

Puppycow said:
Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

The first half of the article is understandable, and makes a coherent argument.
The second part under the subheading "Elliot Wave" sounds like woo-woo to me.

Neither of the two arguments, however, do I find persuasive.
Click to expand...

His appeal to authority is correctly predicting a severe crisis in US economy after the collapse of one of the most important banks and ramifications that follow from that.

Just how many people are out there that didn't make the same prediction?

McHrozni
 
I think there has to be concern internationally that the deficit spending in the US will lead to higher than normal inflation here, which should lead to a further decline in the dollar. Of course, inflation also usually implies some improvement in economic activity, unless we're back to the 1970s with stagflation.

Personally I am flabbergasted that gas prices are remaining high, and frightened a bit by the inflation I see at my local supermarket during such a downturn.
 
If concern about deficit spending is a reason for the dollar to be weak, then what about this story?
Oct. 20 (Bloomberg) -- Japan’s Finance Minister Hirohisa Fujii said the budget deficit for the year ending March may be “quite large” as tax revenue declines, an indication bond sales could exceed 50 trillion yen ($555 billion).

“There’s no doubt that this reflects the global recession we experienced in the past year,” Fujii said at the Japan National Press Club in Tokyo today, adding that the government will issue deficit-covering bonds to make up for the shortfall.

The government in April estimated it would issue a record 44.1 trillion yen in new bonds this year. Earlier today, Fujii said tax receipts may drop below 40 trillion yen ($442 billion) in the year ending March 31, compared with the 46 trillion yen forecast.

Fujii, who became finance minister last month when the Democratic Party of Japan came to power, said it’s too early to determine the amount of debt to be sold this year. He said tax revenue may decline in an interview with the Nikkei newspaper published today, which said the drop in receipts meant bond sales may swell to a record 50 trillion yen.

For the year starting April 1, Fujii said he wants to keep the budget to below 92 trillion yen. Ministries and agencies last week said they want to spend 95.04 trillion yen in fiscal 2010. The requests were 7.4 percent higher than the current year’s record initial budget of 88.5 trillion yen.
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This means that the Japanese budget is more than double the tax revenues. In dollars this year's deficit is about $550 billion. Japan's GDP is about 1/3 that of the US (source), so this would be equivalent to about $1.6 trillion for the US. But Japan's public debt is already 170% to 198% of GDP, whereas that of the US is only 60% to 73%. So while a person can be concerned about the US deficit, it would seem that they should be even more concerned about the Japanese deficit.

According to this, the fundamentals are that there's a glut of oil and weak demand. Eventually reality will catch up. I think. According to the chart here prices are lower than they were in 2007.
 
Brainster said:
I think there has to be concern internationally that the deficit spending in the US will lead to higher than normal inflation here, which should lead to a further decline in the dollar. Of course, inflation also usually implies some improvement in economic activity, unless we're back to the 1970s with stagflation.

Personally I am flabbergasted that gas prices are remaining high, and frightened a bit by the inflation I see at my local supermarket during such a downturn.
Click to expand...

How exactly does inflation "imply some improvement in economic activity"? Inflation is either the central bank manipulating the money supply by increasing it (and only the financial positions of the recipients of the new money "improve"), or, it's the result of a decline in real output which makes the goods chased by existing dollars more valuable, and dollars less valuable. Neither represents "improvement in economic activity" at all.
 
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