Forex Training Blog

Forexmentor.com Forex Trading Price Action

Blame the credit crunch and the falling U.S. dollar on the vice of the bosses at Merrill Lynch, Citigroup, and Bear Stearns. These math geniuses created new kinds of high-grade bonds that only they fully understood. The financial world finally woke up to the fact that it owned hundreds of billions of flawed U.S. mortgage-backed bonds. As this nightmare unfolded, the great global investment banks on Wall Street, previously held to be invincible, soon discovered that they were on the hook for enormous sums. And, so it was no big surprise that the greenback continued its swoon dive, and gold soared – while investors dumped big American bank stocks and U.S. mortgage bonds (where bids were available). Then, Bernanke came to the rescue – bailing out the bad boys of Wall Street, considered to be the richest and smartest in the world.

All this gave foreign investors a bad case of heartburn, and stopped foreign investment in U.S. debt instruments, other than Treasuries and high-grade bonds. The grim reality is the U.S. needs an inflow of $2-billion a day to counter-balance its trade deficit loses. The question is, will the dollar and Wall Street continue to be locked in a death grip, or will it be revealed that the housing and mortgage crisis is not as bad as it is being painted? Should that be the case, the greenback will get its legs back. Otherwise, watch out below.

This news is brought to you by www.forexmentor.com (courtesy Globe and Mail ROB, Don Coxe, BMO Financial Group global financial strategist, Nov. 8/07).
 

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