I thought the reality based wise ones were only a few months ago predicting that the Euro was about to overtake the US Dollar as the primary currency for world trade. What changed? Were they wrong? Why were they wrong?

Buffet has a $21 billion bet against the $ according to the WSJ. He's lost walking around money so far.

Can we hope?

Gates, too.

We saw the Movie "Millions" Saturday night. it was wonderful. Go see it. Take the kids.

The protagonist in the plot is an 8 year old boy who talks to the Saints who come to visit him. The action occurs in England and one of the plot devices is the conversion from Sterling to Euros. That is a much less believable fantasy than being visited by the Saints.

As Thodore Dalrymple has pointed out, the movie well illustrates the current attitude of the British Police, i.e., there is nothing that we can do about a burglary at your house other than helping you to submit an insurance claim.

As Thodore Dalrymple has pointed out, the movie well illustrates the current attitude of the British Police, i.e., there is nothing that we can do about a burglary at your house other than helping you to submit an insurance claim.

Phil:

Why were they wrong?

That's usually the key question, and unfortunately, they don't always know.

Even people who have a great record, like Buffet or Jim Cramer, are only making guesses, and are wrong maybe a third of the time.

In any case, long-term the U.S. dollar is still the currency to hold, since America has very little political risk, and among the world's top and near-top economies, is best positioned to weather the storm of the Boomers' retirement.
Western Europe, Russia, Japan, and China all have huge demographic and political problems to work through, before they can expect to match the U.S.' long-term economic prospects.

Time spent worrying about exchange rates is time wasted.

Buffet, in particular, was mislead by his politics.

A lot of people are misled by measures of dubious value like the current budget deficit. The important number is the deficit as a percentage of GDP not its raw number.

The Europeans, whether they like it or not, need economic growth and that can only be export-driven. Large sections of EU-land are underdeveloped essentially 3d world in character. The need for investment is dire in places like Poland or Slovakia or now Italy. A policy of preserving the high-tax, welfare-state policy of Old Europe strangles all others. The interest rates are too high. So, if your interest rates are too high and your factories aren't exporting, you have to weaken your currency. It's inevitable.

The question Buffett failed to ask himself was 'What do the Europeans actually do to generate income?' The locus of financial services is either NYC or Tokyo or Hong Kong. Manufacturing is in the Far East. Scientific innovation is in the US, the Far East or South Asia. Military spending is in the US. The Euro can't be a safe haven because the Europeans don't want to spend the money or the lives to defend their continent from invaders. Similarly, the Europeans don't want to spend the money or the lives to enforce a trading system on the planet. They are not an exporter of raw materials or agricultural products in significant numbers.

So what makes them more than a sideshow in the current world economy?

"Western Europe, Japan, all have huge demographic and political problems to work through, before they can expect to match the U.S.' long-term economic prospects."

Well those aren't affecting them too badly as yet.

What's hurting is their distinctky sub-par capital structures and labour laws.

bart:

Scientific innovation is in the US, the Far East or South Asia.

Don't forget Israel.

Ali Choudhury:

Well those aren't affecting them too badly as yet.

What's hurting is their distinctky sub-par capital structures and labour laws.

While agreeing with your last sentence, I think that Japan is, in fact, suffering from a political structure that makes it very hard for them to have a massive, short-lived recession and be done with it.
Instead, they've spread it out over more than a decade.

The Nikkei peaked at around 39,000 in December 1989. It closed this morning at just under 11,000.

I remember the news' item stating that a square inch of property in Tokyo was more expensive than all of Mahattan Island.