GMT Comments

Global Money Trends:

The dollar came under heavy selling pressure after US Treasury chief Paulson said
subsidiaries of foreign banks doing business in the US are eligible for the taxpayerfunded
bailout. European banks welcomed the plan, and could dump up to $58 billion
of toxic mortgages US taxpayers. Japanese banks hold $9.3 billion in US sub-primemortgages.
That leaves the US-dollar and its economy in a weaker position relative to
other currencies, since the world’s biggest debtor is bailing out foreign banks!

McCain’s reaction to the meltdown was anything but presidential, and Obama grabbed
the lead in the opinion polls, as consumer confidence was badly shaken by the turmoil
on Wall Street, and instability in the banking system. Obama’s odds of winning the
White House rebounded from as low as 43% at Dublin’s inntrade.com, to as high as
51.2% on Friday. In turn, the Euro climbed from $1.40 towards $1.470, and the lowly
British pound, recovered from as low as $1.750 to above $1.850.

Crude oil market rebounded from a seven month low of $90.55 /barrel, and is zeroing
in on $110 this week. Any further missteps by McCain this week, such as a poor
showing at the upcoming presidential debate on Friday night, could lift Obama at the
online betting parlors, boost the Euro higher vs the US$, and in turn, could send
crude oil towards $115 /barrel. Gold and silver are also tracking oil and the Euro, and
traders are increasingly convinced that the Federal Reserve will end-up monetizing a
large chunk of the upcoming supply of US Treasury debt, thereby fueling inflation.