Greenspan's Speech - Quite Some Market Reaction

Greenspan didn't really say anything he hadn't said before in his speech on Friday. It must have been the timing that made the dramatic fall in U.S. assets that followed Greenspan's remarks:

"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point."

but also

"The inability to anticipate changes in supply and demand for a currency is at the root of the statistically robust finding that forecasting exchange rates has a success rate no better than that of forecasting the outcome of a coin toss."

and of course (central banker should always blame treasurer, no?)

"Reducing the federal budget deficit (or preferably moving it to surplus) appears to be the most effective action that could be taken to augment domestic saving."

Note also that treasuries and dollars, that simultaneously got weaker on Friday, has shown the reverse relationship during the year. Treasury bonds tend to have strengthened on weaker dollar, perhaps via growth expectations. Treasuries stronger and dollar weaker on growth below expectations. But what will happen next?

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