The US economy

[Jason]

Here's a question for you. Do you think the discontinuing of M3 lending by the FED was the right thing to do?

[David Smith]

I'd always prefer more rather than less data, so in that sense it was a pity that the Federal Reserve stopped publishing the M3 figures. But I believe their argument that M2 had always been the more significant measure. As with M4 in the UK, US M3 was telling us something about financial intermediation but probably not much else.

[sandid]

Pound hits two-year high against dollar
http://news.independent.co.uk/business/ ... 013343.ece
By Philip Thornton, Economics Correspondent Published: 25 November 2006

The pound hit its highest level against the dollar in two years as the US currency slumped across the world. The dollar's tumble yesterday triggered fears that the imbalance between America's multi-trillion dollar deficits and Asia's huge surpluses was finally poised to unravel.

Some economists have warned that this could result in a global recession as Americans stop spending on imported goods due to the falling dollar fuelling a surge in their prices.

The pound was the accidental beneficiary of a titanic shift between the two behemoth currencies - the euro and the dollar. Sterling jumped as much as two cents to hit $1.9350, its highest since New Year's Eve 2004, making a two-dollar pound a distinct possibility.
:
Capital Economics is forecasting a further 7 per cent fall against the euro to $1.40 and a 17 per cent decline against the Japanese currency to 95 yen.

Analysts said yesterday's movements had been exacerbated by thin trading in New York, which had a quiet day sandwiched between the Thanksgiving holiday on Thursday and the weekend.

It must be a worry for the MPC that the pound becomes too strong. It's quite handy therefore that Rachel Lomax voted against the Nov. rate rise on worries about the US economy. Her vote gives a level of uncertainty about the ability of hawks to push through another rate rise next year - thus helping to keep the pound from running away higher.

Meanwhile, the "Black Friday" sales in the US seem to have gone well. It's a good sign for the start of the Christmas season.