Memo To: David Wessell & Michael Sesit, WSJournal
From: Jude Wanniski
Re: Dollar's strength
Your report on page Cl today, "The Dollar Just Keeps Climbing," indicates widespread surprise among Wall Street economists, and reports the forecasters who didn't know what they were doing a month ago are now revising their forecasts to predict a stronger dollar ahead. You report: "If you want to see people with egg on their faces, take a look at currency forecasters: Only three weeks ago, they were either proclaiming that the dollar could never climb as high as it has or that the ascent would be a lot slower." No egg here at Polyconomics, thank you. On January 2, we sent our clients a forecast based on a set of likely political assumptions, which cast the dollar/yen rate at 130 before the end of 1997. This is 2 yen higher than the highest forecast among the 57 blue chip forecasters who were cited in the Journal that day [the highest at 128 being that of Edward Yardeni of Deutsche Morgan Grenfell], We also said, "With gold at $368, there is every reason to expect that Greenspan might be able to get it to $350 before the end of 1997," and now we see it below $350 before the end of January — which begins to cause problems of its own. We actually called the break in the dollar gold price on November 20, when it first slipped below $380. We append our January 2 report, "Springboard Into 1997."