>Why would this market be grounded in fundamentals,
>especially something as relatively esoteric as
>productivity differences, while others are prey
>to animal spirits?
Because a currency is fundamentally the price of a nation's goods on world markets, and relative prices are determined over the long term by relative productivity differences. The oscillations around the fundamental values are the play of animal spirits.
Doug --------------------------
Does "fundamentally the price" mean that the currency price converges to the fundamental as some kind of (shudder) . . . equilibrium? And if not for currency, why not for everything else? Is the short run on that account a tertiary consideration? Does the disparity between short- and long-run have no fundamental significance for the economic trends?
mbs