UP AND DOWN WALL STREET DAILY

Obama may find it easier to bring about peace than to steady the greenback.

A PROPHET IS NOT WITHOUT HONOR, save in his own country, the Bible says. To which Barack Obama can respond, Amen.

In what appears to have been an expression of hope over lack of experience, to paraphrase Dr. Johnson, the Nobel Peace Prize has been bestowed on President Obama. Yet the cheers are loudest from afar; at home, the American public is split down the middle about their chief executive.

Growing negativity is extending to the financial sphere, with the dollar's decline being laid at the door of the White House. And it's now going past the steady drumbeat on the theme on the Drudge Report. "Obama Dollar Retreats Most Against Commodities in Wealth Shift," intoned Bloomberg News, now even more a part of the media establishment with its rescue of BusinessWeek.

But the President's fellow Nobel Laureate, Paul Krugman, blasts those who would favor policies to support the dollar, equating such notions with the backward thinking that produced the Great Depression. In his New York Times column Monday, Krugman attacks the "gold-standard mentality" that he says opposes not just a decline in the exchange rate, but also "obsessively" fears inflation in the face of deflation, easy credit even when its needed, and government job creation.

What's needed, Krugman and wide range of economists say, is to let the dollar continue to fall. That will boost U.S. exports, thus providing stimulus to the weak economy, and help right the imbalances in the global economy.

At the same time, China, Russia and members of the Organization of Petroleum Exporting Countries are not only speaking out against the continual slide in the dollar, but also are calling for alternatives to the U.S. currency as the linchpin of the global monetary system and trade.

Amid these conflicting cross-currents, only one thing is clear: just as President Obama hasn't been in office long enough to merit a Nobel Prize, neither has his policies been in effect long enough to alter the course of the dollar.

In case anybody checked, the dollar's path has been steadily downward since the early years of the administration of George W. Bush. And, notwithstanding the bleating you hear about the battered buck, that's just fine with Wall Street.

According to Barclays Capital, "since 2003, dollar weakness has gone hand-in-hand with equity rallies." The bank's economists estimate currency depreciation helped to reduce the trade deficit, which added 1.1 percentage points to gross domestic product growth in the first half of 2009 from a year earlier.

From the stock market's perspective, Barclays Capital notes in its U.S. Portfolio Strategy weekly letter that more than 30% of revenues for Standard & Poor's 500 companies come from abroad. Thus, dollar weakness boosts earnings of large, U.S. multinational corporations through increased competitiveness and positive currency translation effects, as foreign revenues are converted into a greater number of shrunken dollars.

It's no surprise that technology, energy, materials and industrial sectors benefit the most from the dollar's decline. Barclays plotted the performance of those groups (inversely) against the Fed's trade-weighted dollar index, and the lines moved in lockstep.

Barclays expects dollar weakness to persist in the months ahead, which would support the cyclical rally through year-end, it says. Bad news for the buck is good news for stocks. Booyah!

That underscores why, for all the angst the dollar's decline has produced, it has failed to upset the stock market ("October Crashes I Have Known (But Not Loved)," Oct. 9.)

Yet that only demonstrates the stock market's well-deserved reputation for looking no farther ahead than next quarter's earnings. Moreover, it appears the stock market has its own version of "money illusion," in which equities are marked up in marked-down dollars.

At the same time, notices of the dollar's demise seem premature. It's popular to compare the U.S. with post-war Britain in terms of the dollar being supplanted as the global reserve currency, as sterling was after World War II, when U.K. was all but bankrupt from fighting two world wars.

As long as there is no ready substitute for the dollar, Wall Street can celebrate the currency's steady decline. And U.S. GDP will be boosted by a cheap greenback's spur to exports and deterrent to imports.

This cannot go on forever, however. The dollar's fall may not have started on President Obama's watch, but it may become his problem. And it will take more than high-minded gestures and diplomacy to solve it.

Oct. 14, 2009, 4:50 a.m. EDT

Geithner: Confidence stabilizing dollar -- report

Have you all forgotten the change to accounting rule...i thk Goldman will be profitable...

how to lose when you revalue at current low...but if you value at pre crises you lose big times..

so i thk shd be fine...pls dyodd.