FINANCIAL CRISIS II – AT 9:17 A.M. ET:  We Americans, concentrating on the home court, and on the Olympics, haven't been focused on the financial crisis sweeping Europe.  But it can have an enormous impact here. 

The first result, however, has been positive for the U.S., as the Wall Street Journal reports:

A dramatic turn in sentiment in favor of the dollar and against the euro continued Monday, with lingering fears of a possible European debt crisis pushing the greenback to its highest point in nine months.

Among investors, the question a few months ago wasn't whether the U.S. dollar would decline in value, but rather how far and how fast.

The currency's surge is throwing a monkey wrench into the plans of corporations and investors who were betting on a weak dollar..

...Sentiment has flipped on the world's two major currencies. Greece's woes amid a soaring deficit have exposed the fragility of the 16-nation euro zone's government finances and the Continent's recovery, overshadowing any nervousness about the American economy and the massive U.S. budget deficit.

The European Central Bank is now seen as having to delay interest-rate increases in order to prop up growth, while the Federal Reserve appears on track to begin tightening credit sooner rather than later. Higher rates tend to draw investment into a currency, all things being equal, thus boosting the dollar's prospects over the euro's.

COMMENT:  The Greek economy is in desperate trouble, and it's affecting all of Europe.  The world is nowhere near out of the economic woods.  Some economists are predicting a double-dip recession in the United States.  Housing prices in Britain may well collapse again in the face of new pressures.

The White House has no credible answers.

February 16, 2010