The weak dollar – causes and consequences
I believe its important to see the market through the eyes of the cup half full and cup half empty (or about to be tipped over) folks. Bill Gross and PIMCO manage a literal ton of bond money, and are thus important to listen to even if one does not agree with their point of view. Bonds matter, even though we only tend to notice them when things are going stunningly well or exceedingly bad.
The weak dollar – causes and consequences
John Snow and Alan Greenspan have finally bowed to the inevitable. Instead of blocking the lane in defense of a Shaq Attack slam dunk, they have politely if somewhat obfuscatingly stepped aside. “Put it down brother” they seem to be saying, but it’s the dollar and not a round ball that they’re referring to. The dollar has gone down. The dollar is going down. The dollar will continue to go down because it’s the easiest way out (for the U.S.) to begin to rectify its imbalanced finance-based economy.How the world came to this point is well documented in some journals, including this one, but it bears repeating if only to reacquaint pre-Alzheimer candidates and those with “senior moments” such as myself with the facts. The U.S. spends too much; eats too much; drinks too much; TOO MUCH, (thank you Dave Matthews). And we pay for it with our debt and 80% of the world’s excess savings. In so doing our creepy crawly balance of payments deficit has inched its way up to 6% of GDP – a level never seen in the U.S. and reflective of third world nations in financial crisis. The imbalance has been tolerated by those nations on the surplus side of the ledger – read “Asia” – in a strange sort of mercantilistic Faustian bargain that promises China and Japan the benefits of a strengthening economy now for the perfidy of falling dollar denominated Treasuries bonds later, an arrangement that once again will prove that there is no free lunch, or that hell often follows heaven on Earth. More >
04.12.12 12:12 #