I know a lot of folks don't think the dollar's collapse effects them. They couldn't be more wrong. But like losing everything in the housing collapse, it'll just have to kick 'em in the head, then maybe they'll understand.
You have been warned. PIMCO's Bill Gross in his April report:
But with the U.S. Fed now almost done and the BOJ removing quantitative easing and threatening a tightening cycle of their own, the carry trade and importantly the existing level of the U.S. dollar vs. the Yen and almost all currencies is at risk.
As global real interest rates converge, the export potential of comparative economies should begin to dominate exchange values and it is there, of course, where the U.S. is so critically deficient.
Japan as we all know is an export powerhouse. Less well known is the ongoing ability of Germany as the center of Euroland to command global market share. The ascendancy of China’s production for export is of course unquestionable. That leaves the U.S. with its increasingly hollowed out manufacturing core as the near certain loser in currency valuations going forward. To be blunt, the dollar must go down as it loses its carry.
April 25, 2006
Posted by blogger at 4/25/2006