Hi Ron, We are not in disagreement on the immediate future, as I have 95%+ of my investments in US$ denominated assets. I had been heavy non-US$ assets in the past but only for very short durations as the foreign exchange market moves too fast on long pent up factors, making it near impossible to step out of the way.
We are in disagreement on the longer term, but mostly on the possibilities, and I am not certain that I am right. What then remains to be decided is how to play the possibilities ... switch $ into Yen/Euro, or short NEM/SWC puts and gradually buildup some anti-dollar devaluation positions. On the murky issues, I do not bet on being right, I only want to be able to laugh if I am wrong.
More specifically, on the fiscal surplus. It had been expected, and is necessary in order for the boomers to retire, and thus the money is already spoken for, not spendable on increases in education, missile shields or other new fangled initiatives.
On the trade deficit, it drives manufacturing asset rich old economy into the ocean in favor of human capital rich new economy. Uncharted territory. Human beings are fickle.
On the government debt reduction, I believe a good portion of that reduction is not actually done via buyback of treasury bills (you can not force people to unload their treasury bills), but via purchase of corporate bonds and then undergo some sterilization process (here I am doubtful on my description of what I believe I have read) and via the lessening of issuance of treasuries. Well, I do not understand the process, and I tend to shy away from what I do not understand.
Whatever the process, the government is borrowing less. However, the government will have to borrow more as the boomers retire. Who will lend? The boomers, the equity market, the Japanese? I think the Japanese may then be busy paying back their own government debt via higher still taxes or increased productivity of their overseas assets or imported labour. Which ever way, a messy affair.
Do we really want to take chance on having to be absolute right, as we step into that time machine I spoke of earlier? |
