eventually, only eventually the trade gap will narrow
and foreign exporters will wonder why their business doesnt pick up more quickly
I dont expect any meaningful narrowing in the current account deficit for at least 18-24 months
I have said for months that the trade gap will mysteriously not narrow
because foreign economies will be hurt badly
their whole economies are set up to take advantage of their own weaker currencies
a strong dollar kills profit margins for those who supply American products
you put it well, that only goldbugs comprehend the dollar
the Fed understands though, all too well
the dollar is now due for a massive downtrend versus SwissFranc
it could slice off more than 30% more
what many experts imho fail to understand is the power of momentum in currencies
as the dollar sells off, hyperspeed could enter the picture
the entire US economy is geared for a very strong dollar
as effects are felt, more factors will push the dollar even lower
all hell will break loose, and few will expect it
as it gets out of control, a collapse is actually possible
some really smart experts fear such a scenario
esp if we continue to see Mickey Mouse US leadership
unfortunately, our economy and Asian economies have now suffered (not enjoyed) 25 years of de-evolution and distortions
it will be these twisted deformities that will cause untold havoc as the dollar correction unfolds
not only will import prices rise
but the greatest risk is TrezBond rates will rise
from foreign TBond selling
so many imbalances must be cleaned, it is mindboggling
I totally agree
the Fed must defend the whole US Backyard, our Home Businesses
and sacraficing the dollar will be expedient if it gets us to where we must go
a full-blown degradation into a recession would be horrible
but I suspect the Fed's actions only forestall the inevitable pain
there will be much hope that the dollar will not fall too far, cause too much damage, lead to too much world banking turmoil, force too many job losses, close down too many companies, move too many mfg plants back home
but it will, I know it will
as sure as the nose on my face
gonna be ugly, downright fugly
and gold will be almost the only winner
with Mideast war, the oil sector could share the stage
but given Russia's presence, only if war
in a couple years, the world economies will look very different
inflation will be springing up all over the landscape
smash 20% of the companies in any given oversupplied sector, wait a year, and pricing power might return
gonna be wild and exciting
inflation will win, but when?
/ jim |
