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Strategies & Market Trends : P&S and STO Death Blow's
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To: 16yearcycle who wrote (13345)11/3/2002 7:49:45 PM
From: Justa Werkenstiff  Read Replies (1) of 30712
 
Roach made a good start earlier this year:

"But there’s more to the story of hard landing for the dollar than the macro of price and income effects. In my view, a dollar crash would have a devastating impact on US financial markets. Foreign investors would continue to reduce their exposure to dollar-denominated assets, and US investors would undoubtedly rebalance their portfolios in an effort to seek greater exposure to non-dollar-denominated assets. The result would be lower prices for equities and bonds alike. This could have significant negative consequences for a wealth-dependent US economy. It would undoubtedly deal a blow to consumer confidence, finally sealing the fate of the long-awaited consolidation of the American consumer. The negative asset effects would also result in a higher cost of capital that would most likely impede business capital spending. In short, under a hard landing, wealth effects driven by further downward pressure on asset prices could swamp the positive benefits of the income and price effects. That would spell tough news for the US economy -- more than enough to stoke renewed fears of a double-dip. Nor would the rest of the world -- still overly dependent on the US, in my view -- take kindly to wealth-induced shortfall in America. If the world’s growth engine gets hit by a currency-related wealth shock, the global reverberations would likely come at a fast and furious pace."

morganstanley.com
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