<And why didn't they do this? They believe they can get a better return in dollar denominated assets (whether they are right or wrong). >
1.) The guy's point is that they don't want to sell dollars and drive it down.
Now, I wouldn't do that and DONT do that, but it's an arguable point.
2.) The entire bear argument on the $US is the imbalances in "flows"...
Now, you can argue that since these flows have so far been sucked up and it will continue. But you can argue against it as well, as many reasonable economists are. I just happen to be on that side.
<Now here you are smart enough to see that anyone who holds dollars has a choice of what to do with them, but you feel compelled to defend the guy who seems to think that our trading partners only have two choices, either buy dollar denominated financial assets >
First I'm not defending the 'guy'... I'm defending the "point" of the 'dollar inbalances'. It's not my problem that the guy may not express himself or his ideas very well. He's certainly not here.... so....
Anyway, choice one is correct, you're not going to put the $'s in your mattress. So the question is own dollar assets or sell dollars. And while I find it hard to believe that on an individual [basis] the decision selling your dollars for another currency would include worrying about ""what I"m holding will be forced down by my own selling""... it certainly would make sense as an issue collectively, and actually is an issue for all large mutual funds in equities on a daily basis.
<Why, because his theory supports your prejudice. Whatever happened to critical thinking?>
Since I don't recall ever talking about the issue with you, I find it somewhat confusing you are judging my decision making process.
<The debt created by the annual trade deficit maybe takes maybe 12-14 billion to service. It's an amount almost equal to the free cash flow from one American company, MSFT. >
I think you've hit the bottom line here... you don't feel there are imbalances, SOME others do. There are any number of prominant WS economists on both sides of the issue...
I happen to believe that position will be proven incorrect.
DAK |
