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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: elmatador who wrote (43505)12/17/2003 11:42:06 AM
From: macavity  Read Replies (1) of 74559
 
A very good article.

The eurozone and Japan are being punished for not having economies capable of creating demand in the 1990s.

The catch was this US demand was false caused by the growth of USD_M3.
In a way the US is right to let its currency fall relative to other countries. It was overvalued.

My worry is that we will need to see a default, or deep devaluation in the overseas value of US Treasuries for this to correct itself.

The JPY and EUR politicos are screaming.
I believe that soon we will start hearing politicians demanding that the spigots be opened to prevent their currencies overheating.
It is a short-term gain for serious long-term pain.
They should simply allow the currency to strengthen until they can buy real US assets (rather than finanacial assets, which are simply liabilities).

If the Japan MOF had any sense (and they do not behave as if they do), they should start encouraging Japanese companies to start buying unleveraged real assets in the US, i.e. not property, bonds, stocks.
Say some natural resources - oilfields, mines, farmland etc..
Though I am sure with the rise of xenophobia this will never be allowed. Hell they own enough mortgage debt so what is the big deal.

-macavity
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