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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Haim R. Branisteanu who wrote (7231)2/7/2004 3:16:10 PM
From: mishedlo  Read Replies (1) of 110194
 
Let the dollar drop
economist.com

Let the dollar drop
Some think the dollar has fallen too far. On the contrary, it has not fallen by enough.

OK - I agree
The US$ should drop.
The problem is what does that do to European trade?

Then the writer goes on to say:
In essence, Asian governments are buying American Treasury bonds in order to ensure that Americans can afford to keep spending money on Asian goods. This cannot go on forever. Despite their mercantilist instincts, sooner or later Asia's central banks will have to face the fact that they are holding far too many risky, low-yielding dollars. If they stop buying, it could trigger a sharp fall in the dollar and a jump in bond yields.

This sure seems contradictory.
OK he wants it all at once now, but bitches about a sudden plunge later. Seems silly to me.
If the problem is they are holding too many US $ and treasuries then why don't they just stop buying them? That is the problem that he does not address. Nor does he understand why. The why is to keep US consumers buying low priced junk and their currencies competitive.

This part is surely correct:
The euro area is also far from blameless. Policymakers wring their hands about the “brutal” rise in the euro, yet the euro is still close to fair value against a basket of currencies. If Europeans are worried that a stronger euro will hurt their economies, then the solution is simple: the European Central Bank should cut interest rates to boost demand.

Mish
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