Phil > I have seen so many wrong calls (my own included), that I wouldn't bet the farm on any single opinion
I absolutely agree with you, the situation is unbelievably difficult particularly since such enormous speculative positions have been taken both ways. Perhaps, because of that, the threat of "derivatives" which Buffett fears is not as great as if the bets were all one way.
Clearly, the big unknown is the effect of, or more importantly, the significance of the twin deficits. Some, who believe they will have a negative impact on investors' perceptions, bet that the USD will fall. That makes hedges like gold and/or currencies attractive. Others believe that "growth", however achieved, is more important and they bet that the dollar won't fall and the economy will "grow". That seems to be the way the big creditors, China and Japan, feel. And, clearly, if interest rates rise, that will also tend to favor the "growth" school because it will show that the economy can sustain a rise. Therefore, if they can manipulate interest rates, and I'm sure they can, they can do whatever they want to the dollar and the market.
I just try to watch the play as best I can because I cannot come to a conclusion about what will happen to the USD. |
