Hello again Malcolm,
there is an uncertainty premium.
Exactly! For currency traders, being on the wrong side of a currency change for as little as a few cents (US) can be absolutely catastrophic. Their entire portfolio can be wiped out in a just a few seconds. Because of that, no group of traders is more hedged (insured) than currency traders. And no group of traders anticipates future events more than currency traders. I once knew a guy in NJ who was a currency trader in NYC. He was a chain-smoker, jumped at every passing noise, always nervous, always reading the newspaper (this was before the advent of the Internet), was always studying obscure facts and numbers... The guy was just a bundle of nerves, always fearing the worst and hoping for the best. I presume he's long dead by now, as this was some 30 or more years ago when I knew him. But I saw people that he worked with, and they were pretty much the same as he was...
when a south American country has increased inflation it does not cause the currency of that country to rise relative to world currencies.
Currently, no South American economy (or any other part of the globe for that matter) has as much influence on the global economy than that of the USA... Over time, because of population trends and whatnot, this will change. Asia will eventually become bigger consumers than the USA, just to name one example. It won't happen in our lifetimes, but it will come to pass someday...
Well what happened to Brazil or Argentina doesn't seem to be happening to the US ----yet.
Very likely it will never happen in our lifetimes. The US economy is simply too big at the moment. If the US economy were to fail, so would every other nation's economy. The entire world's economies would go down the tubes in one big flush. I just don't see that happening yet. There's way too much global liquidity, soaring populations in some countries, an excess of foodstuffs (whereas only a decade or so ago, there was a global shortage of food). soaring production of goods and services... Eventually, a doomsday scenario may evolve, but personally, I think it's a long way off. There's simply too much power fighting against that doomsday event throughout the world (as I see it). Things may get bad, and then worse from there, but humanity will not simply roll over and die off. Solutions will evolve somehow, someplace...
KJC |
