Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Taikun who wrote (58621)	1/9/2005 11:52:14 PM
From: energyplay	Read Replies (1) of 74559

Carry trades get wound up, money comes back to the US (most carry trades were shorting the USD) and what does it do ? Pay off the debt - the USD were borrowed. When debt is paid off, money is destroyed. There is usually some capital in various trade, in addition to the "carry"....so there will be some additional funds in the US. So the effect is somewhat reduced. Less money around means less to chase commodities. One of the hidden macro economic dangers of low interest rates is they make it too easy to pay off debt. With debt being paid off early, the creditor will ususally need to make a new loan - and this can push interest rates down. 2005 might be the year of cash.

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