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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: kris b who wrote (48126)12/24/2005 4:02:34 PM
From: regli  Read Replies (1) of 110194
 
Wrong from my perspective! I don't believe in the synthetic short theory at all as this would be largely a domestic phenomena.

I expect money flows OUT of the U.S. once the the domestic economy tanks and not INTO the U.S. with the notable exception of returning Euro dollars. In addition, FCBs will not be there with their handouts once they have lower exports whereas the U.S. deficits might hardly shrink though with a change of balance from the current account deficit to the budget deficit.

How can the current account go to zero if we don't produce many of the essentials. Most of the production has migrated overseas. There won't be the time nor the investments to affect this change quick enough. The reduction in the current account will come very gradually but the dollar can tank in a flash as Russ' link very nicely illustrates.

Clearly being in cash is being in an extremely lopsided long trade on the dollar. Far too risky for my taste. But we will see.
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