US was the epicenter of easy money, which others were forced to
accept because the dollar is the main reserve currency. Thus,
US should be the crisis center, IMHO, a crisis similar to
that in Argentina in 2001. The main differences are
1) US is a major economy
2) USD is a global reserve currency
Growth in the rest of the world will suffer and reverse should a crisis
in the US happen. The crisis is happening already, with the
USD where it is (Canadians are laughing at us).
Since none of the imbalances were corrected
by the dollar drop, more of the same (dollar drop) is
expected. The best the global CBs can do is to slow it down
and maybe avert an outright Argentina-style meltdown.
Nevertheless, most likely the dollar will be much lower in
a year. The crisis appears to be structural, as a lot of
manufacturing has been moved away from the US. Thus, it
will take years to cure the imbalances that were created,
and to move the manufacturing base back into the country
(from Asia, etc.)
What is the great new source of growth in technology? Stocks
appear to be cheap compared to treasury bond yields, but
that could be deceiving, as most earnings growth of recent
years happened in energy and financials. Financials are now
teetering on the edge of bankruptcy (negative book value), so all
that earnings growth of the last 5 years has been reversed,
and then some. |
