The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: goldenrodger who wrote (3218)	1/9/2008 7:58:10 PM
From: Real Man	Read Replies (1) of 71477

My scenario of eventual BK is the currency crisis, which does mean higher long-term rates as the risk of currency devaluation is priced in. I don't see it happening yet, even though the Feds are scared of precisely this scenario (I wonder why - the ECB injects liquidity, while they swap dollars for Euros with them -g-). As long as long-term yields continue to follow the Fed funds rates down, the economy and the stock market will keep pedaling or bubbling along. Gold should do well, as the real rates remain very negative for now. The fact that it's not happening has to do with the dollar reserve currency status, which could make matters worse once the confidence is lost. Why are long rates low? Cause banks make money on spreads, and drive long rates down as the Fed lowers the rates. Eventually, bond holders will revolt. It's a scenario, and once bond holders revolt, there will be no way out. The Fed will be forced to raise the rates into a slowing economy to stop the currency meltdown, or print and face hyperinflation.

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