The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: carranza2 who wrote (3254)	1/10/2008 6:31:12 PM
From: Real Man	Read Replies (2) of 71454

A nuclear war is a good analogy, but the motivations are not the same :) A currency crisis along with the bear market in long bonds occurs because of perceived lack of safety of the government bonds, a large external debt and trade deficit. It's not a nuclear war, and it happened before. In many countries with sovereign bonds are denominated in dollars or euros it's the risk of default. US Treasuries carry zero default risk, but they can be devalued by inflation (for internal investors) or currency devaluation (for foreign investors). The last 5 years were, perhaps, similar to a nuclear war - everyone accumulated dollars because they didn't know what to do with these dollars, and now they can't quit because the value of these assets will drop a lot. However, nobody orders a bunch of foreigners exactly how many dollars they have to buy, or if they have to sell some of their holdings. The issuers of reserve currencies (US and Europe) recognize the potential devastating effect of the dollar crisis on both US and European economies, and thus act together to prevent it.

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