Message 24427100
Deflationary forces that can stall USD fall for some time. However,
as soon as stress is relieved a bit, the slide on weak
fundamentals and interest rates differentials continues -
at least, until US recession goes global or US current
account reverses. You can track deflationary flows as
LONDON and the Caribbean combined in TIC data, as foreign
banks turn to FX swaps to satisfy their USD liquidity needs.
However, so far these flows are substantially lower than
what is needed to counter US monthly current account deficit -
and, God Forbid, foreign CB flows. If those reverse and FCB
sell USD, God help us. Now that USD became second carry trade
funding currency after Yen, this too has to be taken into
account when thinking which way the buck will go.
As long as the world
is stronger, the buck will continue to fall. As long as the
global economy does not go into recession, commodities will
likely keep rising, even though a significant global slowdown
could hit them. If the Fed chooses to do massive bad debt
monetization like they essentially did with Bear, well,
inflation will skyrocket. I think we come to crossroads
when SOMA runs dry. |
