I agree that if world growth returns and remains solid it is probable, but not inevitable, that the dollar would weaken. But if the dollar did weaken that would shrink our trade deficit, which would cause more of the torrid domestic demand back into the domestic market, which would really heat up inflationary pressures, which would cause serious Fed tightening and higher US rates.
Assuming that world growth does return vigorously, AND that the seemingly continuous growth of population and consumption for goods and services increases.... would such scenario create:
1. Improve US trade deficit (since the consumption would continue to promote exports, unless local producers can effectively compete with US manufacturers.... then again, many foreign manufacturers, could be take-over targets, or are already part of US companies, hence, making some US companies attractive investments.)
2. Drive capital away from the US markets (since demand for investment offshore would increase)... (I guess this makes a case for higher US interest rates to attract capital).
3. Promote more inflation outside of the US, given such growth, as in recent recoveries, this has taken place... and if so, this continues to make a case for a strong US Dollar, since it seems that the US economy, for the time being, continues to become more efficient than others, and capable to avert inflation, in spite of the evident growth...therefore a more stable/stronger currency, than said foreign ones suffering from local inflation. Making it even worse for poor ole' gold bugs.
4. If true "free trade" and "global economy" logic were to apply, then, it seems to me that a case for the US Dollar as a global currency seems logical, since the need for exchange rates become obsolete, rather asset pricing (in US Dollars), would apply to different assets world-wide, based on the respective individual capacity of each asset to be more or less productive... unless a more efficient currency (or block), could be more efficient...
It seems the US Dollar will become a sort of the borg. ["why resist it Pickard ?"]
Am I on the right track... or am I leaking somewhere in my deductions of possible scenarios?
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I'm skeptical however given that the most convincing reason for his having resigned was how much his wife disliked Washington.
Bummer.... that would be a great replacement, then again, how could you not agree with Mrs. Rubin.... seems to me Washington is... well, a permanent hazardous waste site, prime for an EPA clean-up, since the political sewage spills continuously... |
