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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (869)	9/6/2007 10:56:24 AM
From: Real Man	Read Replies (1) \| Respond to of 71426

There is a fundamental dollar problem, the huge twin deficits. US is exporting most goods from Asia and even Europe. $2 billion a day in foreign inflows are needed just to keep the dollar steady. Needless to say, their selling would ruin the currency. The only thing keeping the dollar alive was the carry trade, thanks to the rates higher than in Europe and in Japan. The rates are no longer rising, and the European and Japanese investors are not very eager to buy US corporate and mortgage paper (do you blame them?). Since that, not the Fed, was the biggest source of the credit market funding, we just might have a credit crunch and the dollar slide, also known as the currency crisis. -g- I just wonder how much longer can the dollar float above strong 80 support. A break will likely kill it, and so will any weakness of the US economy. The carry trade must be pretty lopsided toward the dollar, supporting it all these years. Of course, we'll never know until a major bank failure, cause most of these positions are OTC, off balance sheets, hidden trades. BIS says currency and rates swaps have a notional value of 400 Trillion dollars. That makes the Fed pretty small and irrelevant. They need lots of help from other CBs.