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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (211745)	5/10/2025 9:08:27 AM
From: yard_man	1 Recommendation Recommended By GROUND ZERO™ Read Replies (2) \| Respond to of 222890

So some things that are clear: The US trade deficit is inextricably linked to the US having the world's reserve currency. There is a virtuous feedback loop involved. We are able to purchase goods from abroad cheaply because the USD is relatively overvalued vs other currencies. The more goods that we get on this basis, the more foreign holders have USDs that they hold in US assets as reserve: stocks, bonds, farm land? This pushes up US asset prices and benefit holders of these assets whether abroad or in the US. Manufacturing leaves the US. Adjusting trade imbalance is not quick, easy or without difficulty for citizens in the country with the world's reserve currency. In order to adjust the trade imbalances, the dollar MUST lose it's reserve currency status...i.e. come more to 'parity' with other currencies. Hence the buzzword: multi-polar world meaning an adjustment that results in the world having more than 1 reserve currency. {See Trump talking points about the Chinese keeping their currency 'artificially' undervalued.} Current administration is at work to lower the USD. This adjustment needs be done carefully. Yes, a lower dollar can make US goods more competitive and grow exports. Simultaneously, though, increasing the cost of imports to the US dampens domestic demand slowing our economy. The USD does need to fall, but not too fast and that's a problem. How to achieve that? Main points: adjusting trade imbalances can't happen overnight. The price for the US is a stag-flationary outcome at first and a decent period of sub-par growth if all goes well. My thoughts: policy makers are not apt to accept the slowing effects, especially unemployment and little to no growth in asset prices. The result is apt to be a less-than-controlled decline in the USD. You see Trump pressuring Powell. I expect dollar volatility is going to increase. Stock and bond prices at risk. Bottom line: Reallocation of funds to ...sorry ...gold, silver, commodities and crypto is prudent. Oh ... and as the author points out here and there some exposure to foreign assets as well.