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re: SHORT THE DOLLAR

Posted on 11/7/12 at 4:00 pm to
Posted by BennyAndTheInkJets
Middle of a layover
Member since Nov 2010
5689 posts
Posted on 11/7/12 at 4:00 pm to
quote:

First, the euro- short term due to Greece this will likely stay flat. In particular the long-term view that the dollar is the relative safe haven of the two will keep the pair in its current range.

If the dollar is the relative safe haven compared to the euro than it will appreciate, I'm not sure what you're getting at with Greece. This is the thing about Greece that people need to understand, the EU actually doesn't care about Greece that much. The holes in the ESM and EFSF can be plugged quickly if Greece were to default in an unorderly fashion, and the ECB has several programs that could fund the non-Greek banks that hold GGBs and Hellenic bank debt. The reason that the onus has been on Greece was for precedent of actions going forward rather than for news itself.
quote:

When rates are artificially low because the government is the primary buyer of notes. This easy monetary policy will continue for the foreseeable future causing an escalation of national debt.

The Fed monetizing the debt does not cause an escaltion of national debt, you're calling the cause the effect and vice versa. In academia lower interest rates would signal a depreciation of the currency but this isn't an ivory tower. I watch correlations and relationships taught in school break every single day, and mean reversion must be based on like time periods rather than based on all available data.
quote:

Eventually, and as you can see in my original post I didn't say the dollar would crash today, but it will when debt as a percent of GDP doesn't normalize.

Like was said before, it really doesn't matter if D/GDP normalizes or not, it just depends on the relative ratios around the world.
quote:

The debt growing is assumed but the only way to prevent this is to grow your way out.

There are several ways to correct unsustainable debt: inflation, default, restructuring (whether negotiated or forced), or war. All of these are more likely than us growing out of our debt. People need to get used to developed countries having "unsustainable" levels of debt for the future. We either have to take an austerity hit with decreasing relative standards of living (which will happen regardless of austerity) or continue to be better than the other developed countries with unsustainable levels of debt, which we are doing so far.
quote:

With the election I see no reason to believe growth will exist in a significant way to have this moderate.

I agree with this.
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