Reading a post from Yves Smith on her blog nakedcapitalism, from where I took the above quotable, she cites a Financial Times article explaining the imbalances that helped set off this collective recession/financial collapse are bound to worsen.
I’m not going to disagree with the article on that point – the imbalances still might worsen before they get better; but ...
Actually there has been a lot of good news out there in terms of ongoing production and exports, but many are now seeing through the lens of risk thanks to the Eurozone. If we can believe China’s export numbers, and we seem to want to when we need to, then the country pulling the wagon is still in pretty good shape.
Ok, we all know the story (even though it’s been thrown on the backburner with the ongoing implosion of Europe): the US dollar is doomed because of the growing deficits and debt in the United States.
Even though the euro is making the front page of every newspaper and online editorial website, the story that’s been following the dollar around like a dark cloud has certainly not disappeared; it’s just waiting to strike again when its time.
We put together the chart below for a presentation we made back in January this year; it is a visual representation of the four primary underlying themes we think will drive the long-term dollar bull market.
To phrase it another way, global healing and a strong US dollar are mutually reinforcing and the process itself could lead to a virtuous circle of strength for the US dollar.
On Wednesday, I had an opportunity to present a webinar to discuss my current views about the euro. One of the key PowerPoint pages summarized reasons for my continued concern about the euro, includes the comment that the market has still not priced in the risk of breakup, i.e. bond yields relative to Germany are still too low for the countries facing huge debt problems, that will either be worked off/restructured/defaulted upon.
