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fiatboy
Administrator
912 Posts |
 Posted - 12/20/2007 : 14:30:50
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If you want to read some stimulating and challenging economic articles, check out Professor Antal E. Fekete's Gold University. You must be logged in to see this link.
Although I don't always agree with what he writes, I must say that I've learned more from this prof than any of my economics profs in college---every one of whom did nothing but yammer on about the Glory of Keynes and the Wisdom of the Federal Reserve.
So about that dollar. I know, I know....dollar collapse this, dollar collapse that....but if you want to dig a little deeper into this whole mess, one aspect of the dollar's decline that is oft ignored is the yen carry trade. This article in particular offers some good food for thought on the matter. "The Decoy of the Falling Dollar Revisited" You must be logged in to see this link.
The first part of the article from 2005 is also a good read: You must be logged in to see this link.
To quote:
"The yen carry trade in my view still has a long way to go. It is the main prop that keeps
the dollar from collapsing. It may even cause the price of US bonds rise some more. Why? The Bank of Japan will continue to feed the yen carry because it could not afford to let interest rates rise for fear of bankrupting the Japanese government, to say nothing of the Japanese banking system. The Fed will feed it because it is cornered: the alternative is ’sudden death’ for the dollar. The yen carry represents the only steady and reliable international demand for dollars since America has effectively de-industrialized itself when the exporting of paper turned out more profitable and less bothersome than exporting manufactured goods. International speculators want the unilateral dollar export to continue and to stoke the furnaces of the yen carry trade."
As long as there is money to be made in the dollar vis-a-vis the yen carry trade, the dollar still has some life remaining---albeit the way a prisoner being walked to the gallows still has some life remaining. But when there's no longer any profits to be made in the yen carry trade, and you can't watch Bloomberg or CNBC without hearing the word "unwinding"---that is when you know that the Grim Reaper has just handed the dollar a one-way ticket to fiat oblivion. A little obvious, yes, but worth remembering. The Ghost of Fiat Past always tells the same story.
Now if I could only find a way to invest in the makeup and hair stylists at CNBC.....
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The dollar's red flag
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