Anyone here have the CFA app? This was an article in their “Enterprising Investor” series and I thought it was really interesting. I feel the author has over simplified a few points but overall I thought it was really good.
The author is making the assertion that a large current account deficit is a de facto quantitative easing and that by running massive deficits, it has led to large treasury purchases by foreign govts, articificially keeping interest rates low. He then goes on to make the point that by having an accumulated $8 trillion dollar deficit in the current account, that increased volatility is the new norm. (this is not an adequate summary, I’d really recommend reading the article)
My question is: If this is the case, then is it fair to say that the dollar is equally artificially strong? If so, when the global economy reverts to the mean, will this imply a large sell off of the dollar assuming this process cannot go on indefinitely? What is the end game for the US? I’d be curious to see what everyone elses take on this is…
Donnie
The author is making the assertion that a large current account deficit is a de facto quantitative easing and that by running massive deficits, it has led to large treasury purchases by foreign govts, articificially keeping interest rates low. He then goes on to make the point that by having an accumulated $8 trillion dollar deficit in the current account, that increased volatility is the new norm. (this is not an adequate summary, I’d really recommend reading the article)
My question is: If this is the case, then is it fair to say that the dollar is equally artificially strong? If so, when the global economy reverts to the mean, will this imply a large sell off of the dollar assuming this process cannot go on indefinitely? What is the end game for the US? I’d be curious to see what everyone elses take on this is…
Donnie