oicur12
I didn’t see this so called expert but I am always very wary of anyone that comes on TV or anywhere else for that matter and talks crap like this. 90% of the time they have a vested interest in wanting this particular outcome come to fruition. Most carry on about US foreign debt, both private and public to support their argument. The reality is that most of Europe, Australia and New Zealand have the same if not worse debt problems than the US. Australia, while having government debt under control has a private debt crisis. The only western country that currently is in good shape is Canada and that is because of oil. Now while I think the US$ still has further to decline, we are now reaching a level that the US$ is considerably undervalued. When we see a proper correction in global equity markets in the next 12 -18 months, we will see an unraveling of currency trading positions similar or worse than what we saw in August, and remember August was just a bump in the road. When we see the proper correction it will be long lasting and pronounced. Some of the emerging markets like China and Vietnam from my point of view are a train wreck waiting to happen.
While we are talking about the currency market, it is interesting look and see how the dynamics have changed in the last thirty years or so. In 1975, about 80% of foreign exchange transactions (where one national currency is exchanged for another) were to conduct business in the real economy. For instance, currencies change hands to import oil, export cars, buy corporations, invest in portfolios, or build factories. Real transactions actually produce or trade goods and services. The remaining 20% of transactions in 1975 were speculative, which means that the sole purpose was an expected profit from buying and selling currencies themselves, based on their changing values. So, even in the days when the real economy was dominant, some currency speculation was going on. There had always been that little bit of frosting on the cake. Today, the real economy in foreign exchange transactions is down to 2.5% and 97.5% is now speculative. What had been the frosting has become the cake. The real economy has become just a small percentage of total financial currency activity.