Monday, April 13, 2015

The Dollar's Vicious Cycle

The investment world, generally confused about the dollar's expected strength, will search for reasons to justify their positions. The majority will gravitate towards 'solutions' involving as little work to their lives and portfolios as possible. That is, until unexpected volatility and panic force a lot of save-me-from-the-pain actions.

Capital's preference for the dollar, a function of relative safety within a global system heading for either a soft or hard rest, has created a vicious cycle that will defy expectations and policies aimed to correct it. This cycle, a negative feedback loop, will continue until the invisible hand forces a monetary reboot.

Headline: The $9 Trillion Short That May Send the Dollar Even Higher

Investors speculating the dollar rally is fizzling out may be overlooking trillions of reasons why it will keep on going.

There’s pent-up demand for the U.S. currency that will underpin years of appreciation because the world is “structurally short” the dollar, according to investor and former International Monetary Fund economist Stephen Jen.



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