Nothing good lasts forever, or so at least many would have us believe. I shall neatly leave it aside of whether this is true in a general sense but merely note that it appears that we are moving closer to some form of another of crunch here. And my rationale you ask? Well, let me simply note that it appears, despite the fact one would believe that investors' and punters' should know better, that we are headed right back into the same dead end as we did the last time the Dollar was canooled with the Euro taking center stage. Of course, this is not only a Euro story even if it may appear so and in this sense the current environment once again shows us the very real obstacles which exist in terms of correcting global rebalancing since while everybody seems to agree that this is what we need, nobody wants to hold the old maid represented by a role of importer with a strong currency.

Over at Macro Man, the Dollar's recent plight to reflect lingering risk appetite and low volatility (mmm, the USD as the new carry funder) was given an acronym a long time in the form of DGDF (dollar-goes-down-forever) and I am very symphatetic to MM's ending point in today's installment;

It's entirely possible for this liquidity/positioning/DGDF rally in risky assets to continue through year end; in many ways, it's in everyone's best interest for this to happen. But Macro Man can't shake the feeling that we're all repeating the mistakes of the last cycle (in fast forward, no less!) and that when the reckoning comes, it won't be much fun.

In fact, Macro Man does one better I think since he also points to the very telling issue about Brazil and Turkey fighting tooth and nail to avert an appreciation by, among other things introducing taxes on capital inflows (so far, only Brazil has introduced this measure). I cannot tell you how strongly I feel the sense of deja-vu here since this is exactly what happened the last time the USD began a decline everyone hailed as natural and long overdue but whose counterpart in the form of the inevitable appreciation of other currencies was unduly and harsh. This narrative of course does not make sense and it will be interesting to see this time around where the discourse takes us.

In Europe, policy makers are fast becoming very nervous and although Trichet delivered his well known ECB-speak at the most recent board meeting; the mentioning of a worry of excess currency volatility is indeed, as Macro Man also notes, the closest we will come to the ECB expressing concerns over the flight of the Euro.