The argument about a lower value dollar, or whether there actually
is a strong-dollar policy in the U.S. will move on until such time that
all and sundry agree on one thing; The political will to address the
dollar index weakness is the only question here, and in reality the
internal U.S. markets seem oblivious to the ravages of a weaker dollar
overseas.
Global central bankers accepted the massive injection of Usd based
liquidity that hit the global market after Lehman collapsed, and have
to accept the trading arena may not even be here, and if it were, would
certainly look different than it does now, without the massive printing
of Usd notes.
The cost of that move is now being paid in a lower Usd, and rather
than expect the U.S. administration to actually stand behind the Fed,
Government, and Treasury calls for a strong-dollar policy, the bankers
may have to print their own notes, or to adjust their foreign reserve
holdings.
Neither of which will be palatable to most, and both options are
what the U.S. has already done. Catch 22; the U.S. phases of
sustainable growth have come from periods of weak dollar values, and
this may just be the calm before the perfect Usd bullish storm.
It seems that a weak dollar will have to be addressed by overseas
holders of Usd notes, and not by those who are actually printing the
notes. Go back 35 years and the dollar was revalued with the scrapping
of the gold standard, and at that time the global economy accepted U.S.
paper debt instead.
It is no different now, the Usd is being revalued, and the rescue of
the developed economic markets now has a price to pay; and that is in a
weak dollar for a while. However, when that dollar index starts to
climb, it may not get back to 75.00 again for a while, and maybe not
until the next ohase of large economic contraction, which will likely
be in 5-7 years if history is anything to go by.
The question of how far the economy can expand in that time may be a
moot point, the real qusetion is that when the U.S. shows sustainable
growth the strong dollar policy will come to natural fruition.
