Subtitles section Play video
-
Up, up we go, we're now back to strong dollar of the 1990s,
-
at the end of the day it overcomes all. why is it our exorbitant privilege?
-
I think exorbitant privilege in the sense the U.S. actually can get away with policies that no other country can,
-
I mean think about this, when the Fed was doing QE for five years,
-
other countries might have basically brought on a crisis, the U.S. on the other hand was able to watch the recovery off this.
-
So I think that's the main thing, but I think what we need to basically recognize is, there is now bifurcation of the dollar in the market.
-
Dollars doing very well against EM currencies, against commodity currencies, but against the Euro and the Yen or the likes,
-
the dollar has been actually taking a bit of a back seat because the problem line is, as China devalues, China slows,
-
you know to the extent that it's gonna lead the Fed to basically hike more slowly,
-
this has not been such good news against the Euro.
-
OK, help me with your Yen callouts, three four and five years, where is Yen three four five years from now?
-
I think the Yen is going to be a tad weaker, but I think the short-term, in fact if anything, the Yen is probably going to be stronger.
-
Think about it, going to tomorrow. If the Fed were to hike rates, the Yen is going to be stronger because the stock market is going to go down.
-
If the Fed doesn't hike rates, the Yen is probably going to be stronger too.
-
The differential between Bank of America, Merrill Lynch, and Goldman Sachs, is to a weaker Yen,
-
through some further form of Abenomics, that implies a Rubin-like dollar, doesn't it?
-
I think to some extent, yes, absolutely. But I think to the extent that the U.S. until now is willing to accept further Yen weakness,
-
but I think those days are coming to an end. I think somebody in Detroit is already calling up somebody in Washington, somebody in Washington is calling up...
-
Exactly! This is my point, you know David Woo, that this is not solved by economists,
-
it's solved by manufacturers like Detroit, or frankly by the state department, isn't it?
-
Absolutely, especially now with Donald Trump, and basically Mario, basically Rubio talking up, you know basically,
-
the whole story about China, Japan taking jobs away from the U.S., I think you have to believe that sooner or later the U.S. will be forced to join the currency war.
-
I gotta ask this question, very critical here. Have you been advising Mr. Trump on economic policy?
-
Not yet.
-
What you're talking about Trump and Rubio also to some extent,
-
it's the great American past-time to predict our own decline, but does anything threaten?
-
Anywhere in the future, this exorbitant privilege?
-
Not, not really. I mean I think in fact this whole SDR business around China is a fig leaf.
-
In fact, if the U.S. is in an invariable position and nobody else is in right now.
-
So there's no question the U.S. is coming back, however, the question is can the U.S. decouple from the rest of the world as the rest of the world slows.
-
And I think at what point will the U.S. be forced to join the currency war, because the dollar and the renminbi remain the two strongest currency in the world,
-
we'll just see what the Chinese, no longer the one with strong currency, the question is how much longer the U.S. will find a strong currency desirable.
-
And because so much is invoiced in dollar as well, you know, the currency war works better for us than it does for anybody else.
-
Exactly. There is no question.
-
Until? For our viewers out there that don't know Modigliani, or viewers who don't really understand reflation versus inflation,
-
what is the trip that turns us from a benevolent strong dollar into a troubled strong dollar?
-
I think you know, honestly, this is where renminbi would devalue, which is my prediction,
-
I think my prediction is that the biggest story in the next six months is gonna be an acceleration in the renminbi devaluation,
-
that's gonna basically create competitive devaluation around the world,
-
commodity prices are gonna come down sharply, it's gonna be highly deflation for the U.S. That's where the problem is.
-
Okay, David Woo, thank you so much with this core call of a second derivative of what we will see in the Yen,
-
we've got calculus into the six o'clock hour, that's cool.
