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  • 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.

Up, up we go, we're now back to strong dollar of the 1990s,

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B1 US yen dollar currency renminbi basically extent

Why Can U.S. Have Policies No Other Countries Can?

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    Ray Du posted on 2015/09/16
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