Anticipating a Strong U.S. Dollar

The U.S.-denominated credit bubble has achieved great and fascinating progress in the U.S. and (especially) around the world. However, it did it so under a slightly over-prescribed - per Treasury's order - and massive credit overdose. And with the rude awakening from this credit trance came a realization of what the capital world looks like when the brakes are put on a massive credit generating mechanism: A glimpse into the end of times for the expansion of U.S.-denominated credit.

We can see the effects of credit expansion in many places. The interesting ones are with the globally producing creditor nations. It appears that the initial response (to the "end of times") is favorable to the U.S. dollar. And to explain that kind of strength, one can consider that some of these capital participants were entire economies that have absorbed our debt in order to spur their own economic growth. It is also helpful to note that their growth faltered as a result of our hold on credit expansion. From our vantage point these events (of a halt in credit expansion) might not seem too troubling at this point. After all ,the Feds have certainly done their part to ensure that this will be a smooth transition. A transition so very well crafted and handled.

Before focusing too much on us, the U.S. consumer-driven economic part of this big equation, let's take a look at these aforementioned foreign entities. To be exact: The debt holders to a foreign driven credit market. Consider that their decision to enter the capital market arena was made some time ago and under the stipulation of holding and keeping U.S. denominated reserves in exchange.

I guess it's anyone's guess as to whether we are about to reverse the roles on who consumes and who produces. And as we embark on the possible age of (possibly) being recipients to our own reserves, we soon realize that the fortunate foreign recipients of our products, goods and services, really have no choice in this matter. And neither do we. But the stage for this kind of economic activity is currently priced in the value of a highly anticipated and valued U.S. product.