fxtrader07

Prepare To Profit from the U.S. $1 Trillion Budget Deficit

ah, you think the asians are too dumb to have long recognized that the dollar is just ever depreciating green paper? But what about this: All paper currencies are - those of the Asians' included. Central banks allover the world have one common agenda: keep the system alive and running, no matter how and no matter what. They might use different rhetoric, emphasize gdp-growth, employment or inflation. but at the end of the day they share a common goal. whiochj is why they all keep hoarding dollars. if they stopped - the world economy would grind to a halt within a few quarters. the often touted u.s. current account deficit is in fact the great liquidity pump for the world. If you look at the growth in foreign central banks' dollar reserves they FAR outpaced their trade surpluses. How can that be? well, simple: they bought dollars and sold (borrowed) their local currencies. In other words: their dollar reserves are borrowe dmoney to quite an extent that they recycled into their own economies. guess what happens when the u.s. current account deficit shrinks (whioch it does considerably, already): that global liquidity pump goes slow and as a result, liquidity in Asia dries up fast.all of a sudden interest rates climb and the economic boom comes down - which in turn brings the asian currencies under pressure. just wait and watch. it will happen.
to come back to your suggestion: shorting us-treasuries seems like a no-brainer at this point - but it is far from that. time is not ripe yet. people who short the T-bonds will get burnt heavily over the coming 2-3 years.