The euro??? The euro has a much, much better chance of ceasing to exist than it does of replacing the dollar as the reserve currency. Countries like Spain and Italy that are near depression will have huge incentives to leave the euro so they can conduct their own monetary policy. If Eastern Europe is not bailed out before it goes bust, then more Western European banks will go bankrupt - and many countries in Europe are too small to bail out their banks. There will be immense pressure on the eurozone countries to leave the monetary union.
In the land of the blind, the one-eyed man is king. The dollar does not look good, but compared to the euro or the yen, it looks great. We don't have to worry about losing reserve currency status anytime soon. We just need to figure out what to do with insolvent banks.
The banks are insolvent. Mortgages and auto loans and credit cards are all going bust. There is nothing panic driven about the depressed value of those assets. Studies they've done on CDOs show that they are worth even less than what the pessimists projected (30 cents on the dollar for super senior tranches and 5 cents for mezzanine).
If this were a matter of illiquidity, the massive liquidity the Fed has injected into the system in the last six months would have ended the crisis.
Again, I tend to agree with you, although associating the illiquidity opinion with TF is just an unnecessary swipe. Much smarter people than he support the illiquidity theory, which was what I intended to point out.
As much as I would like to see the end of the EU (or at least the Euro), Spain and Italy can't leave; they can't afford to. Imagine what the speculators would do to a new currency Spain/Italy introduced after not being able to survive in the EU.
If anyone leaves it's going to be France or Germany.
>The dollar does not look good, but compared to the euro or the yen, it looks great.
There are more currencies out there then these. The British pound seems to be down at the moment, but I expect it to recover. The swiss franc isn't looking bad either. Personally I expect the dollar to go down, but there are way too many variables out there to actually bet on it.
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The euro??? The euro has a much, much better chance of ceasing to exist than it does of replacing the dollar as the reserve currency. Countries like Spain and Italy that are near depression will have huge incentives to leave the euro so they can conduct their own monetary policy. If Eastern Europe is not bailed out before it goes bust, then more Western European banks will go bankrupt - and many countries in Europe are too small to bail out their banks. There will be immense pressure on the eurozone countries to leave the monetary union.
In the land of the blind, the one-eyed man is king. The dollar does not look good, but compared to the euro or the yen, it looks great. We don't have to worry about losing reserve currency status anytime soon. We just need to figure out what to do with insolvent banks.
I agree with you, and wanted to add this Marginal Revolution post which is tangentially related. Are the banks insolvent or illiquid?
http://www.marginalrevolution.com/marginalrevolution/2009/03...
The banks are insolvent. Mortgages and auto loans and credit cards are all going bust. There is nothing panic driven about the depressed value of those assets. Studies they've done on CDOs show that they are worth even less than what the pessimists projected (30 cents on the dollar for super senior tranches and 5 cents for mezzanine).
If this were a matter of illiquidity, the massive liquidity the Fed has injected into the system in the last six months would have ended the crisis.
here's more: http://hedgedbet.blogspot.com/2009/03/friedman-toxic-assets-...
Again, I tend to agree with you, although associating the illiquidity opinion with TF is just an unnecessary swipe. Much smarter people than he support the illiquidity theory, which was what I intended to point out.
Fair enough on TF. But plenty of smart people also thought housing prices would never go down...
As much as I would like to see the end of the EU (or at least the Euro), Spain and Italy can't leave; they can't afford to. Imagine what the speculators would do to a new currency Spain/Italy introduced after not being able to survive in the EU.
If anyone leaves it's going to be France or Germany.
>The dollar does not look good, but compared to the euro or the yen, it looks great.
There are more currencies out there then these. The British pound seems to be down at the moment, but I expect it to recover. The swiss franc isn't looking bad either. Personally I expect the dollar to go down, but there are way too many variables out there to actually bet on it.