Bond Outlook [by bridport & cie, May 10th 2006]
As the USD continues to weaken, and its continued decline becomes accepted wisdom, let it not be forgotten that world economic rebalancing is not achievable solely through exchange rate adjustment. The other key condition for rebalancing that must eventually come about is for American households to spend no more, and preferably a little less, than they earn. G7 decisions and Fed/People’s Bank of China (PBC) collaboration can and will determine changes in exchange rates, but rebalancing the US economy internally is a quite different matter. |
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