The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Bond Outlook by bridport & cie, February 16 2011

A falling dollar, rising commodity prices, and inflation in Asia threaten the standard of living in the West and especially in the USA, and undermine the reserve currency system.

Bond Outlook

There are so many negative factors facing the world economy that we find the relaxed tone of financial markets a cause of wonder. We recognise, of course, the desirability of “accentuating the positive and eliminating the negative”, advice which most politicians have been practising even before the Johnny Mercer 1945 song hit. There are a few Cassandra’s, often so extreme that they are not taken seriously, yet overall the scenario is neither so disastrous as such commentators claim, nor as optimistic as the establishment would have us all believe. Let us review the current threats.

 

First is the gradual breakdown of the implicit bargain linked to the USD as the leading reserve currency. The USA, consumer of last resort, undertakes to buy much more of the world’s output than it sells and, to cover the gap, will always provide enough dollars, which the foreign creditors keep or recycle.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree