[lbo-talk] Dollar Slide Accelerates; Risks of Rout Increase

Doug Henwood dhenwood at panix.com
Thu Jan 8 08:24:09 PST 2004


Conrad Herold wrote:


>Doug: My questions are: Technically, in terms of how the markets
>work, can it occur suddenly, that is, feed itself in the space of a
>few days? Can there be a "great dumping" of U.S. Treasury bonds?

Yes, that's quite possible. You could have panic selling of dollar assets (and people don't just hold "dollars" - they hold instruments denominated in dollars, like Treasury bonds) - a collapse in bond prices and the dollar's value. It's also possible that the panic would come closer to the end of a long down move than the middle (where we probably are now). Trends typically last a long time in currency markets. A panic is more likely to produce an aggressive policy response (e.g., raising interest rates or imposing currency controls) than a long slow down move.

Doug



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