Weakening the dollar is the last throw of the dice in rescuing the global economy…
Elliot Smith, CNBC, New York:
Weakening the dollar is the last throw of the dice in rescuing the global economy, according to Saxo Bank’s Steen Jakobsen.
In the online trading and investment specialist’s outlook report for the fourth quarter, published today, Jakobsen said 2019 will most likely be remembered as the year that kickstarted a global recession, despite the lowest ever nominal and real interest rates.
“Monetary policy has reached the end of a very long road and has proven a failure,” Jakobsen, who is the chief economist and CIO at Saxo Bank, added. …”In a global system of failed monetary policies and a long and difficult path to fiscal policy, there is only one other tool left in the box for the global economy and that is lower the price of global money itself: the U.S. dollar,” Jakobsen said.
The outlook report pointed to an estimated $240 trillion of debt worldwide, roughly 240% of global GDP, and argued that too much of this debt is denominated in dollars, due to the greenback’s role as global reserve currency and the deep liquidity of U.S. capital markets.
This means the prospects for all asset classes have become a function of U.S. dollar liquidity and direction, Saxo Bank economists suggested.
“If the dollar rises too much, the strain in the system increases: not only for U.S. exports, but also for the emerging market with its high dependence on USD funding and export machines,” Jakobsen said.
… For the remainder of the report:
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