Wednesday, June 29, 2011

Shift to US Backed Securities


Institutions pulled out of U.S. prime money-market funds at the fastest pace in 15 months, shifting to funds that invest only in U.S. government-backed securities out of concern the European debt crisis would worsen.

The possible collapse of the Euro will do nothing to create the conditions for a slow slide in the US dollar and a calm deflating of the Global Imbalances plaguing the capitalist world system. The longer the dollar remains artificially inflated due to residual US political and military hegemony, the greater the collapse when its true value as a measure of production in the manufacturing and real goods sectors emerges.

De Long:

A too-strong dollar is not in the public interest: a too-strong dollar greatly increases the future chances of a major, major dollar crash that will produce a depression that makes today look like a day on the beach at Malibu. When the dollar is at a level where U.S. net foreign debt is growing unsustainably fast it is time to think about lowering it, not keeping it where it is or raising it...

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