‘America is leading the charge into protectionism, deglobalisation and decoupling. Its share of world foreign-exchange reserves has fallen from a little over 70 per cent in 2000 to a little less than 60 per cent today. Its Covid-19 containment has been an abysmal failure. And its history of systemic racism and police violence has sparked a transformative wave of civil unrest.
‘Against this background, especially when compared with other major economies, it seems reasonable to conclude that hyperextended saving and current-account imbalances will finally have actionable consequences for the dollar and/or US interest rates.
‘To the extent that the inflation response lags, and the Federal Reserve maintains its extraordinarily accommodative monetary-policy stance, the bulk of the concession should occur through the currency rather than interest rates. Hence, I foresee a 35 per cent drop in the broad dollar index over the next two to three years.’
Read here (South China Morning Post, June 25, 2020)
