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Macroeconomics  |  April 02, 2013 11:54:44

Paul Brodsky: Dollar retains its dominance

The world economy is not in perfect condition, in the world rages   Financial World War . This is not for readers of this site not surprising. Personally, I believe that China and its allies will win.

-Webkit-text-stroke-width: 0px; "> I recently read the author's comments, believing that the financial war wins Fed. Statement author is Paul Brodsky, co-founder of QB Asset Management. Statement was from arguing, it was described by Fed steps. therefore I decided to prepare a summary of these observations.

Markets by him beginning to address how the Fed wants to end QE. In his view, actually no standard can not. No choice but to look for non-standard solutions. According to him, there is a solution in 3 steps:

  1. Ongoing QE, the Fed increases the size of its own balance sheet
  2. Enabling bridle inflation, speaks to the hyperinflation (where you would like to note however that the term hyperinflation people representing various%, someone "enough" to be 20%, the other automatically sees one thousand% annually). This will result in administrative action and the other "classical" monetary reforms, eg adding one zero to the bill, accompanied by a step change in prices and wages in a similar range
  3. Changing the monetary system to restore confidence in the currency

In such a process would have earned borrowers experienced lenders - including China. Throughout the process, the Fed will have to "treat" the bank, because the value of debts to them will not change.

Higher interest rates (though not dramatically) collides price of the bonds held by financial institutions. Capital adequacy of banks would fall into jeopardy, interest on government bonds suddenly not cover inflation.

Without that financial sector out of the whole process strong, no sense at all to take the entire operation. Therefore, the Fed will have to find a way to strengthen the bank.

To rescue the banks and change the Fed will need to support the public and international support. In this case, similar to place (s) as the conference in Bretton-Wood from 1944.It may be a similar result may occur in remonetizaci gold (the question is, at what price).

The future will decide.

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Paul Brodsky: Dolar udrží svoji dominanci

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