August 12, 2005
Why the housing "bubble" will continue
Guest blogging at instapundit, Megan McArdle (aka JaneGalt.net)talks about why the dollar will continue to go down. Her argument is, more or less, that we have a large current account deficit and the european economies have no where to go but up. To me the current account deficit isn't really evidence of anything either way. What is more interesting is that she assumes that european economies recovering will make the dollar less attractive even as recovering economies will probably import more goods from the US resulting in a lower trade deficit. Growing economies will demand more dollars to purchase US goods.
That being said, if her argument holds then the value of the dollar should keep falling and therefore the price of real assets that dollars buy should keep rising e.g. real estate, oil, etc.
However, today oil prices are at record highs and the dollar is down against the Yen, but it is UP against the Euro. So Europe now faces much higher oil prices (compared to us) and still has no growth potential. I bet real estate prices in europe are going up, but nothing else is. I've always believed the Europeans would eventually get their groove back. These days I'm not so sure.
Posted by Alex at 11:43 AM | Comments (0) | TrackBack (0)
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