You guy's are missing some key points.
First off. The dollar only loses value vis a vis an easing cycle, if no one else is easing. While that's been the case recently it probably won't be the case going forward. Any crisis that's severe enough for further cuts in the Funds rate will be serious enough for Europe to also loosen their restrictive stance.
2. The dollar is no lower vs. the majors than at other points in time. In fact against the Yen it's been at the same level for years. Once upon a time the Pound was 3.50. Because the majors have crappy "balance sheets" so to speak they're all losing ground to some emerging currencies that don't come strapped with budget deficits and looming entitlement issues.
3. All one needs do is look at Treasury yields throughout the curve and you'll get an idea of how market participants view inflation pressures vs. the broader economic outlook. Bond investors are more concerned with the risk of holding non-Treasury assets than the indignity of holding low yield paper denominated in depreciating dollars. In other words, Treasury investors think the risk of recession out weighs the risk of hyper-inflation.
Today's action couldn't have been more illustrative of the dilemma fixed income investors face. Grains, Oil, metals, foreign currencies and stocks all surged to multi year highs today while the 30 year Bond yield tumbled 6 basis points! Incredible, eh? Yields on the most inflation sensitive issue were LOWER today than yesterday. Why? One weak economic report after another....
First off. The dollar only loses value vis a vis an easing cycle, if no one else is easing. While that's been the case recently it probably won't be the case going forward. Any crisis that's severe enough for further cuts in the Funds rate will be serious enough for Europe to also loosen their restrictive stance.
2. The dollar is no lower vs. the majors than at other points in time. In fact against the Yen it's been at the same level for years. Once upon a time the Pound was 3.50. Because the majors have crappy "balance sheets" so to speak they're all losing ground to some emerging currencies that don't come strapped with budget deficits and looming entitlement issues.
3. All one needs do is look at Treasury yields throughout the curve and you'll get an idea of how market participants view inflation pressures vs. the broader economic outlook. Bond investors are more concerned with the risk of holding non-Treasury assets than the indignity of holding low yield paper denominated in depreciating dollars. In other words, Treasury investors think the risk of recession out weighs the risk of hyper-inflation.
Today's action couldn't have been more illustrative of the dilemma fixed income investors face. Grains, Oil, metals, foreign currencies and stocks all surged to multi year highs today while the 30 year Bond yield tumbled 6 basis points! Incredible, eh? Yields on the most inflation sensitive issue were LOWER today than yesterday. Why? One weak economic report after another....