Rampant Dollar is about to undo the Fed’s best plans
A lone deflationist on the lunatic fringe of economics 30 years ago, I wrote in Barron’s and the San Francisco Sunday Examiner that an out-of-control dollar eventually would do us in. Specifically, I asserted that a short squeeze on dollars would send their value soaring, making it difficult or impossible for anyone who owed dollars to repay them. I’d already run this idea past a few Ivy finance professors, who all had the same reaction: “What have you been smoking??” Not Professors Ivor Pearce and W.P. Hogan, however. It was their 1984 book, The Incredible Eurodollar, that had awakened me to the potential disaster brewing in a dollar market vastly larger than all of the others put together, including stocks and Treasury paper. Could a tradeable asset available in theoretically unlimited quantities from the central bank ever be in dangerously short supply? “An interesting question,” Prof. Pearce allowed in a…
