Sunday, September 27, 2009

The U.S. Dollar is the New Peso Not the New Yen Says Peter Schiff

In a recent converversation about the collapse of the U.S. dollar, Peter Schiff stated that the Federal Reserve is facing a dilemna that they'll have to make a decisions about, neither one which looks like it'll end in a good way for the U.S. dollar.

The first one is to continue on with close to zero interest rates where inexpensive dollars are the endless supply for carry traders, or they could stop the carry trade in its tracks by raising interest rates, which would cause a deeper recession "than anything we’ve experienced so far.”

Schiff added that the use of the yen for carry trade is now over, and it should continue strengthening, as the Japanese consider it a good move for their domestic economy for it to strengthen rather than be weak with low interest rates connected to it any longer.

When asked about the future of the U.S. dollar and carry trade, Schiff responed in a CNBC interview, “I don’t know when [the dollar] is going to strengthen. The dollar isn’t the new yen, it’s unfortunately the new peso.

Either way, as far as making money on the carry trade, Schiff said that because the U.S. dollar will continue to collapse, those using it to invest in higher yielding currencies and assets should make a fortune for some time to come.

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