Arnott Says Currency Could Lose Dominance If Deficit Deal Is Not Reached

Tuesday, December 18, 2012 08:20
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Arnott Says Currency Could Lose Dominance If Deficit Deal Is Not Reached

Tags: Congress | currency | world economy

Robert Arnott, CEO of Research Affiliates is bringing a different element into the fiscal cliff conversation: what will happen to the US dollar if a deal is not reached?

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Since the Fed is now printing $85 billion each month as a result of closing its Operation Twist program and instituting was amounted to QE4, its balance sheet is now $3 trillion and is on slate to grow $1 trillion per year.
 
Printing money to purchase our own debt only works for so long. What happens when it stops working?
 
Arnott says we must get back to a balanced budget within 10 years and reinstituting pay-as-you-go.
 
He says we can either voluntarily make the necessary changes or the markets will force those changes on us.
 
Fierce political battles would make those of 2012 look like a party. If the markets lose confidence in our currency because we can no longer manage our debt, it won’t matter who is in the White House or which party controls Congress.
 
The consequences can be very disruptive across the globe, for both businesses and consumers.

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