US dollar carry trade & SPECFLATION explained my Max Keiser

[WarzSchoolchild]

As ever, "It will all end in tears!"

[joshrain1]

can someone please explain what is the US dollar carry trade?

[beltane3]

International investors borrow in US dollars at lower interest rates, exchange those dollars for another currency with higher interest rates...so, you'd take out a two year loan in US dollars, invest that money in a two year Australian bond which is paying a higher interest rate than your loan and pocket the profit. Hopefully the dollar doesn't appreciate in that time against the Austrailan dollar.

[joshrain1]

thanks. so does that mean that carry trade will cause usd to go higher? since, loan was taken in USD, it has to be repayed, right?

[beltane3]

Dollars are borrowed, used to buy currency of asset purchased. Since loans expand money supply, should depreciate the USD [triggering import inflation].Fed been monetizing the US Treas market to keep rates down. Can't go on forever,will accelerate depreciation if Fed stops & no other buyer steps in,US int rates will shoot up to attract foreign capital.Inflation+higher int rates+unemployment-bad combo.Get income in foreign assets whose currency will go up-$will be chepr latr to buy & pay off debt

[joshrain1]

thanks.

[van1976]

Sounds like Max has a cold--Noticed No "On the Edge" this week.

--Van