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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Commentary Of The Month
February 27, 2015
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HITTING THE FAN

By Graham Summers

The world carry trade for U.S. dollars is over $9 trillion. In today’s world of monetary insanity, investors seem to forget that $1 trillion is a staggering amount of money. So to put that $9 trillion carry trade into perspective, if it were a country instead of a carry trade, it would be roughly equal in size to the economy of China, the second largest economy in the world.

Suffice to say, we’re talking about a truly staggering amount of borrowed U.S. dollars that have been invested into other assets/ investments. Carry trades only work if the currency you are borrowing in doesn’t rally. As soon as it does, your trade very quickly goes into the red. This is particularly true if you’re talking about a corporation that has borrowed in U.S. dollars to fund projects in countries where sales are denominated in other currencies (Europe, Asia, etc.).

The reason for this is that many multi-nationals do not hedge their currency risk. So if, for instance, they are borrowing in U.S. dollars without a hedge to invest in Europe and the U.S. dollar rallies, their projects very quickly begin to lose their appeal and a lot of money.