There are advantages to the depreciation option for the US: foreign debt is denominated in US currency so that a depreciation does not cause valuation effects on the stock or the service of the debt, and the economy is relatively closed which considerably mutes the effect of the exchange rate on inflation.
After a depreciation, US assets would seem extraordinarily cheap from a foreign perspective, but current holders of US assets would be wiped out (measured in currencies different from the dollar) and this in itself could discourage them from dumping these assets onto the market. http://www.rgemonitor.com/latam-monitor/253761/should_the_united_states_defend_the_dollar_or_let_it_go
That's just "collateral damage".
It's because if they do, the $68 Trillion chain reaction could start.
What does this mean?
• The $700 billion WILL be approved, there is no question about that.
• The Fed will keep interest rates far below the rate of inflation, to stimulate an increase in house prices.
• House prices will rise.
• The US Government will effectively guarantee all RBMS's against default.
• So, no more defaults on RMBS's.
• The dollar will fall
• Disaster will have been avoided.
http://www.marketoracle.co.uk/Article6495.html
One hedge fund said: "We've produced 15 per cent returns for 10 years. This year has been bad and our funds under management have been reduced from $2billion to just $300m. This is decimation."
Not a single hedge fund strategy has produced positive returns so far this month, with convertible arbitrage and distressed securities down an estimated 7.96 per cent and 7.34 per cent, respectively, according to Dow Jones Hedge Fund Indexes. Equity market-neutral funds, which often short a stock in one sector and go long on another in the same sector, are down 1.85 per cent. http://www.nakedcapitalism.com/2008/09/hedge-funds-face-record-redemptions.html
http://www.dailymail.co.uk/news/article-1063356/Credit-crunch-banker-leaps-death-express-train.html The City was in shock last night after the apparent suicide of a millionaire financier haunted by the pressures of dealing with the credit crunch.
