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Monday, February 28, 2005



Quite an excellent post. A nice blog, which I will visit often :)


"The decline in the value of the dollar carries with it a huge decline in the foreign-currency value of dollar-denominated assets with no compensating increase in contemporaneous returns or fall in desired dollar-denominated asset holdings valued in foreign currency."

What is your unstanding of this passage? I am missing something. Why would you not find American assets immediately more attractive were the Pound to appreciate by 20%?


repost from brad's blog:

anne, IANAE, but I'll take a stab at it...

Isn't he just saying that a foreign holder of a US asset will see the value of that asset decline after the dollar falls?

He's not talking about someone holding euros seeing US assets become attractive after the devaluation, he's talking about folks in the EU who were holding US assets when the dollar fell.

Again, IANAE, and it's late, so I may be completely misguided or delusional.

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