US experienced the sharpest plunge in domestic saving on record, dating back to 1947. Roach USD
Because that will continue, and the current-account balance is following suit, the dollar's real effective exchange rate can head in only one direction.
Even with the recent modest correction, the greenback remains the most overvalued major currency in the world, with the REER still 34% above its July 2011 low.
This will trigger a collapse in the US current-account deficit. Lacking in saving and wanting to invest and grow, the US must import surplus saving from abroad and run massive external deficits to attract foreign capital.
Again, this is not esoteric economic theory – just a simple balance-of-payments accounting identity.
Stephen S. Roach Project Syndicate 25 September 2020
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My prediction of a 35% drop in the broad dollar index is premised on the belief that this is just the beginning of a long-overdue realignment between the world’s two major currencies.
IMF expects the US current-account deficit to hit 2.6% of GDP in 2020, the EU is expected to run a current-account surplus of 2.7% of GDP.
Stephen S. Roach Project Syndicate 22 July 2020
https://englundmacro.blogspot.com/2020/07/imf-expects-us-current-account-deficit.html
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