I joined Tom Keene and Marty Schenker (chief content officer) on the set of Bloomberg TV this morning. Schenker discussed some of the geopolitical issues in the Middle East, and Keene asked about the impact on the dollar.
I expressed my concern that the chief threat to the dollar’s role in the world economy is the several administrations have increasing weaponized access to the dollar and the dollar funding market. It used to be a public good, a utility if you will. However, since 9/11 or so, the US has increasingly used it to punish behavior, it does not like and reward friends. This provides a significant incentive to find an alternative.
The second issue that we discussed was the outlook for the US economy and the Federal Reserve. I see the end of the record-long business expansion in the US. Instead of guessing about a recession, which does not seem to have an objective definition–and the official arbiter in the US, the National Bureau of Economic Research does not use the rule-of-thumb of two consecutive quarterly contractions in GDP–I posit the economy is rolling over. This will, I suggest, prompt the Fed to cut rates possibly three times before it moves to the sidelines ahead of next November’s election. I look for a cut this week and two in the first half of next year.
Click here for the roughly 2.5-minute clip.