See Stiglitz (2003)for a fuller explantion of the racket. I should note that Soros did this sort of thing against the Pound and other Euro currencies in 1993(94?) and nearly bankrupted the Bank of England. There was serious talk that he might be arrested for it. A cautionary tale. Explosive margins when a currency is in free fall though.
I've got a colleague that just moved here from Norway, and has made significant gains off the rise in the Kroner against the Dollar. He seems to think that the dollar's free fall is nearing it's end. I think that there's a good 30-50% further to fall before we hit bottom. Remember, although the economic fundamentals suggest that a much greater decline is possible, there's a 50/50 chance we'll invade Europe to stop that. And I'm only partially joking. There are an array of coercive measures available to the US to enforce European "cooperation."
Now there I've gone and used academic citation in a post. Too much test for me today.
Stiglitz, Joseph.(2003) Globalization and its Discontents. W. W. Norton & Company:New York. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
As Migeru so lucidly explained, there are different techniques available to allow people to take on or offload risk, as they see fit.
Certainly, "geared" investment is not for the faint hearted, and yet millions are daily exposed to gearing in respect of their properties in the blithe, and to date, self-fulfilling, expectation that property (ie land) prices can only go up.
The fundamental "strategy" behind my thinking, at least - and I believe many on this site may well agree with it - is based upon two fundamental propositions:
(a) Peak Oil - that we either will shortly reach, or have already reached, a "peak" level of crude oil production;
(b) Secular Dollar decline - the ongoing collapse of the property backed US financial bubble economy, and the end of "dollar hegemony" that will result.
If we combine the two, then we see that to be "short" of the dollar and "long" of energy assets - or of the currency or securities of countries which have them - is a pretty logical, and possibly optimal, strategy for "asset allocation" right now.
Assuming of course that one has any assets other than between the ears.
Migeru and I agree that there is probably the potential for consenting adults among our number to "pool" intellectual and financial capital to take advantage of what is, IMHO, an opportunity unlikely to come along again.
What I add to the pot, based upon a career in financial regulation, is a simple new "disintermediated" form of cross-border investment framework/vehicle.
Anyone interested should contact Migeru, who is to blame for all this ;-) "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
