Another big 2010 surprise could be the U.S. dollar rebounding exceptionally strongly (even if temporarily) along with the economy. In this event, the international contribution to multinational profits would slow, but any such shortfall would then be more than made good on the home front. Private equity would have to take this into consideration as they nurse their portfolio companies back to some semblance of health.
A further consequence of a rebounding U.S. dollar could be the price of gold and gold shares both taking a beating - what a non-consensus surprise that would be!
However, even given an exceptionally strong recovery, I still can’t see the
outgrowing its intractable debt and deficit problems without something big having to give. And, facing the hard fiscal choices that lie ahead, there could very likely be the temptation of expediently continuing stimulus and debt and deficit policies for that much longer. Repaying ballooning sovereign debts in depreciating currencies would be another expedient way out. These are why the risks of returning inflation must continue to loom large. U.S.
But what if these risks were to be headed off by a debt-hammered
electorate being sold on a Canadian-style GST consumer tax? U.S.
I’ll leave readers to calculate by how much a 5% tax on $10 trillion of annual consumption would reduce those gargantuan annual deficits. It might not herald a new “Morning in
”, but investors and stock markets would rejoice the world over. America