The US Economy and the US Dollar: the US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach says - by Shalini Nagarajan

• The US dollar could collapse by the end of 2021 and the economy can expect a more than 50% chance of a double-dip recession, the economist Stephen Roach told CNBC on Wednesday.
• The US has seen economic output rise briefly and then fall in eight of the past 11 business-cycle recoveries, Roach said.
• Grim second-quarter data cannot be dismissed, he said, pointing out that "the current-account deficit in the United States, which is the broadest measure of our international imbalance with the rest of the world, suffered a record deterioration."
• Roach last predicted a crash in the dollar index in June, when it was trading at about 96. He said at the time that it would collapse 35% against other major currencies within the next year or two.

The "seemingly crazed idea" that the US dollar will collapse against other major currencies in the post-pandemic global economy is not so crazy anymore, the economist Stephen Roach told CNBC's "Trading Nation" on Wednesday.

Roach,a former chairman of Morgan Stanley Asia, also said he sees a more than 50% probability of a double-dip recession in the United States.

He based that prediction on historical evidence, saying that in eight of the past 11 business-cycle recoveries economic output has risen briefly and then fallen.

"It's certainly something that happens more often than not," he said.

Roach last predicted a dollar crash in June, saying it would collapse 35% against other major currencies within the next couple of years. At the time, the dollar index traded at about 96. On Thursday, the index traded at about 94.41.

He said on Wednesday that he expected the collapse to happen by the end of 2021, but he did not say by how much.

Read more at: 
The US is facing a dollar collapse by the end of 2021 and an over 50% chance of a double-dip recession, economist Stephen Roach says | Markets Insider

Iran: Rouhani calls on Muslim states to end US dollar domination

Iranian President Hassan Rouhani pointed to the potentials of Islamic countries in different economic fields, noting that measures should be adopted to put an end to the domination of the US dollar.

“The Islamic world should adopt measures to set itself free from the domination of America’s financial system and US dollar,” Rouhani told the Kuala Lumpur summit on Thursday in Malaysia.

He went on to say that Islamic countries complement each other and that signing banking cooperation and creating various financial mechanisms can lead to the mentioned aim.

Read more at: Rouhani calls on Muslim states to end US dollar domination - Mehr News Agency

Global Currencies: Wall Street’s bet on global currencies is bloodied with the U.S. dollar soaring - by Luke Kawa and Sid Verma

Politics have foiled the best-laid plans of Wall Street’s currency strategists.

Turmoil in Turkey as well as strife between Italian leaders and the European Union have forced dollar bears to throw in the towel on bets that the rest of the world’s currencies would continue to play catch-up with the greenback in 2018. A continued flight to safety propelled the Bloomberg Dollar Spot Index to a 13-month high on Monday.

The advance prompted TD Securities to close the G10 foreign exchange convergence trade recommended in its 2018 outlook after losses of more than 4 per cent. The team targeted 10-per-cent upside in going long the euro, Swedish krona, and New Zealand dollar relative to the U.S. and Swiss currencies. In early Tuesday trading, the Bloomberg Dollar Spot Index eased 0.2 per cent.

“The soft patch in global growth and the emergence of Italian political tumult curtailed this thesis even though the ECB signaled the end of QE this year,” writes Mazen Issa, TD’s senior foreign-exchange strategist.

Read more: Wall Street’s bet on global currencies is bloodied with the U.S. dollar soaring - The Globe and Mail

Europe: How Markets View European Unity Vs. Disintegration - by Erik Norland

EU-US: It is high time for a divorce

Opposing forces championing integration versus disintegration are assailing Europe. In the past two years, both sides have scored important victories. Britain's Brexit, Spain's Catalonian independence referendum and the entry of the nationalist Alternative fur Deutschland (AfD) party to the German parliament, or Bundestag, were victories for proponents of lesser European unity. The electoral defeat of far-right forces in the Netherlands and the victory of Emmanuel Macron in France were celebrated by those favoring the guiding principle of an "ever closer union."

Whatever one thinks of Brexit, the prospects for deeper European integration and the legitimacy of the various national independence movements, the currency markets' view is unambiguous: they strongly favor deeper political integration:

• When exit polls mistakenly called the Brexit referendum for the "Remain" voters, the British pound (GBP) rallied from 1.45 to 1.50 versus the U.S. dollar (USD) before crashing, first to 1.32 and later to as low as 1.18 versus the USD when the "Leave" victory became apparent. The euro fell 3% versus the USD on the day of the Brexit referendum and fell nearly 10% versus the USD within six months.
• Euro rallied 2% versus the USD in the week after Dutch voters dashed the hopes of Geert Wilder's eurosceptic Party for Freedom.
• Euro soared more than 10% to a two-and-a-half-year high in the weeks after Macron won the French presidential election on a platform advocating domestic economic reform and deeper European integration.
• September's German election results halted this advance after it became apparent that not only did AfD enter the Bundestag, as expected, but that Angela Merkel underperformed the polls by about 5-6% and would have to create an unwieldy coalition with the enthusiastically pro-European Greens and the Free Democrats, who oppose deeper economic integration.
• Catalonia's independence referendum led to a 1% one-day decline in the euro, further offsetting gains from the Macron victory. Ninety percent of Catalans voted to leave Spain in the referendum on October 1 that the Spanish state considers illegal and attempted to repress with force, leading to nearly 900 injuries.

Note EU-Digest: The obvious question therefore is: "if deeper unification of Europe is good for business in general , why has the Trump Administration been supporting Brexit and other nationalist movements in Europe, directly undermining European Unity?"

When will the European Union, in particular the EU Commission, EU-Parliament and member states wake up to the fact that a strong united Europe, with an independent foreign policy is not in the interest of the US, whatever they might say to the contrary.

You also do not have to be an Einstein to recognize that the US Foreign Policy has usually been based on a"divide and conquer" doctrine, with the Trump Administration now openly championing this doctrine. 

Obviously a fractured EU. would give the US a wide open playing field in Europe, with very little resistance from individual countries, to oppose major US policy decisions in a variety of areas, which could have a negative effect on the well-being of European citizens.

Yes indeed EU citizens, the motto: "United we Stand, Divided we Fall" is more important today than ever before. 

Read more: Europe: How Markets View Unity Vs. Disintegration | Seeking Alpha