Dollar to be avoided as US dodges reality of deficit reduction

ON BONDS

Old Mutual's Stewart Cowley says while data on the US economy may look promising, the flow of money from the Fed is likely to overwhelm any thoughts of artificially created economic growth.

The difference in approach between Europe and the US could not be starker. In Europe, there have been riots as citizens grapple with the realities of deficit reduction. In the US, a Democratic President has got into bed with a Republican Congress to add an $853bn tax giveaway to a $600bn expansion of quantitative easing. The US policy is stretching credulity. To come is some $3trn in debt accumulated during the Bush era, set to mature over the next three years, not to mention the unfunded liabilities due to the baby boomers. The immediate response to QE2 in the bond market was a rise in ...