Monday, October 8, 2012

Klarman and Koncerns

An absolutely fantastic interview!
Jason Zweig interviewing Klarman in September, 2010.
Do go through the interview.

I like what Klarman says about currency debasements and manipulations. It does have many people all over the world concerned.

A currency is a medium of exchange
That said, it is wonderful if it can retain its value
Over the last few decades, the global economy has become credit-fuelled
Hence, there has been a general bout of actual inflation in all global currencies

After the 2008 crisis, the US went berserk with creating money and refuses to acknowledge its fiscal imprudence
This has caused a near 100% increase in its outstanding debt
What happens to the global economy when creditors demand a higher coupon for new issuances of debt of a currency which is steadily being debased?

Example: Ordinarily, the USD should depreciate against the INR; but a lot of USDs would flock out of India - which would cause the USD to appreciate in the short run and create a fundamental mismatch.

Will global trade stop?
Or will we move to another currency regime - one that is may be a basket of currencies against gold?
Plausible. I have said these things earlier, but it is still a matter of concern.

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