capital flight

We've already seen it happen: a flight from the dollar. Things that will accelerate the trend will be: economic weakness, lower interest rates, defaults in US $ debt, etc. This trend is self-reinforcing because a lower dollar will cause more US debt to default, and also will engender more capital flight. On top of domestic dollar flight, there will be international flight. Where will they put the money? Anywhere except US dollar debt. Treasuries yield nothing, and anything else may never be paid back.
The flight from the dollar will fuel emerging markets, commodities, etc. Since we have an import economy, commodities will skyrocket (we haven't seen anything yet).

This is a dramatic shift from what I've been thinking recently, but it's the only way I see to explain what I see happening in the global economy.

Strategy for this view will be to move to a 50-50 weighting of short domestic and long non-US dollar positions over the next couple of months. Watch/wish list: MO, TCK, RIO, SFD, ABX, OZN, SU.

Only one way to test the hypothesis: act on it. If I'm wrong, at least I believed in myself. If I'm right, believing in myself pays off. Hopefully, either way, I'll learn to be a better economist.